Spain-US Tax Treaty Article 13: Capital Gains — Which Country Taxes What

Capital gains are among the most internationally mobile categories of income: an investor resident in Spain can hold US securities, a Spanish property, shares in a Luxembourg holding company owning Madrid offices, or Bitcoin — and the question of which country has the right to tax any gain on disposal is governed by Article 13 of the 1990 Spain-US Treaty. Getting this analysis wrong creates the risk of paying tax in the wrong country, failing to claim credits in the right country, or — in the case of real estate — being caught by a 3% retention obligation that operates as a withholding mechanism before tax is even assessed.

This article provides a complete analysis of Article 13, its exceptions, the 2013 Protocol amendments, Spain's non-resident capital gains tax (IRNR), the exit tax under Article 95bis LIRPF, and the treatment of crypto assets under the Treaty framework. Both the Spanish IRPF/IRNR position and the US federal income tax position are addressed.

1. Article 13 Overview: The General Framework

Article 13 of the Spain-US Treaty does not adopt a single rule for all capital gains. Instead, it establishes a tiered system that allocates taxing rights differently depending on the type of asset sold and its location. The overarching principle is that the location of the asset and its nature — immovable property, business assets, corporate shares, or other property — determines which country has the right to tax the gain.

The Treaty's structure in Article 13 can be summarised as follows:

The word "may" in the source-state provisions is significant. It confers a permission rather than a mandate — Spain may tax gains on Spanish real estate held by a US resident, but it does not prevent the US from also taxing those gains. Both countries can and do assert taxing rights over certain assets, and double taxation is relieved through the credit mechanism rather than through an exclusive allocation to one state.

2. Real Estate Gains: Article 13(1) — The Source Country's Right to Tax

Article 13(1) establishes that gains from the alienation of immovable property — real estate — may be taxed in the contracting state in which the property is situated. This is the source-country rule for real property: Spain can tax gains on Spanish property regardless of where the seller is resident, and the United States can tax gains on US property regardless of where the seller is resident.

The term "immovable property" has the meaning given to it in the law of the contracting state where the property is situated. For Spanish property, this covers land, buildings, apartments, houses, commercial premises, parking spaces, and other fixtures that constitute inmuebles under Spanish civil law. Usufruct rights, long-term leases over real property, and other real rights in real property are also covered.

The Key Bilateral Consequence

Article 13(1) creates the potential for double taxation on real estate gains. Consider a US tax resident (not a Spanish tax resident) who sells an apartment in Marbella at a gain. Spain — as the source country — may tax that gain under Article 13(1) and does so through the IRNR (Impuesto sobre la Renta de No Residentes) regime. The United States — as the residence country — also taxes the same gain on the seller's Form 1040. Both countries exercise their taxing rights simultaneously. The seller pays Spanish IRNR first, then claims a foreign tax credit on their US return for the Spanish tax paid.

The reverse applies with equal force: a Spanish tax resident who sells US real property pays US capital gains tax on the gain (the US asserts source-country rights), then declares the same gain on their Spanish IRPF return (Spain asserts residence-country rights over worldwide income), claiming a credit for the US tax paid.

3. Business Property and PE Assets: Article 13(2)

Gains from the alienation of movable property forming part of the business property of a permanent establishment (PE) — or gains from the alienation of the PE itself — may be taxed in the state where the PE is situated. This provision addresses the business-investment overlap: where a capital asset is used in a permanent establishment's trade or business, the state hosting the PE can tax gains on its disposal.

For most individual investors and expats, Article 13(2) is less frequently relevant than the immovable property or "other gains" provisions. It becomes significant for US business owners who operate through a branch (PE) in Spain, or Spanish entrepreneurs with US-based permanent establishments. The gain is treated as arising from the PE's activities, and the PE-source state takes priority.

The key requirement is that the property must genuinely form part of the PE's business assets — it cannot simply be an investment portfolio held by a company that also happens to have a PE. The distinction between investment assets and business-use assets in the PE context requires careful analysis of the economic reality of the asset's use.

