Capital gains on selling your property after 1st January 2015. Tax Reform.


Derecho Inmobiliario y cuestiones Fiscales

Increase of the TAX PAYMENT (Patrimony increase) on selling your property after 1st January 2015. Possible Tax reform for next year.

In the process of purchase/sale of a property in Spain the sellers are obliged to pay tax on the profit obtained from it, in other words, the payment of increase in patrimony or Capital Gains Tax. At present, in order to calculate the capital gains tax - or increase in patrimony for the sale of a property-, “rates of correction and reduction” are applied but with the new Tax Reform presented by the Spanish Government and pending parliament process, these rates possibly will disappear. Therefore, those people who after the 1st January 2015 wish to sell their properties will undergo a notable increase in the payment of capital gains to be paid for the sale of their property. What are the “rates of correction and reduction”? These are the rates that update the price of sale of the property with reference to the increase in cost of living and this applies a reduction of capital gains in the properties purchased prior to 1995. The difference between the payment of Income Tax (the increase of patrimony) before 2015 and until the end of 2014 will be very large above all in the properties purchased years ago and also for those which are going to be inherited. Increase of capital gains tax.

It is true that it is planned that the percentage band of the increase in patrimony (capital gains) will be reduced between 20% - 24% but without the possibility of obtaining neither corrections nor reductions, whereby the sellers will be forced to pay much higher amounts than those at present, all this, in the case of the final approval of the Tax Reform that is pending its process in the parliament. Here we reflect an example of the tax applicable to the seller on selling a house before and after the Tax Reform in 2015:

  • Date of purchase: 15/08/1988
  • Value of sale: 450.000€
  • Value of purchase: 275.000€
  • Date of sale: 29/12/2014
 TAX PAYMENT 2014                                                       TAX PAYMENT 2015
  • Gross profit 175.000 €                                                                     Gross profit 175.000 €
  • Rate updating: 1,3299                                                                      Rate updating: Removed
  • Profit subject to reduction: 55.695,10 €                                Profit subject to reduction: Removed
  • Percentage of Reduction (%) : 77,77                                        Percentage of Reduction (%) : Removed
  • Net profit: 40.963 €                                                                            Net profit: 175.000 €
  • Amount to be paid: 8.602 €                                                         Amount to be paid: 36.750 €

As can be seen in the example above, the difference is very significant; an increase of more than 20.000€, and therefore from our legal and consultancy point of view we can only advise you to sell in 2014 in order to avoid more taxes in your Income Tax in 2015, in particular should you contemplate selling in the near future. For any doubts or if you wish to know the difference in tax payment that you would be liable for in selling your property in 2014 or in 2015, Bufete Frau Lawyers and Solicitors in Mallorca, with offices in Palma, Portals, Soller and Ibiza are at your disposal, do please contact us at any time under Important entries of legal matters in Mallorca and in Ibiza: Spanish Inheritance and Donation Tax discriminates Non Residents. Planning Law and Use of Land (LOUS). Draft of the Agricultural Law. Modification of the Coastal Law.  


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