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Changes to Tax Spanish Laws for 2012

2011 has been indeed a very particular year. Whilst we - Spanish citizens - where trying to digest the international financial crisis (we still do) we where also called to participate in a process of general elections.

As surely everybody knows at this moment in time, the EU is firmly advising some of their member countries to urgently reduce their “public deficit”. This word only means that some countries should stop spending what they don’t have and at the same time stop borrowing money that they after have to return at a very high interest rate. This, obviously, makes impossible for the country to grow from an economical point of view. If you spend all you generate paying your debts, how could you invest to create new employment or modernize the country or become more competitive? Its not easy.

The new government elected at our general elections which took place last 20th September (conservative or right wing party) had to carry forward the necessary legal modifications to cut, to reduce, the public deficit. The new government promised during the official electoral campaign that they will not need to raise the taxes. However, once they came into power, they said that they had found a “hidden bag of deficit from the regions” in a amount above 20 billion euro.

The consequence of this has been an immediate raise of taxes through a Decree dated last 20th December 2011. Please note that, as it is said at the Decree, these changes (meaning raise of taxes) is temporal, only until the end of 2013.

If any reader wishes to have a copy of this Decree we will be pleased to send a PDF copy.

Changes introduced in 2011 for 2012

Value added tax, VAT  (Spanish “IVA”)

In Spain we have 3 different types of VAT:

  • The GENERAL (applicable as an example to services),  
  • The REDUCED (applicable when a new dwelling is purchased)
  • And the SUPER REDUCED (applicable to prime necessity good such as bread).

The Super reduced VAT will remain as it is, 4%.

The general VAT will increase from 16% to 18%.

However the reduced VAT will go from 7% to 8%.

Please note that the VAT applicable on the purchase of houses is reduced to 4%. This measure clearly tries to incentive the purchase of property. It is important to say that, in principle, this modification is temporal, only for 2 years.

Capital Gains Tax, CGT (Spanish “Impuesto sobre ganancia patrimonial”)

The CGT is a tax payable when an individual obtains a profit selling something, i.e. real estate.

With the new law the CGT has been raised from 19% to 21% (for non residents, so now residents and non residents pay the same CGT).

Transfer Tax, TT (Spanish “ITP”)

When an individual purchases real estate from another individual (not a developer, not a property off – plan)  the tax to be paid over the transfer of this property is called Transfer Tax (remember, when purchasing from a developer this tax is then VAT).

The transfer tax is and has been for many years 7% over the purchase price. As from march 2010 this rule changed:

  • Up to 400.000,00 € price the TT has been raised from 7% to 8%.
  • From 400.000,00 € up to 700.000,00 € the TT to pay has been raised from 8% to 9%
  • Above 700.000,00 € the TT to pay will be 10%.

As a conclusion, it is possible to say that this change will only affect to luxury properties.

Stamp Duty, SD (Spanish “AJD”)

In those cases where new property is purchased (I mean directly from the builder or developer), together with the VAT Stamp Duty should be paid. Same when a mortgage is used to finance the purchase of real estate.

The Stamp Duty to be paid was 1% and now it has been increased to 1,20%.

Income tax for non residents (Spanish IRPFNR)

The  tax rate to use at the time of doing the calculation for this tax has been raised from 24%  to 24,75%.

I would like to achieve this opportunity to remind our readers that we have a very illustrative article about how the non residents income tax is prepared. We will be delighted to send you a PDF copy upon your request.

Wealth Tax, WT (Spanish Impuesto sobre el Patrimonio)

This tax was eliminated from our legal system in 2008. The new party at the government has decided to put this tax back in place to tax those who are wealthier.

However, this tax has not been put back in place exactly as it was. No, there has been some changes. Only those tax payers owners of a wealth valued above 700.000,00 € have to file and pay this tax. It is understood that for the calculation of the wealth it is possible to deduct some charges (i.e. mortgages). The final tax to pay will be in accordance with a running scale.

If you have any doubts or wish to discuss any change at the Laws, please don’t hesitate to write us.

Yours sincerely,

Jose F. Criado
Abogado - Solicitor

This article was posted by Criado & Kraus
on Friday, March 30, 2012 - 11:50