When an American sells a home in Spain, two tax systems look at the same sale at once. Spain withholds 3% of the price and taxes the gain at 19%; the IRS expects the gain reported in dollars. Here is how the Spanish 3% retention, non-resident capital gains tax, plusvalia and the US side fit together — and how the foreign tax credit stops you paying twice.
Selling a property in Spain is straightforward enough for someone who lives there. For a US resident — whether you are a US citizen, a green-card holder or a tax resident of the United States who happens to own a Spanish home — it is materially more complicated, and not because Spain treats Americans differently. The complication is that the same sale is taxed in two places at once. Spain taxes the gain because the property sits on Spanish soil. The United States taxes the gain because it taxes its citizens and residents on their worldwide income, wherever the asset is. Get one side right and ignore the other and you can find yourself with an unexpected bill, a frozen reclaim, or a tax return that does not add up.
This page sets out, in plain English, what actually happens when an American sells a Spanish property. We cover the Spanish 3% retention that the buyer is legally required to hold back, the non-resident capital gains tax that the retention is an advance against, the municipal plusvalia, and the documents and process you need to complete a sale — including how to sell remotely from the United States under a power of attorney. We then explain how the same transaction is reported to the IRS, why the foreign tax credit matters so much, and the foreign-currency trap that catches sellers who once took out a euro mortgage. The throughline is simple: the Spanish and US sides must be planned together, not in isolation.
As a non-resident seller you face three distinct charges. Understanding which is which is the first step to keeping control of the money.
The buyer is legally required to withhold 3% of the agreed price and pay it directly to the Spanish tax office on your behalf, using Modelo 211, within a month of completion. It is not an extra tax — it is an advance payment against your Spanish capital gains tax, designed so the authorities are not chasing a seller who has left the country.
Your real Spanish liability is capital gains tax on the gain — broadly the sale price less your acquisition cost and allowable expenses — charged at the flat non-resident rate of 19%. This is declared on Modelo 210. The 3% already withheld is set against this figure, and you either owe the balance or reclaim the excess.
A separate local tax charged by the town hall on the increase in the land value during your ownership. It is calculated by the municipality, not on your overall profit, and is payable on the sale. It is independent of the 3% retention and of national CGT, and it is a genuine cost of selling that needs budgeting for.
The reason the 3% retention causes so much confusion is that sellers see 3% of the full price leave the table at completion and assume that is the tax. It is not. It is a deposit. If your actual capital gain is small — or if you sold at a loss — the 3% withheld will often exceed the tax you really owe, and the difference is reclaimable. The mechanics of that reclaim are where many non-resident sellers lose money, simply by not filing the right form in time.
When you complete the sale, the buyer (or, in practice, the buyer's lawyer or gestor) keeps back 3% of the declared sale price and pays it over to the Agencia Tributaria using Modelo 211. You should receive a stamped copy of that Modelo 211 as proof the money was paid in your name — keep it carefully, because it is the document that proves you are entitled to credit for that 3%. Without it, reclaiming becomes far harder than it should be.
The 3% is an advance against the 19% non-resident capital gains tax due on your actual gain, which is declared on Modelo 210. There are then two outcomes. If your gain is large enough that 19% of it exceeds the 3% already withheld, you pay the difference when you file. If your gain is modest, or you sold at a loss, the 3% will usually be more than your true liability — and the excess is refundable. You claim it back by filing the non-resident CGT return, in the variant commonly referred to as Modelo 210H for the refund of the retained amount, within the statutory window (generally within several months of the sale, and you should treat the deadline as strict). The refund is then paid to a nominated bank account.
This is one of the most common and avoidable losses we see with American sellers who try to manage the Spanish paperwork from abroad after completion. The buyer's side has every incentive to deduct the 3% — it protects the buyer — but no one on that side is responsible for getting your overpayment back. That is squarely the seller's job, and it is precisely the kind of filing we handle as part of representing you on the Spanish side of the sale.
