New Tax Regime On Spanish Property Sales
If you’re thinking of selling your property in Spain, you need to know about the new tax regime that is being prepared for introduction in 2015. Changes will mean that some people will pay a lot more in tax, read on to see what has altered.
Current Tax Situation
When you sell property in Spain you can reduce the tax payable on the profit made on the sale by applying one or two compensatory coefficients: one that takes into account the increase in the cost of living (inflation) and an additional coefficient that is time-based and is only applied to properties purchased prior to 1995.
In simple terms, 100,000 € twenty years ago are not worth the same as 100,000€ today and until now every year the Tax Office published a table with the applicable coefficients.
Will All Sellers be Affected?
Basically no, there are three types of sellers who won’t be affected by the new tax regime:
- Those who intend to reinvest the amount received from the sale in the purchase of another property.
- Those who sell their main property (ie where they live – not holiday homes)
- Those who sell and then buy another property within two years.
Additionally there will be possibilities for people aged over 65 to reinvest the profit in an annuity.
How Much Extra Tax Would Be Due?
On Idealista, Spain’s main property website, they give the following example:
A home bought in 1989 for the equivalent in pesetas of 80,000€ and sold for 500,000€ would generate a tax bill of around 29,000€ less if it was sold this year compared with 2015.
There has been little publicity about the change, which is not surprising as it only favours the State coffers. The Ombudsman in Spain (Defensor del Pueblo) is requesting leniency for those forced to sell due to the recession.
Anyone who is thinking of selling should take into account the tax change and, if necessary, get professional advice from a property lawyer in Spain. Depending on your circumstances you may be included in one of the exceptions shown above.
El Mundo’s website offers a calculator to input property purchase price and date, and the selling price and date, in order to calculate the approximate tax if you sell this year or from 1 Jan 2015.