4. Shares in Real-Estate-Rich Companies: Article 13(3)

One of the most practically significant provisions of Article 13 — and one that catches many investors by surprise — is Article 13(3): gains from the alienation of shares in a company may be taxed in a contracting state if the assets of that company consist principally (more than 50%) of immovable property situated in that state.

This "real estate-rich company" rule prevents the simple avoidance of source-country taxing rights by interposing a corporate holding structure between an investor and their Spanish (or US) real estate. Without this rule, a US investor who holds Spanish property through a Spanish company (sociedad) could sell the shares rather than the property and potentially escape Spanish source-country taxation under the "other gains" residence-country rule. Article 13(3) closes this loophole.

Practical Application

If a US tax resident holds shares in a Spanish company (or a third-country holding company) whose assets consist principally of Spanish real property, and they sell those shares, Spain can assert its taxing right as if the real property itself had been sold. The Spanish IRNR will apply to the gain on the shares, calculated by reference to the underlying real estate value.

The "principally" threshold — more than 50% of the company's assets being real property — is assessed at the time of sale. A company with substantial business assets alongside significant real property holdings may fall below the threshold, escaping the Article 13(3) override and being treated as "other property" under Article 13(5) (residence-country rule only). Structuring the asset base of holding companies to remain below the 50% threshold is an established (though legally scrutinised) planning technique.

5. The Residence-Country Rule: Article 13(5) — "Other Property"

Article 13(5) is the residual provision and provides that gains from the alienation of property other than that described in paragraphs (1) through (4) are taxable only in the contracting state of which the alienator is a resident at the time of the alienation. This is the exclusive residence-country rule for all capital assets that do not fall within the specific categories addressed by the earlier paragraphs.

The practical significance of Article 13(5) is enormous for investors. It means:

• Gains on US stocks, bonds, and other securities sold by a Spanish tax resident are taxable only in Spain — not in the United States (as source country)
• Gains on shares in ordinary operating companies (not real-estate-rich) sold by a Spanish resident are taxable only in Spain
• Gains on intellectual property rights, financial instruments, and most investment assets are taxable only in the residence country
• A Spanish tax resident who sells US mutual fund shares, ETFs, or corporate bonds is taxed only by Spain — the US has no taxing right as the source country

6. US Stock Portfolio Example: Article 13(5) in Practice

Consider a Spanish tax resident (not a US citizen) who holds a portfolio of US equities — Apple, Microsoft, S&P 500 ETF shares — and sells them at a gain. Under Article 13(5), the gain is taxable only in Spain, the residence country. The United States has no right to tax the gain under the Treaty.

In Spain, the gain is treated as a ganancia patrimonial (capital gain) and is included in the base imponible del ahorro (savings tax base), subject to the savings income scale rates:

The gain is calculated in euros: the acquisition cost in USD converted to EUR at the exchange rate on the date of purchase, and the sale proceeds in USD converted to EUR at the exchange rate on the date of sale. Currency fluctuations therefore enter the gain/loss calculation. A US dollar appreciation against the euro between purchase and sale increases the euro-denominated gain even if the dollar value of the investment was unchanged.

For US citizens in Spain, the US saving clause again applies: the US also taxes capital gains on US securities held by its citizens regardless of Spanish residency. The gain must be reported on Form 1040 Schedule D, with a foreign tax credit claimed for Spanish IRPF paid. For most long-term gains, the US federal rate (0%, 15%, or 20% depending on income) is lower than the Spanish rate, so the Spanish tax fully covers the US liability and the credit may exceed what is needed in the capital gains basket.

7. Spanish Property Example: The Double Taxation in Detail

A US tax resident (not Spanish tax resident) who owns an apartment in Marbella and sells it for a gain faces the clearest example of double-taxation under Article 13(1).

