Good news arrived for sellers of properties in Spain in the form of the established value valid for calculating capital gains tax. As of 1 July this year, the Spanish tax authorities have ruled that the value should be the selling price rather than the cadastral reference used previously.
This shift in the figure used for capital gains tax brings good news to sellers who should now find that their tax bill is lower. In this article, we explain why.
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New ruling from the Spanish Tax Office
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In their ruling V1601-22 from 1 July, the tax authorities established that the property price be the base for calculating capital gains for income tax purposes. Previously, the calculation had used the value stated in the cadastral registry.
As a result, most sellers will pay fewer capital gains tax on profit made from the property transaction. At Costaluz Lawyers, we believe this is undoubtedly good news.
“Capital gains tax is levied at rates ranging from 19 to 26%, which are already high,” said Maria de Castro, CEO and founder of the legal practice. “Anything that helps reduce the tax burden on sellers is very welcome,” she added.
One exception to the new ruling
The use of the selling price for capital gains has one exception: the seller may not use the transaction price if it is lower than the market value. In this case, the seller must take the market value as the base for calculating capital gains from the sale.
Buyers continue with cadastral reference
However, although sellers may now use the selling price at the base for their capital gains tax calculations, buyers may not. They must continue to use the cadastral reference as the base for transfer tax (impuesto de transmisiones patrimoniales/ITP).
ITP constitutes the largest cost of buying property in Spain and can be as high as 11% of the value depending on the region of Spain. In Andalucia, for example, it’s levied at a flat rate of 7%.
Get expert tax advice
Capital gains tax ranks as one of the most complicated in many countries and Spain is no exception. If you’re selling a property, take expert advice on this tax, how to reduce it as much as possible and how to file it.
The fiscal team at Costaluz Lawyers provides such advice and will be happy to assist you in all matters concerning capital tax gains. Get in touch for a consultation.
Disclaimer: This information is provided for general guidance purposes only and does not constitute personalised tax or legal advice. Each case must be assessed individually according to the client’s specific circumstances. It is essential to consult a qualified specialist before taking any action or making any decision.
Legal Notice: The content on this page is provided for general informational and educational purposes only. It does not constitute legal advice and should not be relied upon as such. No action should be taken based solely on this content without first seeking independent professional legal counsel. Each case requires individual assessment based on its specific circumstances. CostaLuz Lawyers accepts no liability for actions taken or not taken based on this content.
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This is general information, not definitive legal advice — every case requires individual analysis.