More reasons to buy that holiday home in Spain

Holiday Lettings keeps its homeowners informed on proposals to reduce Capital Gains taxes payable by non-residents in Spain.

If you are about to purchase a holiday home in Spain or sell up and buy another elsewhere can you wait until the New Year celebrations are over? It is likely that your vendor, if a non-resident, would be happy to wait a little too. And all because the Spanish government is about to change its stance on taxes payable by non-residents.

The Capital Gains Tax payable on the difference between the selling price and original purchase price is currently a frightening 35% if you are a non-resident vendor. Proposals set to come into effect from 1st January 2007 will bring resident and non-resident taxes to an equal value of 18%.

Should you, at some point, decide to sell your Spanish home, as non-resident 5% of the purchase price is currently retained by the purchaser and paid to the Spanish Tax Authorities upon completion. This covers any debts that could be difficult to recover from a non-resident vendor once they have left the country. This amount will be reduced to 3% under the new proposals and the amount is reimbursed to the vendor against the difference of the capital gains tax when it is paid.

If you can step away from all the jargon, the proposed changes would enable non-resident investors to reap a larger profit from their Spanish property at time of sale. Should you want to gain even more from purchasing in Spain the answer is to gain residency rights.

As a resident over 65 and having lived in your property for more than 3 years you are no longer subject to capital gains tax. But most enticing, residents can claim some of the capital gains tax back if they buy another principal residence in Spain within two years of the first.

Ross Elder, MD of www.holidaylettings.co.uk commented: “This is great news for non-resident homeowners in Spain. It’s important not just to think about those exiting the market though, but about those who are thinking about upsizing or extending their investment in the country. It will bring equality amongst all Spanish homeowners.”