The Spanish Side: IRNR

Spain taxes the gain under the IRNR. The applicable rate for the gain depends on the seller's country of residence:

• EU or EEA residents: 19% on the net capital gain (allowable deductions for improvement costs, notary fees, taxes paid on acquisition, and agents' commissions apply)
• US residents (non-EU/EEA): 24% on the net capital gain

The gain is calculated as the sale price minus the acquisition cost (adjusted for acquisition expenses), with no inflation indexation adjustment for acquisitions after January 1, 1995 (the indexation mechanism was abolished for assets acquired after that date). For properties acquired before 31 December 1994, transitional reduction rules (coeficientes reductores) may apply to the portion of the gain attributable to the pre-1995 period — a useful legacy provision for long-held properties.

The US Side: Capital Gains Tax

The same gain is reportable on the US seller's Form 1040. If the property was held for more than one year, the preferential long-term capital gains rates apply: 0%, 15%, or 20% depending on the taxpayer's total income. There is also the additional 3.8% Net Investment Income Tax (NIIT) for higher-income taxpayers under Section 1411 IRC. The sale price and acquisition cost are both calculated in USD, so currency movements create a separate layer of gain or loss calculation for US tax purposes.

The credit for Spanish IRNR paid is claimed on Form 1116 (or on Schedule B for certain small amounts). For a US resident (not citizen) selling Spanish property, the Spanish IRNR rate of 24% typically exceeds the US long-term capital gains rate, so the credit fully offsets the US liability and may generate excess credit carryforwards. For a US citizen already resident in Spain, the IRPF savings rate (up to 28%) similarly generates sufficient credit to cover the US federal liability in most cases.

8. Spain's Exit Tax: Article 95bis LIRPF and the Treaty

Spain introduced an exit tax (impuesto de salida or "exit charge") under Article 95bis of the LIRPF, effective from 2015. The exit tax operates as a deemed disposal: when a Spanish tax resident ceases to be resident in Spain, they are treated as having sold their financial assets (shares, interests in funds, and other securities) at market value on the date of departure, triggering a taxable gain equal to the unrealised appreciation in those assets.

Triggering Thresholds

The exit tax only applies where the departing resident meets either of the following thresholds:

• The aggregate market value of the qualifying assets exceeds €4,000,000; or
• The aggregate unrealised gain in the qualifying assets exceeds €1,000,000, provided the taxpayer holds a stake of at least 25% in a single company

Below these thresholds, the exit tax does not apply and unrealised gains are not taxed on departure. The thresholds are assessed at the individual level, not per account or per asset class.

Treaty Interaction: Can Spain Tax the Deemed Disposal?

The exit tax's Treaty compatibility is a contested question. For a Spanish resident departing to the United States, the exit tax treats the departure as a realization event and taxes any unrealised gains on shares or fund interests. Under Article 13(5) of the Treaty, gains from "other property" (including shares in non-real-estate-rich companies) are taxable only in the residence state. At the moment of the deemed disposal, the taxpayer is still a Spanish resident — so Spain's position is that it is entitled to tax the gain as residence country before the taxpayer's residence changes.

The US, conversely, may not recognise the deemed disposal — the shares have not actually been sold, and no cash proceeds have been received. This creates a mismatch: Spain has taxed a gain that the US does not yet recognise. When the taxpayer eventually sells the shares as a US resident, the US will tax the full gain from the original cost basis, with no credit available for the Spanish exit tax already paid (because the US did not recognise a taxable event at that time).

For high-value assets, early planning before departure is critical. Options include: selling appreciated assets while still resident in Spain (paying IRPF at savings rates and potentially avoiding the exit tax's deemed-disposal mechanism); obtaining agreement on a stepped-up basis arrangement for US tax purposes; and timing the tax residency change carefully relative to asset disposals.

9. Spain's Non-Resident Income Tax on Property Gains: IRNR Rates

As noted above, Spain taxes capital gains on Spanish immovable property held by non-residents through the IRNR regime. The key rates and rules for US residents selling Spanish property in 2025 are:

The taxable gain is the sale price less the acquisition cost (purchase price plus acquisition expenses: notary fees, land registry fees, transfer tax or VAT paid on acquisition, estate agent fees). Improvement costs incurred during the holding period are also deductible, provided they are properly documented.

