The introduction of law 26/2014 of the 27 of November changed dramatically the way Capital-Gain Tax from the sale of an unmovable asset (a property) is calculated. This law entered in application from the 1st January 2015 end will set a roadmap for the next few years.
The calculation algorithm
From the 1st January 2015, capital gain will be calculated simply as the difference between the sale price and the acquisition price of the property. This is a drastic change from the previous calculation algorithm, where the acquisition price of the property was corrected taking into account of the inflation reducing conspicuously the capital gain.
As was the case previously, any expenses derived from the purchase or sale can be detracted from the capital gain; for example transfer tax (in Spanish ITP or impuesto sobre las transmisiones patrimoniales), real-estate expenses, lawyer and notary expenses. Interests from mortgages cannot be deducted. Provided that there are regular fiscal invoices, it will also be possible to deduct expenses from work that increased the value of the property during the period of ownership; for example, major renovation work.
Once the base is calculated, we can apply different tax rates, depending on when the sale was signed at the notary.
|2015||2016 and above|
|from 1/1 till 11/07||from 12/07 till 31/12|
- It’s worth noting that there is a 50% reduction on the capital gain if the acquisition of the property was done between the 12th of May, 2012 and the 31st of December 2012. This measure was introduced in 2012 in the hope of giving a boost to the sluggish real estate market of the period – the measure didn’t have the hoped-for big impact. This reduction is not applicable if buyer and seller at the time of purchase or sale were relatives (up to the second level, including spouses).
- In the case of the seller being a resident of the EEA excluding Liechtenstein (European Economic Area: the EU plus Norway, Iceland), the sale is not affected by capital-gain tax, provided that all the following conditions are met:
- The asset is located on the Spanish territory
- The property was the usual residence of the seller
- The money from the sale will be reinvested in the acquisition of a new usual residence. If the amount reinvested is lower than the sale, the difference will be subjected to the capital gain.
Of course capital gain tax will have to be paid after the sale, and will be returned by the tax office after the acquisition of the new property.
Special case: property acquired before the 20th of January 2006
If the property was acquired before the 20th of January 2006, the calculation is more complex and there will be reductions related to the proportion in time of ownership before the 20/01/2006.
Retention at the moment of the sale
If the seller is non-resident, the buyer will have to retain 3% of the sale price. This will be paid to the tax office less than 30 days after the sale, as an advance on the capital gain tax. Within 3 months from the sale, the seller will have to pay the rest of the capital-gain tax (or claim the difference if the 3% retention was higher than the capital-gain tax).