Spanish Capital Gains Tax

Capital Gains Tax
New for 2007

Here we are dealing with the latest rumours from the Spanish rumor mill, so before taking any action or relying on the information provided please check with your own Assesor, Gestoria or Fiscal Representative. If you don’t have one drop us an email and I will try and arrange an introduction for you.

There was a time when anyone who had bought their Spanish property before 31st December 1986 was exempt from paying Capital Gains Tax. [THIS NO LONGER APPLIES.]

This exemption was annulled as from 20th January 2006 and now long term owners of property in Spain must pay Capital Gains Tax on the profit gained after January 20th 2006.

This is in draft and will not be enacted upon until 31st December 2006, so it is posible there could be changes.

Again, it is possible that this could change however, the differential between the rate for residents and non residents which has been deemed to be discriminatory is changing to 18% for all gains regardless of residence.
Residents and Non Residents

A gain is calculated by deducting the acquisition cost from the disposal value.

For property (real property) the acquisition cost may be adjusted by application of a co-efficient from statutory tables. This adjusts the cost for inflation purposes and reduces the amount of tax payable.

Any qualifying improvements to the property may also be taken into account

Where the period of ownership is less than one year the “gain” is added to income and taxed accordingly (this is not an attractive option).

Where the period of ownership is over one year the gain is taxed at a flat rate of 18%.

For property, there is up to 100% hold-over relief on your main residence providing the gain is re-invested in the new main residence within two years of the sale.

If only a proportion of the gain is re-invested, then only a proportion is taxable.

If aged over 65 years and have lived in your main residence for more than three years and are tax-resident, the gain is tax-free and there is no need to buy a new property to claim roll-over.

There are additional rules for other Spanish financial investments and you should seek specialist advice, please do contact us!

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