New rate of Spanish Capital Gains Tax

A new rate of Spanish Capital Gains Tax came into force on January 1st 2007.

A much needed boost for the beleaguered Spanish property market, this drop in capital gains tax on property sales and personal income for non-residents in Spain which fell from 35% to 18% has been well received. Until yesterday only over 65-year-olds who have lived in Spain for the last three years could benefit from CGT exemption.

Head of European operations at Halifax, Ian Smith believes this is fantastic news for overseas residents living or working temporarily in Spain. This change by the Spanish Government follows a European Court ruling deeming the previous tax regime to be unfair to non-residents. Holiday home owners and property investors alike will benefit from thousands of pounds of savings as they will have to give up 50 per cent less to the Spanish tax authorities than they did previously and landlords too will be able to cling onto more of their rental yields. Furthermore sellers of property in Spain will also enjoy a reduction in the withholding provision that non-residents pay upon completion down from 5% to 3%.

A CGT rate of 18% markedly improves Spain’s housing market competitiveness respective to other popular overseas property hotspots such as France. The Spanish lifestyle and it’s sunnier climes continue to lure British buyers and it remains the second most popular destination in which to settle overseas accordingly to recent research published by the Institute for Public Policy Research in December, which said that 760,000 Brits have selected the Iberian peninsula as their home in the sun.