Here is the part that catches Americans off guard. Selling the Spanish property does not end with the Spanish tax office. Because the United States taxes its citizens and residents on worldwide income, the very same sale is reportable on your US federal tax return. You report the disposal of the foreign property, calculate the gain under US rules and in US dollars, and pay US capital gains tax on it — the long-term federal capital gains rates apply if you held the property for more than a year, alongside any state tax depending on where you live and the net investment income tax where it applies.
This is not optional and it is not avoided by having paid tax in Spain. The Spanish and US calculations are separate, run under different rules, and frequently produce different gain figures — most obviously because the US side is computed in dollars and the Spanish side in euros, but also because the definitions of acquisition cost and allowable expenses do not line up perfectly between the two systems. You may also need to report the foreign bank account that receives the sale proceeds (FBAR / FinCEN Form 114 and possibly Form 8938) once balances cross the reporting thresholds. The clear message is that the US filing is a second, parallel obligation — not a formality.
If the same gain is taxed in Spain and in the United States, the obvious fear is double taxation — being charged twice on a single profit. The mechanism that prevents that, for a US resident, is the foreign tax credit, claimed on Form 1116. In broad terms, the Spanish income tax you pay on the gain — your non-resident capital gains tax — can be credited against the US tax due on the same income, so you are not paying the full amount twice. Where the foreign tax credit is fully available, it commonly reduces the US tax on that gain to the extent of the Spanish tax already paid, with the United States effectively collecting only any excess if the US rate on the gain is higher.
Two practical points make the foreign tax credit fiddlier than it sounds, and both are reasons the timing of the two filings needs to be coordinated rather than left to chance. First, the credit is generally for foreign tax that has actually been paid or accrued, so the sequence and dates of your Spanish payments and your US return have to line up. Second, the US gain and the Spanish gain are different numbers — computed in different currencies under different rules — so the credit does not simply cancel the US tax pound-for-euro; it offsets US tax on the foreign-source portion of income within the limits the form imposes. A US CPA runs that calculation. Our job is to make sure the Spanish figures, the dates of the Spanish payments, and the supporting documents are clean and available so your CPA can claim the credit properly.
This is the single most under-appreciated US tax issue for Americans selling Spanish property, and it surprises even experienced sellers. If you financed the property with a mortgage denominated in euros and you repay or discharge that mortgage when you sell, US tax law can treat the change in the dollar value of the loan between the date you borrowed and the date you repaid as a separate transaction. Under Internal Revenue Code Section 988, that foreign-currency element can produce a distinct gain or loss — and, critically, it is treated as ordinary gain or loss, not as part of your capital gain on the property.
The trap is real and counter-intuitive. If the euro strengthened against the dollar over the life of the loan, repaying a fixed number of euros costs you more dollars than you originally borrowed in dollar terms, and the law can treat that movement as a separate item to be reckoned with — and the asymmetry between when a currency gain is taxable and when a currency loss is deductible can work against you. The result is that the headline capital gain on the property is only part of the US picture; the euro mortgage can generate its own ordinary gain or loss that has to be computed and reported on top. This is exactly the kind of issue your US CPA needs flagged early, with clean Spanish loan and repayment records — which is why we make a point of preserving and passing over the mortgage cancellation documentation as part of the Spanish file.
You do not have to fly to Spain to sell. The standard solution for a US-resident seller is a power of attorney (poder), which lets a trusted representative — typically your Spanish lawyer — sign the sale deed and handle the surrounding steps on your behalf. This is routine, it is secure, and it is how a large share of non-resident sales complete. It also removes the pressure of having to align an international flight with a notary appointment that can move at short notice.
