Changes to Spanish Capital Gains Tax Part 2
The new tax system will do away with the system regulating asset holding companies and replace it with much higher taxes. These holding companies are usually owned by more than one person which means that the assets are no affected by “economic activities”.
Property letting has until now not been considered an economic activity unless the company had an employee and premises dedicated to the absolute running of that particular business. Under the old legislation a non-resident owner/owners of real estate in this type of company would have benefited from the same GCT rate 15 per cent as individual resident if assets were disposed of by the company after only 1 year.
The new legislation now means that all companies with a turnover of less than 8 millions euros will now be taxed at 25 per cent up to 120,000 euros profit and 30 per cent above that figure. Tax fraud is now being looked at, with the buying and selling of property being put under the microscope.
Fiscal numbers ( NIFs or NIEs for non-residents ) must always be included on the property title deeds and on the local reference documents of a property (referencia catastral) so that you can obtain services from utility companies.
A massive change is that all offshore companies will now be considered resident in Spain for tax purposes, if their main assets consist of real estate on Spanish soil. This will mean that any transactions involving offshore companies will result in their tax assigned using the market value of their real estate as opposed to the declared value. This will definitely increase their tax liability.
It is anticipated that with the reduction of GCT to 18 per cent most property purchasers will now buy the property in their own name rather than through an offshore company. This will give the tax authorities a better overall picture of actually owns what and who is paying what in terms of taxes.
Pablo Conway has owned a property in Spain for the past 3 years and has viewed the changes to GCT. www.spanishbankaccount.com
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