- August 28, 2006 at 3:58 pm #52168
So it seems that CGT on property sales will change from 15% (Residents) and 35% (Non Residents) to 18% for all – on 1st January 2007.
[is that date definitely right?]
What effect might this have on the property market?
Loads of properties suddenly come on the market (as if there weren’t enough already) . . ?
At a 35%-minus-18% related lower price, thus energising the market a bit?
- August 30, 2006 at 10:49 pm #65319
Nick I’ve bumped your post up the board as nobody has reponded yet.
Drakan, on a previous thread
you said that the CGT rate would be changing. I’m sure you’re right but can you point us all in the direction of an official publication or site where the new legislation in terms of changes to CGT for non-residents is to be found such as a BOE site. It’s just that this question is being asked on a lot of forums and nobody seems to be able to come up with the proof! Thanks.
- August 30, 2006 at 11:02 pm #65320
- August 30, 2006 at 11:57 pm #65322
Thank you D. However, this article still says that it “has not yet been passed by law”. What I’m looking for is a link to the official change in legislation details as published by the government in their Boletin del Estado or similar.
- August 31, 2006 at 7:47 am #65326
- August 31, 2006 at 9:03 am #65327
Hi D, yes I’ve looked there but, unless I’m missing it (which is why I asked Drakan), I can’t find anything as yet which leads me to believe that the legislation still hasn’t gone through. If Hacienda is going to be “losing” all this revenue from the reduction in CGT in non-residents’ house sales then they are going to have to recoup it from elsewhere. Will the proposed 1% increase in CGT from residents make up the difference?
- August 31, 2006 at 10:19 am #65333
The CGT change is not yet law. It is still what they call an ‘anteproyecto de ley’, which is a statute in draft, before it becomes law. Although nothing is ever 100% certain to become law until it is on the statute book, in this case it’s very likely to go through. This raises an interesting question: shouldn’t non-resident vendors be waiting until this change becomes law in January before completing a sale? Doing so could save them 17% in CGT. That’s not to say that vendors shouldn’t be trying to find a buyer now – they certainly should. It just means that they should try to put off the final signing of deeds before notary until the law is passed.
- August 31, 2006 at 11:11 am #65335
I wonder if this reduction will make any difference to the 5% that is withheld on selling.
- August 31, 2006 at 12:07 pm #65339
I beleive this would become 3%
- August 31, 2006 at 1:22 pm #65341
Thanks HB for ‘resurrecting’ my post.
Forgive me, Mark, but even you, your emminence, sir, don’t seem able to point to something definitive that suggests 1st January (or any other January date) as likely, let alone definite. For a law that will ‘probably’ come into being, soon-ish.
And what about the second part of my question – what change if any might the change in CGT, whenever it happens, provoke?
- August 31, 2006 at 6:33 pm #65370
Mark has it spot on. It is still an Anteproyecto de Ley, not a law passed yet.
Here I provide you with a link to the spanish Ministry of Economy where they advertise the legal changes as from January 1st 2007. Hope your Spanish is polished up nickstrong because I’m not going to translate a single word:
If you are going to sell a house, wait until next year to reap the huge cut of 17% in CGT, everyone is doing so and that’s what I’m advising my “clientes británicos e irlandeses”. 😉
- August 31, 2006 at 6:55 pm #65372
Thank you Drakan. I don’t expect the info to be in English or for a translation, I live in Spain and my Spanish is just fine 😉 It’s not even me that requires the info as I’m resident, it’s for friends who aren’t!
- September 1, 2006 at 7:09 pm #65414
Is it just me or does the link not work to the Anteproyecto pdf file at the bottom of the page Drakan provided the link to?
- September 2, 2006 at 10:32 am #65421
Going back to nickstrong’s comment, I think that he could be right and if and when this law is passed it could give the buyers an advantage, provided they are clued-up on Spanish Law and property values.
Conversely could it have a detrimental effect with the more unscrupulous expats still setting their own valuations as if the CGT was still at the same level, thereby making a bit more out of it?
It could even result in the resale market being flooded with properties by sellers who have been reluctant to sell under the current tax regime.
What do others think? Is it a good or bad move? Will it kill-off the Black Money issues?
- September 15, 2006 at 12:06 pm #65740
It is important to rembmer that for UK resident owners of Spanish property this reduction will be academic as they still have to pay UK CGT.
For most higher rate taxpayers who have owned their prperties in Spain for less than 5 years there will still be a UK liability currently, even after paying the 35% CGT in Spain.
This is because the UK has 40% CGT reducing only after 3 years of ownership to 38% and after 5 years to 34%. Only after 10 years of ownership it goes to a maximum 24%.
So, A UK resident still has a liablility and this is so if the money is kept in Spain,or outside the UK or re-invested in another Spanish property.
The 18% rate will benefit 2 types of UK Taxpayer.
Thoese who would pay CGT @ the basisc rate 22% and higher rate taxpayers who have owned the Spanish property for 5 years or more.
Both groups will have been paying Spanish tax above their UK liability.
Many UK residents still think they only have to pay tax in Spain and this only leads to a big tax bill down the line!
- September 18, 2006 at 11:09 pm #65804
Good thread – I am getting the content from the link translated as I see this as extemely poignant information for me. The key factor which as yet to identify, as Mark mentions, if the new law goes through, will the new rate apply ONLY if you purchased on or after the date of the new law, and 35% will apply if you purchased prior to the new law?
Please let me know if you need the translation and I will pass on.
- September 19, 2006 at 7:27 am #65805
The “key factor” is not when you purchase it’s when you sell.
If you sell after 1st of January 2007 the CGT rate applicable will be 18%. Although I imagine there will be many rules regarding how long you have had the property, exemptions, reliefs etc..
