CAPITAL GAINS TAX IN SPAIN

If a capital gain is made as a result of the sale of a spanish property, then this will be subject to taxation.

Calculation of the Capital Gains Tax in Spain

In principle, a capital gain is determined by subtracting the purchase value from the sale value, however certain taxes and costs can also be taken into account.

The purchase value is obtained by taking the original price paid for the property and adding certain costs and taxes, directly related to the purchase, and paid for by the buyer. This value is then adjusted by applying up-to-date coefficients which are established on an annual basis by the General Budget and which depend on the year of purchase.

This inflationary coefficient can only be applied if the property was acquired at least one year before the sales date.

If the property has been rented, the purchase value could be reduced by the amortization corresponding to the rental period. The amortization is also adjusted by relevant coefficients.

The sales value is obtained by taking the sales price of the property, and deducting directly related taxes and expenses, which have been paid by the vendor.

The difference between the sales value and the purchase value will be the capital gain, which is then subject to taxation at a flat rate of 18 %.

Capital gains on properties purchased before December 31st, 1994

If the property was acquired prior to December 31, 1994, the capital gain will be divided in two parts:

a) The proportion of the gain from the date of the purchase to 19th January 2006.

b) The proportion of the gain from 20th January 2006 to the date of sale. For this second part the flat rate of 18 % is applied.

The gain of the first part is reduced by 11.11% for each year of ownership exceeding two years from the year of acquisition to 31st December 1996, and rounded to the next higher whole number. The gain is taxed at a flat rate of 18 %.

If the individual selling the property acquired it on two different dates or if the property has been improved, the amount is calculated as if there were two different capital gains, with different ownership periods for the application of the relevant coefficients

The purchaser, resident or not, is obliged to withhold and pay to the Treasury 3% of the agreed price, which must be paid within one month of the sale taking place.

This payment is considered an advance payment of the capital gains tax liability of the vendor. The purchaser must supply the non-resident vendor with a copy of form 211, which is the receipt of the payment of the withholding tax. The amount will be deducted automatically from the vendor's actual capital gains tax liability.

However, if the amount withheld exceeds the tax due, the vendor may request a refund of the difference.

Useful Information on Capital Gains proceedures

Tax form to be used is form 212. Only in the case of a property which is sold, and jointly owned by a non-resident married couple, may a single tax-assessment be filed.
Filing period: Three months after the end of the deadline of the period for payment of the withholding tax (payable within one month of the sale taking place).
Filing place: At the District or Local Office corresponding to the location of the propert
Tax rate: 18%

Tax-refunds

In the case that there is a capital loss or if the withholding tax exceeds the capital gains tax payable, then you may apply for a refund of the excess. The refund procedure starts with the presentation of a 212 form at the District or Local Office. The refund is paid by means of a bank transfer to the account stated in the return. The account holder has to be the taxpayer or representative. In the latter case the representative must be lawfully entitled to receive the payment.

If no bank account is open in Spain, a cheque payment can be requested. The 211 form filed with the withholding payment has to be attached to the 212 form for non-residents.

The Tax Administration is obliged to carry out a provisional settlement within six months following the deadline established for the filing period of the form 212. If the provisional settlement has not been performed within this period, the Tax Administration will forward the excess of the self-assessed tax due.

If six months have passed without a refund due to reasons attributable to the Tax Administration interest on the amount payable is due.