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Capital gains tax reduction on properties bought from May this year

May 14, 2012

Capital gains tax reduction for Mallorca properties

In order to encourage real estate property investments, the Spanish Government has approved a Royal Decree with tax concessions, to be effective as from 11th May. Here is an overview of the new provisions.

The main measure is a reduction of 50% in the Capital Gains Tax on sale proceeds for properties bought between 12th May and 31st December 2012. This is regardless the future sale date.

The tax remission benefits both natural persons (residents and non-residents) and legal entities (e.g. companies), under the following conditions:

  • The property must have been purchased between 12th May and 31st December 2012
  • It must be an urban property (residential or commercial)
  • The buyer and seller should not have any connection, either corporate or family
  • The property should not be considered a commercial development or venture.

The tax reduction will be applied to the annual income tax declaration, or company tax declaration of the fiscal year during which the capital gain was generated.

Provided that the applicant meets all necessary requirements, the capital gains tax to a non-resident on the sale of their Spanish property will now be as follows:

If property is sold before the end of 2013
Full capital gains tax rate: 21 %
Concessionary rate at 50% of the above: 10.5 %

If sold in 2014 or after
Full rate: 19%
Concessionary rate: 9.5 %

The tax on capital gain to a resident is now as follows:

Property sold before end of 2013
Full rate: up to 27%, depending on amount of the gain
Concessionary : up to 13.5%

Sold in 2014 or after
Full rate: up to 21%
Concessionary : up to 10.5 %

A reminder also that the VAT (IVA) tax rate for newly constructed properties remains at a reduced rate of 4% until 31st December 2012.

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