Don’t believe for a minute that because you’re over 65 your exempt | Photo: Gzabala/ Shutterstock
Pay close attention if you’re over 65 and considering selling your home in Spain. There’s a tax trap out there that has been catching more and more pensioners off guard — and it could cost you dearly if you’re not prepared.
You might think that, having reached retirement age, the tax office would cut you some slack when you sell your home. Not quite. While there are certain exemptions in place for older homeowners, these are tied to strict conditions, and if you don’t meet them to the letter, you could find yourself hit with a hefty capital gains bill, according to local news reports.
Here’s the deal: if you sell your primary residence — the one you actually live in — you can avoid paying capital gains tax, but only if it’s been your habitual home for at least the past three years. That country house you escape to in summer? Or that little flat in Madrid you’ve been renting out? Those won’t qualify. And the Spanish tax agency isn’t exactly forgiving when it comes to technicalities.
You’ll owe the taxman lots
Things get even trickier if you decide to reinvest the money into a lifetime annuity. That’s one of the few ways retirees can legally shield themselves from the taxman when selling property. But again, there are rules. You have to reinvest the money within six months. You can’t go over 240,000 euros. And you must do it exactly as the law demands. Miss one step, and you’ll owe tax on the lot.
Then there’s the issue of co-owned properties or homes with usufruct — when someone else, often a spouse, has the right to live there. These situations can complicate things further. If ownership isn’t clear, or the legal paperwork isn’t watertight, the tax office can — and often does — swoop in to demand its cut.
The government has made it clear: not knowing the rules won’t save you. Plenty of older homeowners have been caught off guard, wrongly assuming that age alone grants them a tax exemption. It doesn’t. If the paperwork isn’t perfect, and the requirements aren’t met, you’ll be treated like anyone else.
So, before you put your home on the market, speak to someone who knows the system. Get clear on what’s required. Because once the sale goes through, it’s too late to fix mistakes — and retirement is no time to be fighting the taxman.
