Tax Break Year 2006 for Spanish property?
By Sue Brown, 18 Jan 2006
Just six months after Spain was ordered by the European Commission to stop charging British and other foreign property owners a hefty extra 20% capital gains tax, 2006 could become Tax Break Year for ex-pats.
The EC has now decided to take Spain to the European Court of Justice to enforce the rules that calls for everyone to be treated the same in Euroland – and that could result in tax demands for only 15% on the profit from selling second homes in Spain.
Per Svensson, of the Foreign Property Owners’ Institute in Spain, said: “If they change the law, people will be able to charge the real rate for their villas or flats. At the moment they charge less or pay money ‘in black’, or undeclared cash, to evade paying capital gains tax.”
Spain also applies a flat withholding tax rate of 25 per cent on employment income for non-residents. Residents pay only 15 per cent.
Terry Walker of specialists PropertyInSpain.Net said: “The timing of this EC action is critical as Spanish property has been losing out to the lower taxes and lower prices of emergent markets. Higher prices in Spain can be justified on build quality and lifestyle grounds, but sky high taxes on successful property sales encourages fiddles and fudge.
“As a follow-up to the UK’s recent botch-up of SIPPs property pensions, we are launching Libertad tax break property buying, a new, one-stop method designed to maximise on the good tax position of Spain and counter balance some of the bad - like this unequal capital gain tax. Libertad buyers will benefit from a raft of tax breaks including CGT and Inheritance tax while at the same time being registered tax payers in Spain and paying what taxes are due.”
Libertad launch to 40,000 UK investors
Libertad is being launched to 40,000 UK property investors next month who will have a choice of 3,000 selected properties in the main second home costas and Mallorca, where brand-new freehold villas will be on offer at £44,000 on a Libertad 3 purchase plan. Four leading Spanish banks will provide low cost mortgages on all Libertad purchases and there will be management and lettings deals on many prime developments.
Note: Under Spanish legislation capital gains of non-resident individuals are taxed at a flat rate of 35%, whereas residents are subject to progressive taxation when the fixed assets remain within the possession of the taxpayer for less than one year, and to a flat rate of 15% when the assets are realised after one year of possession. The Commission considers that the Spanish tax legislation fails to conform to the freedom of capital movement enshrined Article in the EC Treaty together with the non-discrimination principle.
Spanish Property News