There is no indexation mechanism for properties acquired after 1 January 1995. For properties acquired before that date, residual transitional rules may reduce the gain attributable to the pre-1995 holding period. These rules are complex and should be reviewed by a Spanish tax lawyer before any such property is sold.

In addition to national IRNR, local municipal capital gains tax (plusvalía municipal — Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana, or IIVTNU) applies separately. The plusvalía municipal is assessed on the theoretical increase in the land value (cadastral value) over the holding period, using a formula set by local councils. Following a 2021 Constitutional Court ruling, the calculation methodology was reformed and property owners can now use an alternative "real gain" method if it produces a lower charge. The plusvalía municipal is paid to the municipality and is separate from the national IRNR capital gains charge.

10. The 3% Retention Obligation: Modelo 211

One of the most practical — and most frequently overlooked — aspects of selling Spanish property as a non-resident is the mandatory 3% retention. Under Article 25(2) of the Ley del IRNR, when a non-Spanish-tax-resident sells Spanish real property, the purchaser is required to withhold 3% of the total sale price and pay this amount directly to the AEAT on behalf of the seller, within one month of the notarial deed of sale.

The payment is made by the purchaser using Modelo 211. The seller then files their own Modelo 210 within three months of the sale to calculate the actual IRNR liability. If the actual tax is less than the 3% already withheld, the seller can reclaim the excess from the AEAT. If the actual tax is greater, the seller pays the difference.

The retention obligation falls on the purchaser, not the seller. A purchaser who fails to withhold and pay the 3% becomes personally liable to the AEAT for the amount — up to the value of the property acquired. This creates an important compliance obligation for any person or entity buying Spanish real property from a non-resident: they must verify the seller's Spanish tax residence status and comply with the withholding obligation if the seller is a non-resident.

This retention mechanism operates entirely independently of the double tax treaty. The Treaty governs the allocation of taxing rights; the retention is a procedural compliance mechanism under Spanish domestic law that operates whether or not treaty benefits are claimed. It does not substitute for the final IRNR calculation — it merely provides AEAT with a cash-in-hand payment on account while the final assessment is pending.

11. The 2013 Protocol to the Spain-US Treaty

The original 1990 Treaty was supplemented by a Protocol signed on 14 January 2013, which entered into force on 27 November 2019 following ratification by both countries. The 2013 Protocol introduced a number of important modifications, including in the area of real estate investment.

The Protocol added provisions specifically addressing real estate investment trusts (REITs) — entities that invest primarily in real estate and distribute income to investors. Given the prevalence of REITs in US capital markets and the growing cross-border investment flows between Spain and the US, the Protocol introduced clarifications on how dividends and distributions from REITs are taxed under the Treaty. REIT distributions that are attributable to gains on US real property are treated differently from ordinary dividends, reflecting the economic substance of the underlying real estate exposure.

The Protocol also updated the exchange of information provisions to align with the OECD standard, introduced clarifications on the definition of permanent establishment, and modified certain anti-abuse provisions. For capital gains purposes, the most practically relevant Protocol change relates to the confirmation that the Treaty's anti-avoidance provisions apply to arrangements designed to circumvent Article 13(3)'s real-estate-rich company rule.

Practitioners should note that the 2013 Protocol was in negotiation for over a decade before entry into force — reflecting the complexity of the bilateral relationship and the competing interests of two sophisticated tax systems. Further updates remain possible, particularly as Spain and the United States align with OECD BEPS minimum standards, and the position should be monitored for future legislative developments.

12. The US Side: Spain Property Sold by a US Citizen

For a US citizen selling Spanish real property, the US federal capital gains analysis depends primarily on the holding period and the taxpayer's income level.

