Excluding taxes related to the purchase itself and local authority taxes, there
are two main taxes payable by non-residents on their Spanish property, these are:
Capital Gains Tax
-
currently 18% of
the gain made (usually the authorities will deduct 3% from the sale
proceeds in lieu of this tax); and
Spanish Inheritance Tax
-
this is a complex area with many different rates depending on a number
of factors but importantly there are limited allowances for spouses or
any other parties.
Spanish Inheritance Tax may be minimised by:
- Taking out a mortgage in Spain;
- Adding all children 18 or over to the title deeds; or;
- Buying the property in the name of children 18 or over and having them grant you "uso fructo" (lifetime use of the property).
All are commonly used but you should discuss the options with a suitably qualifed Spanish adviser.
Recent Developments
Properties owned by a foreign company: In January 2007 the Spanish authorities announced an annual 3% tax on the catastral value of properties owned by non-Spanish companies. If there are tax treaties between Spain and the country of residence of the company then the company may be entitled to exemptions.
Again, you should discuss with suitably qualified advisers.
Spanish Inheritance Tax: In April 2007 the Junta de Andalucia announced it was studying simplifying, and in some cases reducing, Inheritance Tax, especially for Spanish residents.
UK Capital Gains Tax: By changing your Principal Private Residence (PPR) to your Spanish holiday home the property is not subject to UK capital gains tax during that period or for the final 3 years of ownership. A PPR election must be made within 2 years of buying a new property, regardless of location, and can be made in respect of existing properties owned. Contact your local tax office to find out how to make a PPR election.
Contact us on: rod@ms4spain.com or +34 678 021 347