The power of attorney is usually granted in the United States before a notary public and then legalised with an apostille under the Hague Convention so that Spain accepts it, with a sworn translation into Spanish where required. Once it is in place, your representative can sign the escritura, deal with the 3% retention paperwork, settle the plusvalia and handle the registry and tax filings without you leaving home. We draft the power of attorney to the right scope, tell you exactly how to have it notarised and apostilled in the US, and arrange the certified Spanish translation, so the document does precisely what is needed and nothing more. With nearly extensive experience helping expats with Spanish property, we are used to running these remote sales end to end for clients who never set foot in the notary's office.
Once the sale completes and the Spanish costs and taxes are dealt with, the net proceeds sit in euros, usually in a Spanish bank account. Moving that money to a US dollar account is the final step, and it carries its own considerations. The exchange rate on the day you convert directly affects how many dollars you receive, and the spread and fees on a large currency transfer can be significant if handled through a standard retail bank rather than a specialist. For a six-figure sale, the difference between a good and a poor conversion can run into thousands of dollars.
There is a tax dimension too. The IRS sees the transaction in dollars, so the dollar value at the relevant date is what feeds your US capital gain — and, as covered above, any euro mortgage repaid on the sale brings its own Section 988 currency calculation that is independent of how and when you actually convert your net proceeds. We do not give currency-trading advice, but we do make sure the proceeds are released cleanly from the Spanish side, that the Spanish account and transfer documentation is in order, and that your US CPA has the euro figures and dates needed to report the sale correctly. Planning the conversion deliberately, rather than letting it happen by default, is simply part of treating the sale as the cross-border transaction it is.
Selling a Spanish property as a US resident is not difficult once it is broken into its parts — but the parts sit in two countries and have to be handled in the right order. The Spanish 3% retention has to be paid and then reclaimed; the 19% non-resident capital gains tax has to be computed and declared; the plusvalia has to be settled; the documents have to be assembled and the deed signed, often under a power of attorney from the US; and all of that has to be evidenced in a way that lets your US CPA report the same sale to the IRS and claim the foreign tax credit, with the euro mortgage and currency issues flagged before they become a problem.
Our role is to own the Spanish side completely and to coordinate cleanly with your US adviser on the rest. We manage the conveyancing and the document pack, file the Modelo 211 and the Modelo 210 / 210H, reclaim the excess 3% retention, deal with the plusvalia, and act under a power of attorney so you can sell without travelling. We then hand your CPA the figures, dates and documents they need for Form 1116 and the Section 988 analysis. Our team is made up of bar-registered solicitors and legal specialists, we work entirely in English, and we are explicit about what falls inside our scope and what does not. We do not give US tax advice — we make the Spanish side correct and the coordination effortless. Where work falls outside a clear scope, we will tell you what it involves and quote for it. Extras may apply depending on the complexity of your sale.
When a non-resident sells Spanish property, the buyer is legally required to withhold 3% of the agreed sale price and pay it to the Spanish tax office using Modelo 211, usually within a month of completion. It is not an additional tax — it is an advance payment against your Spanish non-resident capital gains tax. If your true tax is lower than the 3% withheld, the excess is reclaimable.
You file the non-resident capital gains tax return — Modelo 210, in the refund variant commonly referred to as Modelo 210H — declaring your actual gain and the 19% tax due, and crediting the 3% already paid via Modelo 211. If the 3% exceeds your real liability, the difference is refunded to a nominated bank account. The reclaim is not automatic and the deadline is strict, so it must be filed correctly and on time.
A non-resident, including a US resident, pays Spanish capital gains tax at the flat rate of 19% on the gain — broadly the sale price less the documented acquisition cost, improvements and selling expenses. There is no progressive scale for non-residents, and the Spanish main-home reliefs generally do not apply because the property is not your habitual residence in Spain.
Plusvalia municipal is a local tax charged by the town hall on the increase in the land value during your ownership. It is calculated by the municipality and is payable on the sale, separately from the 3% retention and from national capital gains tax. It is a genuine cost of selling that should be budgeted for and, in some cases, can be reduced or challenged where there was no real increase in land value.