Short-Term vs. Long-Term Capital Gains

In the United States, capital gains on property held for one year or less are "short-term" and taxed as ordinary income at federal marginal rates up to 37%. Property held for more than one year generates "long-term" capital gains, taxed at preferential rates of 0%, 15%, or 20% depending on taxable income. For most middle and upper-middle-income investors, the applicable long-term rate is 15%. High-income taxpayers (approximately $492,300 and above for single filers in 2025) pay 20% plus the 3.8% Net Investment Income Tax — an effective rate of 23.8% on long-term gains.

Foreign Tax Credit Calculation for Spanish IRNR

The Spanish IRNR paid on the gain (at 19% or 24%) is a creditable foreign tax under Section 901 of the US Internal Revenue Code, claimed on Form 1116 in the "passive income" basket. The credit is limited to the US tax that would otherwise be due on the same income — if the Spanish rate exceeds the US rate, excess credit is generated. Excess credits in the passive basket can be carried forward ten years.

For a US citizen who is also a Spanish tax resident and sells Spanish property, the analysis involves both IRPF (paid as residence country tax in Spain) and US capital gains tax, with Form 1116 crediting the IRPF paid against the US liability. The Spanish IRPF savings rate (up to 28% for gains over €300,000) generally exceeds the US long-term rate, so double taxation is substantially or fully relieved.

13. Crypto Assets Under Article 13: Where Does the Treaty Fit?

Crypto assets — Bitcoin, Ethereum, and other digital tokens — present a novel question under Article 13. Neither the original 1990 Treaty nor the 2013 Protocol specifically addresses crypto assets, which did not exist when the Treaty was drafted and were not yet a material investment category when the Protocol was negotiated.

Spain's Domestic Classification of Crypto

Spain treats crypto assets as "other capital assets" (otros bienes y derechos) for IRPF purposes. Gains on disposal (sale, exchange, or deemed disposal) are treated as ganancias patrimoniales and taxed at savings income rates (19%–28%) regardless of the holding period. This is consistent with Spain's general approach to investment assets outside the specific categories of employment income, real property, and business income.

Treaty Analysis: Article 13(5) as the Default

Given that crypto assets are not real property (Article 13(1)), not business assets of a PE (Article 13(2)), and not shares in a real-estate-rich company (Article 13(3)), they fall into the residual category of Article 13(5) — "other property" — taxable only in the state of residence of the alienator.

For a non-resident who holds Bitcoin and sells it while physically or legally resident in Spain, Spain taxes the gain as residence country — and the United States, as source country, has no right to tax under the Treaty (subject to the saving clause for US citizens). For a Spanish tax resident who is not a US citizen, crypto gains are taxed only in Spain at IRPF savings rates.

For US citizens in Spain, the saving clause again applies. The US taxes its citizens on worldwide income including crypto gains, using the same short-term/long-term analysis as for other capital assets (crypto held over one year is eligible for the preferential long-term rate). The Spanish IRPF paid on the same crypto gain is creditable against the US liability on Form 1116.

14. Inheritance and Gift of Spanish Property: ISD, Not Capital Gains

A common area of confusion is the tax treatment when Spanish real property passes by gift or inheritance to a non-resident. Capital gains tax (whether IRPF or IRNR) does not apply to the transfer itself at the moment of inheritance or gift — instead, the transfer is subject to Spain's Impuesto sobre Sucesiones y Donaciones (ISD), which is a separate tax on the gratuitous acquisition.

Article 13 of the Treaty — a capital gains provision — does not govern ISD. ISD is not covered by the 1990 Spain-US Treaty, which addresses income taxes only. There is no bilateral Spain-US inheritance and gift tax treaty, meaning that both countries may assert their own ISD/estate and gift tax rules on the same transfer without treaty coordination.

However, the acquisition by inheritance or gift does have a capital gains consequence: it establishes the acquirer's cost basis for future capital gains purposes. In Spain, property acquired by inheritance is valued at the date of death (for ISD purposes), and this value becomes the acquirer's cost basis for future IRPF or IRNR capital gains calculations. If the property was significantly appreciated before the inheritance, the stepped-up basis can substantially reduce or eliminate the future capital gain on sale.

