Capital Gains less taxing in Spain

So the dreaded Capital Gains Tax remains at 18% for most Brits, but the UK Budget added an extra 10% for high earners who want to sell second homes in the UK or Spain.

The tax clicks in only after the owner’s basic UK profit allowance of £10,000 has been applied along with the cost of any improvements and running costs (if renting it out).

This change is likely to encourage more Brits to buy a second home in Spain, where the capital gains tax is the same as the UK basic of 18%, but this can be offset by taking away taxes paid and other costs on acquisition and on selling and then working a multiplier based on the number of years in ownership. In Spain there is no extra percentage penalty for being a wealthier owner.

However, 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, you reinvest the proceeds of the permanent house sale in a replacement property and you get to deduct the buying costs from the profits when you come to sell the replacement house. Likewise for all residents over 65s.

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.

Because the countries have a Double Taxation Agreement, whatever CGT a property seller who remains a UK resident has paid in Spain can be offset against what might otherwise be due in the UK, again minus the personal allowance.

Conclusion: 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, but better to use a local accountant or gestor to do the sum and agree the amount with the Hacienda. They will 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.