Yes. The United States taxes its citizens and residents on worldwide income, so the same sale is reportable on your US federal return. You compute the gain in US dollars under US rules and pay US capital gains tax, with state tax and the net investment income tax potentially applying. You may also have foreign account reporting (FBAR and possibly Form 8938) once balances cross the thresholds. This is a separate, parallel obligation to the Spanish filings.
The foreign tax credit, claimed on IRS Form 1116, lets you credit the Spanish income tax paid on the gain against the US tax due on the same income. Where it is fully available, it commonly reduces the US tax on that gain to the extent of the Spanish tax already paid, so the US effectively collects only any excess if the US rate is higher. It depends on the Spanish tax being actually paid and properly evidenced, which is why the timing of the two filings needs coordinating.
Possibly, yes. Under Internal Revenue Code Section 988, repaying or discharging a euro-denominated mortgage can produce a separate foreign-currency gain or loss based on the change in the dollar value of the loan between borrowing and repayment. It is treated as ordinary gain or loss, not as part of your property capital gain, and is one of the most commonly missed items on the US side. Flag it to your US CPA early with clean loan and repayment records.
No. We handle the Spanish legal and tax-filing side — the conveyancing, the Modelo 211 and Modelo 210 / 210H, the plusvalia and the Spanish documentation — and we coordinate with your US CPA or enrolled agent. We are not US tax advisers. We make sure the Spanish figures, dates and documents are clean so your US adviser can report the sale and claim the foreign tax credit correctly.
Yes. A power of attorney (poder) lets your Spanish lawyer sign the sale deed and handle the surrounding steps on your behalf. It is usually granted before a notary public in the United States, legalised with an apostille and translated into Spanish where required. Once in place, the whole sale — including the 3% retention paperwork, plusvalia and registry filings — can be completed remotely.
The main pieces are a valid energy performance certificate, the occupancy licence (cédula de habitabilidad) where the region requires it, a community-of-owners certificate confirming fees are paid, confirmation that IBI and utilities are settled, the cancellation of any registered mortgage charge, the title deed (escritura), and your NIE and tax numbers. Assembling these early prevents the completion slipping.
You can increase your acquisition value with the original purchase taxes and notary, registry and legal costs, and add genuine capital improvements that are properly invoiced. From the sale side you can deduct the estate agent's commission, the plusvalia you pay and your selling legal fees. All deductions must be evidenced with invoices, so keeping your original purchase and improvement paperwork is important.
After the Spanish costs and taxes are settled, the net proceeds sit in euros, usually in a Spanish account, and are then converted and transferred to a US dollar account. The exchange rate and transfer fees materially affect how many dollars you receive, so the conversion is worth planning rather than leaving to a default. The dollar value at the relevant date also feeds your US tax calculation. We ensure the Spanish-side release and documentation are clean for your CPA.
Yes. We manage the conveyancing and document pack, file the Modelo 211 and Modelo 210 / 210H, reclaim the excess 3% retention, settle the plusvalia, and act under a power of attorney so you can sell without travelling — then hand your CPA the figures and documents needed for the US return. We work entirely in English, act for US-resident sellers across Spain, and quote clearly for the work involved.
We handle the Spanish 3% retention and reclaim, the 19% capital gains tax, the plusvalia and the paperwork — and coordinate with your US CPA so the same sale reports cleanly to the IRS. In plain English, often without you leaving the US.
The information on this page is general guidance only and does not constitute legal or tax advice, and in particular does not constitute US tax advice. Spanish non-resident capital gains tax, the 3% retention, plusvalia municipal, and US federal and state tax rules — including the foreign tax credit and Internal Revenue Code Section 988 — are set out in legislation that changes over time and depends on your specific circumstances. Platinum Legal Spain handles the Spanish legal and tax-filing side of a property sale and coordinates with your US CPA or enrolled agent; we do not prepare US tax returns. Always obtain advice on your specific property and situation before acting. Platinum Legal Spain is an independent English-speaking legal practice serving clients across Spain.