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New Fiscal Laws Will Hammer Some Property Vendors

Cristóbal Montoro, Spanish Minister of Finance and Public Administration
Cristóbal Montoro, Minister of Finance and Public Administration

The Spanish Parliament has voted through fiscal changes that will hammer some vendors with higher taxes next year.

The new laws, which have yet to be published in the official gazette, will take effect on the 1st of January 2015, and were passed with the sole support of the Government’s own party, and opposed by pretty much everyone else.

Vendors of properties worth more than €400,000, and acquired before 1994 (mainly elderly vendors), could see a big rise in their capital gains tax bill, as the new changes scrap the abatement coefficient above €400,000, though the inflation adjustment remains in place.

The Government originally planned to remove the abatement coefficient altogether, but ran into resistance from the regional government in Madrid, the state ombudsman, and associations such as CEIM (employers’ association in Madrid). In the end they left the abatement tax reduction in place for properties sold for up to €400,000.

Howefver, if a taxpayer sells a property bought before the 31st December 1994 for €300,000, the coefficients will be applied to this amount leaving the taxpayer with a credit of €100,000 to be used on the sale of any other property or asset bought before 31 December 2014, which can benefit from the tax deductions, even if they’re sold later.

Another measure affecting property sales approved in the changes brings the non-resident taxation on rented properties in line with the taxation applied to residents.

Both the Spanish Senate, and the Congress of Deputies, have now approved the changes proposed by the Spanish Minister of Finance and Public Administration, Cristobal Montoro.

Under Montoro’s leadership, the Spanish Ministry of Finance has enacted some ill-conceived tax changes that make Spain a less attractive destination for property investors and expat retirees, such as the infamous worldwide asset declaration law. Some of these latest changes will increase the damage.

If you own property worth more than €400,000 and acquired before 31st December 1994 you might, as a result of these changes, have a much higher Spanish capital gains tax bill if you sell next year.

SPI Member Comments

One thought on “New Fiscal Laws Will Hammer Some Property Vendors

  • You mention in the article something about tax reform with regards to rental properties and the bringing into line of non resident tax requirements with residents. Does this indicate the removal of the punative 25% tax burden on rental income for non residents ? And if so presumably the tax payable would be calculated at the end of the tax year with rental income being included in the overall tax bill along with any other income ?

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