- September 19, 2006 at 11:55 am #65809
The cynic in me thinks it’s the Spanish Gov’t attempting to boost a flagging market, sales are well down, properties are overpriced on the Costas and selling slowly, so cut capital gains tax. Vendors could then lower prices maybe and investors might consider re-investing again if the tax is cut, meanwhile the Spanish landscape can be further ruined by high density run of the mill development.
Spain’s economy relies a lot on stamp duties and other taxes derived from the property boom.
- September 21, 2006 at 8:01 pm #65938
I have now had this document translated – it bears no CGT slant for non residents, and is information for tax paying working residents of Spain. In fact, it does not comment on “CGT” at all.
Has anybody any information at all relating to CGT changes that are going through?
- September 22, 2006 at 8:34 am #65946
You better ask for your money back. The document clearly has two links to the fiscal changes in CGT for non-residents as from 1st January 2007.
On the first link:
Enlace (pdf): Presentación reforma fiscal
On page 30 PDF document it clearly states the change.
Then you have the second link which now seems to be brocken and expands on IRPF for non-residents:
Enlace (pdf): Anteproyecto de ley del impuesto sobre la renta de las personas fisicas y de modificación parcial de las leyes de los impuestos sobre sociedades, sobre la renta de no residentes y sobre el patrimonio.
As I posted, you need to know Spanish to read it through. There is no need to translate every page.
- September 22, 2006 at 7:56 pm #66004
I cant see it making much of a difference myself – most foreigners I know just sell and accept the 5% tax and go home. I even know one Dutch guy who buys and sells property all the time – he merely pays the 5% retention and never bothers with CGT – his problem iof course if he gets caught up. But many foreigners wouldnt bother – so I cannot see it making a difference unless they retain the full 18%at source in the Notaries
Just my opinion of course
- September 28, 2006 at 10:51 am #66160
I remember seeing a thread where you recommended a very good Lawyer.
We are in a mess with our purchase in Mijas Costa region and just don’t know who to trust if we have to go forward and complete. Having said that ,the Aifos contract is very flawed as is the final build but no BG or LFO. Desperate situation.
Who is the gentlemen and where does he hand out. Valencia I think you said. We are not made of money and cannot keep wasting it on non productive firms.
4.5 years into this and need to bring situation to a close.
Any help would be appreciated please as we live and work in the UK and don’t have a lot of spare time.
- September 28, 2006 at 1:03 pm #66162
As a citizen I feel it is my civic duty to pay my due and fair Taxes and expects the hacienda to be the custodian of my taxes and other citizens and therefore apply the taxes with diligence.
As the Hacienda treats us foreginors as a cow to be milked and treats us different to Spaniards, the % of capitals gains tax is a case in point.
Why should our Dutch friend do what he does. A society losses its moral/legal grounds when there is parity within its society.
- September 28, 2006 at 2:10 pm #66166
Vince is right though, it is what most foreigners do, thats why they started the retention. I don’t think its a moral question, its just tax avoidance, carried out by the good/not so good the world over.
Maybe when its a fairer tax then sellers will pay it.
- September 28, 2006 at 2:51 pm #66169
Read recently on another forum that some English vendors, who were apparently told by their legal advisor not to bother to pay CGT, !!!! have now been “requested” to return to Spain.
- September 28, 2006 at 3:16 pm #66170
Hi Melosine, can you post a link?
- September 28, 2006 at 9:42 pm #66189
Katy, I am afriad what you have commented above is Tax evasion whilst tax avoidence is legal
- September 29, 2006 at 8:57 pm #66244
Those of you who believe the proposed reduction in Spanish CGT from 2007 will revitalise the property sector could well be right judging by what happened here in Ireland.
The power of low rates was shown when the 40 percent capital gains tax rate was halved in 1999 to 20 percent and revenue increased by 50 percent in one year and by 270 percent over three years.
It also resulted in the virtual end to the so-called ‘black economy’ which was rampant at the time in land/property dealings.
The 20 percent CGT is further reduced depending on how long one owned the property/land.
It’s a win win for the people selling property and the tax authorities.
- September 30, 2006 at 2:38 am #66251
not sure the new rate will revitalise the property market. Whether we agree with it or not unless the 5% retention is more than the 18% CGT payable – who would bother unless they were forced to. I agree that lower taxes should mean more people paying less taxes and the reveue win, so do people paying taxes – but actually cannot see it that way.
Just MHO of course
- October 1, 2006 at 8:02 pm #66298
🙁 I Can’t see how this is going to help anyone. If you brought in 2003 when we did, and are trying to sell at the moment, you will be lucky to break even. If you sell at the moment, say a typical 2 bed apartment on CDS at 22000 euros (if you are lucky). the government gets to keep 11000.00 euros. If you have not made any profit at all how is this going to help??? You then have to go through the process of claiming your retention tax back, this can take a long time, 15 months according to one post and still no refund in sight!!. Has any one else actually managed to get their retention tax back?
The way things are going at the moment, I’m sure there are going to be a lot more people falling into the category where they are not going to make any profit, but the government is still going to get the retention tax.
18% of nothing is no better than 35% of nothing.
- October 2, 2006 at 4:50 pm #66323
We finally got our retention back from the Spanish Tax authorities – this took a total time of 18 months even with our lawyers chasing up on a regular basis. The only good thing is you get 5% interest paid from the 8th month of the claim being submitted.
- October 4, 2006 at 9:33 am #66417
😆 Thats great news, at least we can hope to get it back eventually!!!
- October 4, 2006 at 12:49 pm #66422
Are you saying the % of tax e.g 28% after 10 years is the % that I have to apply after the full tapering releif of 40% after 10 years.
I have to pay 28% on the indexed gain.
My understanding is the % tax falls into the same tax band as the Income tax band ?.
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