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"We heard that Spain is scrapping capital gains tax..."by Martin Bright from Costa Tropicana Properties, Almunecar
First we need to recognise the distinction between wealth tax (0.2% – 2.5%)* and capital gains tax. Thirty years ago, wealth tax was introduced by the government as a temporary measure, then four years ago the Socialist party made an election promise to abolish this tax. In April 2008 the Spanish Council of Ministers supported the measure to do away with wealth tax in Spain as of 1st January 2008, once the scheme is approved by Parliament, the final assessment date for wealth tax will be 31st December 2007, with the final wealth tax bill due around now in 2008.
For those moving to Spain in the future and being Spanish residents they will have one less tax to pay. With foreign residents owning property in Spain also receiving the advantage of no more wealth tax payable on their property.
This move to abolish wealth tax is tied in to an €18 billion plan of emergency tax cuts that were recently published by the Spanish government to be effective immediately. These cuts were given to support economic growth, counter the global credit crunch and assist the depressed housing market. In 2008, €10 billion will be allocated and one of the moves includes an immediate €400 tax rebate to all Spanish workers and pensioners. The remaining €8 billion will be held over to 2009.
The loss of this revenue will almost certainly mean that the regional governments will be looking at other ways to make up the shortfall since it has historically been a fund that tops up the Autonomous counsels. So what does this mean to me? Foreign residents (with no fiscal resident status) owning a Spanish property in Spain, and who have no other Spanish income, will still be accountable for Spanish tax on any earned rental income (fixed rate of 24%) and also capital gains tax on sale or transfer of their Spanish property, currently charged at 18% (including 3% retention as provision of obligation) on exchange. For more information click here or contact your Spanish accountant.
*NOTE: Spanish wealth tax is based on annual net assets held by the 31st December and the tax bands range over eight groups with rates applying from 0.2% to 2.5%. Spanish residents are liable for wealth tax on their worldwide assets and also benefit from various tax-free allowances, however a non-resident will be taxed on their Spanish assets only, and no allowances are given.
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