Understand your Taxes in Spain

Your foreign employer will not have directly any withholding obligations in Spain.

However, if the foreign employer has a permanent establishment in Spain, through a branch, and is deducting the cost of your salary from its taxable base for corporate income tax, they must make withholdings on your salary, which correspond to your personal income taxation.

You would only have to pay taxes in Spain on the sale of your foreign assets if you sell it during a tax year when you have been a Spanish tax Resident.

If that is the case and you are younger than 65 years old in the tax year you sell the property, you will have to pay capital gains taxes when selling the foreign property.

However, Spain has a capital gains exemption if you reinvest the money following the sale. It works as follows:

You bought the property for €400,000 and later you sell it for €1,200,000.

You have made a capital gain of €800,000 and buy a new home in Spain for €600,000

As you have reinvested 50% of the amount received, this portion is exception from capital gains tax. So you will only pay taxes on the 50% of the capital gain. In this scenario, you will pay capital gains on €400,000.

To receive this exemption, you must:

– live in the property for at least two years before you sold it
– buy a new Spanish property within two years of selling your former home
– live in the new Spanish property within a year of buying it
– live in the new Spanish property for at least three years following the purchase