In the United States, the "stepped-up basis" rule under IRC Section 1014 achieves a similar result for inherited property: the US cost basis is the fair market value at the decedent's date of death. For inherited Spanish property, the US investor therefore benefits from a stepped-up basis under both Spanish and US rules, which can dramatically reduce the taxable gain on eventual sale.

15. Frequently Asked Questions

Q1: I am a Spanish tax resident. I sell shares in a US company at a profit. Does the US have any right to tax my gain?

Under Article 13(5) of the Treaty, gains from the alienation of shares in an ordinary operating company (not principally composed of real property) are taxable only in the residence country — which in your case is Spain. The United States, as the source country, surrenders its right to tax your capital gain under the Treaty. Your gain should be declared on your Spanish IRPF return (Modelo 100) in the base imponible del ahorro at savings rates of 19%–28%. No US non-resident tax applies. (Note: if you are a US citizen, the saving clause means the US retains the right to tax you on the gain, but you claim a credit for Spanish IRPF paid.)

Q2: I am a US resident and I just sold my apartment in Malaga. The notary retained 3% from the buyer's proceeds. Do I need to file anything in Spain?

Yes. The 3% retention paid by the buyer (Modelo 211) is a payment on account of your Spanish IRNR liability — it is not the final tax. You must file Modelo 210 within three months of the sale deed date to calculate your actual IRNR liability (24% of the net capital gain for US residents). If the actual tax is less than the amount retained, you will receive a refund. If it is more, you pay the balance. You must also report the gain on your US Form 1040 and claim a Form 1116 credit for the Spanish tax paid.

Q3: I hold shares in a Spanish company that owns several apartment buildings in Madrid. The company is worth €3 million. If I sell the shares, does Spain have a right to tax my gain?

It depends on whether the company's assets consist "principally" (more than 50%) of immovable property situated in Spain. If more than half the company's asset value is those Madrid apartments, Article 13(3) of the Treaty applies, and Spain can tax your gain as if you had sold the real estate directly. The IRNR applies (at 19% or 24% depending on your residency). If the company also holds substantial non-real-estate assets — machinery, receivables, cash, goodwill — such that real estate represents less than 50% of total assets, Article 13(3) does not apply and the shares would be treated as "other property" under Article 13(5), taxable only in your country of residence.

Q4: I am planning to leave Spain to move to the US. I have a stock portfolio worth €5 million with €1.5 million of unrealised gains. Will Spain's exit tax apply?

Yes — you meet both of the exit tax thresholds (assets over €4 million, and unrealised gains over €1 million). Spain will treat your departure as a deemed disposal of the financial assets, triggering Spanish IRPF on the unrealised gains at savings income rates (up to 28% on the amount over €300,000). There is no deferral mechanism for departures to the United States (deferral is only available for EU/EEA destinations). You should plan carefully before your departure date — options include realising the gains before departure (paying IRPF while still resident, but potentially at the same or lower effective rate and with a clean slate for US cost basis), or timing the departure to a tax year where IRPF deferral strategies are available for portions of the portfolio. Consult a Spain-US cross-border tax specialist well in advance of the move.

Q5: I sold Bitcoin at a large profit while living in Spain (I am not a US citizen). Does Spain have the right to tax my crypto gain, and does the US?

Yes — Spain taxes your Bitcoin gain as residence country under Article 13(5) of the Treaty, which assigns taxing rights over "other property" gains exclusively to the residence state. Your gain is declared on your Spanish IRPF return (Modelo 100) and taxed at savings income rates of 19%–28%. The United States, as the source country, has no taxing right on this gain under the Treaty because you are not a US citizen (the US saving clause does not apply to non-citizens). Ensure you have correctly recorded your Bitcoin acquisition cost in EUR at the purchase date exchange rate and your sale proceeds in EUR at the sale date rate. Currency fluctuations between EUR and USD enter the gain calculation and can increase or decrease your taxable gain relative to the dollar-denominated profit.