Discussion 3: Our Transparent World

CAPITAL GAINS TAX.     How?  Why?   Who?    At what rate?   When?

                                          Expenses to be deducted – Pitfalls!

Already sold or have an intention to sell?    Profit or Loss?

HOW? If you sold your house in Spain you can calculate whether you sold it at a profit or loss.

Sales price – Official Expenses-Original Purchase Price = Profit or Loss

Why? You can ask why do I need to know the exact amount of profit that I get from the deal.

The profit obtained by the disposal of real estate located in Spain is subject to a capital gains tax.

Who? Residents. Citizens of EU. Non EU Citizens.

At what Rate?  

-        Citizens of EU who are Not Resident in Spain pay capital gains tax at a flat rate of 19%

-        Non EU Citizens who are Not Resident in Spain pay capital gains tax at a flat rate of 24%

-        If you are a Fiscal Resident in Spain the capital gains tax is paid at the following scale:

Profit:                                                                          Rate,%

0-6.000 euro                                                                19%

6.000-50.000 euro                                                       21%

Above 50.000 euro                                                      23%

 When? Resident pays the capital gains tax as a part of the income tax and has to declare it when filling the tax declaration. Non Resident has 3 months to declare it.

 

                                             Let’s look at the details.

In our previous article we explained the difference between Resident, Non Resident and Fiscal Resident and you now can determine your status.

If you have questions, contact us!

Let’s analyze what pitfalls we can face in calculation.

Sales price – Official Expenses-Original Purchase Price = Profit or Loss

It is very important to calculate expenses that you can deduct.

At the time you purchased your house you paid:

-        Transfer tax or IVA, in case you bought a new build house

-        Notary fees

-        Registration fees

-        Legal fees

-        Commission to your estate agency

If you made any improvements to your house (building a swimming pool and outside kitchen)

At the time you sold your house you paid:

-        Taxes and fees

-        Commission to your estate agency

 All the above expenses you can deduct from your sales price.

BUT!  ATTENTION!

Spanish Tax authorities will accept these expenses only if you have official receipts for such payments. The invoice should include full details of the company that issued this invoice, including CIF number and full details of the client, including your NIE number. Only with such documents in hand you can claim a deduction.

We strongly advice you to ask for an official invoice from the company and keep it in your files in order to be able to deduct such expenses from the sales price.

EXAMPLE:

Sales price:             290.000

Purchase price:      180.000

Expenses:                 65.000

 Profit:                      45.000

Taxes to be paid:

Non EU Residents                                         45.000 x 24%    10.800 euro

EU Residents                                                  45.000 x 19%     8.550 euro

Fiscal Residents                                             45.000 x 21%     9.450 euro

Why do Fiscal Resident pay more than EU Resident?

 In our next article we will talk about this unfairness, double taxation and special situations when seller is not liable for capital gains tax even if the deal is closed at a profit.

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