Occasionally our clients tell us that for family, health, or economic reasons, they are forced to leave Spain. Some cases suddenly and without prior notice. In this cases, the Capital Gains Tax in Spain must be considered.
Until now, those who ceased to be tax resident in Spain, and sold their home in Spain (primary / habitual residence) after they had already left Spain,(ie. once they were no longer tax residents in Spain). Were not entitled to exemption in capital gains tax for reinvestment in a habitual residence.
Becuase this exemption only applied to those tax resident in Spain.
However, a new legal change in Spanish regulation could be very interesting for those who are not tax residents in Spain ( but were before) who are selling their property here.
This is because since January of this year, 2015, following a change in the Non-Resident Income Tax Law (RDL 5/2004). Income Tax for Non Residents has a new additional provision, the seventh, named: Exemption for reinvestment in habitual residence.
Under the new regulation, taxpayers may be exempted payment of capital gains tax, if they are tax residents in a Member State of the European Union (although they are not tax residents in Spain).
And if they transfer a property in Spain which has been their main residence here, and provided that the amount obtained by the transmission is reinvested in the acquisition of a new habitual residency or home.
This exemption is conditional on compliance with the provisions of income tax law, and therefore, certain requirements will need to be met, such as:
.- the reinvestment of proceeds from the sale of the habitual residence, to be carried out within a period not exceeding two years.
.-This time must be considered from the date of transmission (ie from the date of sale of home.).
Spanish rules also foresee the exemption in the payment of capital gains tax if the money from the sale of the home is invested in paying another new habitual. Residence bought by the taxpayer before, but it must be within a maximum period of two years before.
Under the new regulation, despite being exempt in the Capital Gains Tax, the purchaser must withhold and pay 3 percent of the price. This is as per the applicable rules, as this applies when a real estate located in Spain is sold, even though the vendor is non tax resident in Spain.
If you want to sell or buy property in Spain, and you need legal advice, contact us.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.
Carlos Baos (Lawyer)
Spanish Law firm solicitor attorney barrister.
Alicante, Denia, Costa Blanca Marina Alta
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