capital gains

[sheeba]

We have a property in Mallorca which we are selling which was bought in the 1950’s and put in our names as the children. Our question is there a formula the Spanish authorities accept to value the property as there has been a lot of development to the property and we only have estimates but not enough receipts. It was bought as a piece of land with a ruined finca on this at around 4000 euros and currently worth close to 2 million at sale. Any help or guidance would be greatly appreciated.

[Mark Stücklin]

Sheeba, when you come to sell your lawyer will be able to confirm this for you if I’m wrong, but as I understand it you can only deduct building work for which you have receipts. Best work on that assumption and be happy if it turns out better.

[Yolanda P. – Ypama Abogados]

Capital gain tax is calculated over the difference between the selling price and the purchase (acquisition) price.
An inflation correction will be applied to the purchase price. The inflation correction is calculated using official tables of the Spanish government.
To calculate the total acquisition price, to the price paid to the vendor, you can add all kind of costs: Lawyer fees, estate agent fees, taxes, notary and registry fees and the costs of extensions and improvements (they increment the capacity or habitability of the house or makes the house to stay longer in good conditions, such us structural works). The tricky part is that costs for repairs and maintenance (keep house in good conditions as it was, such as painting, changing existing floors, etc) cannot be added to calculate the total acquisition price.
In order to be possible to add all these costs to the purchase price you need evidence of the payments to the constructors/companies.
Invoices are the best documents, but as consumers are not companies, other kind of documents are also admitted. For instance, an estimation from a company and the evidence in the bank of the payment to that company for the same amount (more or less) would be enough to prove the works done and the payment. An email with the explanation of the works to be done and an estimate of the price + evidence of the payment could also be used.

As the amount invested is high and obtaining the higher total acquisition price could mean big savings in taxes, my advice is to look for a good tax advisor in your area and give him all the documents you can find.

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