Currency and capital gains tax boost for Spanish property
By Kevin Barnett, 25 Jun 2010
Spanish property sales are expected to enjoy a new boost as Sterling regains the 20% lost to the Euro since 2008 and prices on some favourite Costas drop to pre-buying bonanza levels of a decade ago.
Capital Gains Tax changes in the recent UK Emergency Budget are an extra incentive for more Brits to buy a second home in Spain, where the capital gains tax is the same as the UK basic of 18%, but with no extra 10% penalty for being a wealthier owner, as is now the case in Britain.
Experts claim CGT can be offset by the UK’s £10,000 personal allowance and more generous allowances in Spain where taxes paid and other costs on acquisition and on selling can be deducted. There is, however, an increased value multiplier based on the number of years in ownership that can marginally add to any CGT tax paid in Spain.
It’s even better, for official ex-Pat residents. There is no CGT (Impuesto sobre Incremento de Patrimonio de la Venta de un Bien Inmeuble) payable in Spain if, within two years, the seller reinvests the proceeds of the permanent house sale in a replacement property - deducting the buying costs from the profits when the sell the replacement house is sold.
More good news for resident house sellers in Spain is that any CGT paid can be offset against any personal income tax due for the year of sale. There is no CGT in Spain for all residents over 65s, an important aspect for Brits seeking retirement homes
Because Spain has a Double Taxation Agreement with Britain and other northern European Countries, CGT a resident has paid in Spain can be offset against what might otherwise be due, again minus any personal allowances.
One expert blogger on the Spanish Property News blog concludes that with the abolition last year of Spain’s Wealth Tax, it is more likely property owners – resident and non resident - will pay far less CGT in Spain. He advises British buyers to use a local accountant or gestor to do the sum and agree the amount with the Spanish tax authorities to ensure you understand your own personal obligations and liabilities and help mitigate the CGT handed over.
For serious buyers, there are many Spanish bank repossessions at bargain prices, Sterling has regained the 20% lost against the Euro since 2008, low cost mortgages of up to 90% and helpful sources like PropertyInSpain.Net who specialise in bank-owned bargains and no-hassle purchase of fully legal property in Spain.