Capital Gains

A capital gain is the positive difference between what you receive when selling an asset and what it cost you to buy it. It is the other half of an investor's return — the part that is not dividends — and it has its own tax mechanics for Spanish residents.

How it is taxed in Spain

Capital gains go into the savings base of the IRPF, on a progressive scale starting at 19% (exact brackets change; the updated detail is in our tax guide). The most valuable nuance: they are only taxed when you sell. While you hold, the accumulated gain generates no tax at all — the deferral that makes buy & hold and accumulating ETFs so efficient.

The three rules you should know

1. FIFO: if you bought the same security in several batches, the tax authority considers you sell the oldest shares first — usually the ones with the largest gain in a rising portfolio. It matters when planning partial sales and when rebalancing.
2. Loss offsetting: realised losses offset gains from the same year; the excess can offset up to 25% of your investment income (dividends included), and whatever remains carries forward for the next 4 years. Selling an unrecoverable losing position has at least that tax value.
3. The two-month rule: you cannot deduct a loss if you rebuy the same (or an equivalent) security within two months before or after the sale. It exists precisely to prevent manufacturing "fake" tax losses without leaving the position.

Capital gains vs dividends

Both are taxed in the savings base, but with a difference in control: the dividend is taxed when the company decides to pay it; the capital gain, when you decide to sell. That asymmetry underlies many portfolio decisions — and is why combining both sources gives tax flexibility.