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Taxes when Selling Spanish Property
(Capital Gains Tax non-residents) |
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Taxes when Selling Spanish Property (Capital
Gains Tax non-residents) |
| A non-resident seller is liable for payment
of a 35% Capital Gains Tax on the profit of the sale of
their home unless it was bought before January 1st 1.987.
However, there are exemptions available for those who have
owned their home since 1.994 and before. Also, the vendor
can offset against the gain made on the sale other costs. |
A vendor will
be able to mitigate his tax exposure by three different
ways:
Reductions on when the home was purchased.
Those who bought a home after the 31st of December
of 1.994 will not be entitled to any reductions.
Those who bought in 1.987 of after will enjoy of a reduction
of 11.11% on the net gain for every year they have owned
the home before the 31st of December 1996 after taking
the first two years. This means that a seller starts benefiting
from this reduction, his first 11.11%, if he bought in
1.994, 22.22% if he bought in 1.993 and so on.
Those who bought before the 31st of December 1.986 will
be pay no tax, as the cutoff point is 1996.
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Reductions on the inflationary movements
This reduction is obtained by applying a percentage to
the l purchase price, raising the original price to the
level of the value of the Euro today. This inflationary
correction factor is applied to the entire purchase price,
as well as to all costs surrounding the purchase. Likewise,
improvements and extensions on the home will have
to be updated inflation-wise.
The correction factor to be applied will be the following:
| Year of
purchase (or of execution of works) |
Correction
Factor (%) |
1994 and previous |
1.1690 |
1995 |
1.2350 |
1996 |
1.1928 |
1997 |
1.1690 |
1998 |
1.1463 |
1999 |
1.1257 |
2000 |
1.1040 |
2001 |
1.0824 |
2002 |
1.0612 |
2003 |
1.0404 |
2004 |
1.0200 |
2005 |
1.000 |
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Reductions on the inherent costs of the
purchase, works done on the home and others.
Costs of the purchase: these would include VAT of Transfer
Tax, Plusvalía Tax (where paid by the buyer), Land
registry and Notary fees, lawyers and real estate agent’s
fees, where applicable.
Costs of the purchase: these would include VAT of Transfer
Tax, Plusvalía Tax (where paid by the buyer), Land
registry and Notary fees, lawyers and real estate agent’s
fees, where applicable.
Examples of not deductible costs are repair or maintenance
works, such as painting, repairs on heating systems, lifts,
plumbing and so on. Also, the installation of iron bars,
doors, double glazing windows and similar works on the
home.
Examples of deductible costs are the installation of iron
bars, doors, double glazing windows and similar improvements
on the home.
Plusvalía Tax (Municipal Tax on the increase
of the value of the land over the years)
From a little as a few thousands Euros for small properties
recently purchased to as much as a few thousand Euros
for larger estates purchased many years ago. This tax
is calculated on the basis of two variables; ratable value
of the home and number of years of ownership by the
vendor. The market value or the sales price does not have
an effect on this tax.
It is recommendable for the seller/legal representative
to find out with the Town Hall the amount of tax they will
demand |
This page has been reproduced
with the permission of Antonio Flores Vila of Marbella
lawyers.
Disclaimer:
Bargain homes abroad does not accept any liability
for the accuracy of the above legal articles and are intended
as general guidance, it does not constitute legal advice,
nor should it be relied upon, you should always consult
a lawyer to discuss your own personal situation. |
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