The payment of capital gains tax is something we all have to bear in mind when we own property in Spain. However, the government has recently made some changes that affect property owners, particularly if you are thinking of selling your home in the near future. The new laws come into effect from 1st January 2015 and for some people there is resultantly an advantage to selling this side of the New Year.
The current capital gains tax situation allows owners a reduction on the profit of 11.1% for every year of ownership. However, this will stop at midnight on 31st December 2014. To illustrate how this affects your tax bill, let’s say that if you bought a property for €30,000 in 1989 and sold it for €200,000 in 2014, you would pay €19,575 capital gains tax with the reductions. The same sale in 2015 will result in a tax bill of €37,500.
In addition to this, under the current regulations the taxman allows for inflation when calculating the gains made on the sale. For example, a property purchased in 1999 for €56,000 would be valued at €71,719 for the purposes of the sale, thus reducing any gains to be taxed by €15,000.
For our UK clients, we’d also like to highlight the fact that the British government has also revised its rules about capital gains tax for owners of foreign property. Therefore we advise British owners to consult a UK accountant for accurate information and advice.
Overseas clients need to consider Spanish succession tax and UK inheritance tax for the future benefit of your family. What is tax efficient in Spain is not necessarily the case in the UK and vice versa, which is why we encourage you to seek expert advice about where to place any capital you gain.
We are not suggesting that owners panic and rush out to sell; there are advantages to waiting. If you’d like more information about these changes and how they affect you, please contact Raquel Perez of Perez Legal Group at info@perezlegalgroup.com for a confidential consultation.