Capital gains on your property in Spain

When selling your property in Spain you may be subject to a Capital Gains Tax (CGT). This tax is on any profit the Spanish government perceives that you have made, which even in the present climate is an issue that many have to watch out for. Currently the rate is set at 18% and can make a serious dent in anyone earnings.

A quick example:
You buy a property for 150,000 Euros
2 years later you sell for 250,000 Euros.
By these basic figures, you have made 100,000 Euros and the government is going to claim 18,000 Euros leaving you with 82,000 Euros.

Well this is wrong!

First you need to calculate your REAL costs of your property.

When you bought at 150,000 you also had to pay a range of costs including 7% transfer tax, stamp duty, legal fees, etc… which to make my life easier will say came to a clean 10% of the purchase price. You now include the money you have spent on the property including the attractive furniture package on offer for only 10,000 Euros that your partner saw and let us not forget the new kitchen for 6,000 Euros!

Now 2 years down the line you intend to sell the property with all the furniture, etc…
Now when calculating your ‘profit’ on the property the figures look a bit different.

Sales price: 250,000
minus the 150,000
minus the 10% (15,000)
minus the furniture 10,000
minus the kitchen 6,000
total costs 181,000
leaving you with a gross profit of 69,000 Euros
with the government claiming 12,420 Euros
which means you net 56,580 Euros

So where am I going with all this. Well quite simple really, although the first example seems to show a nicer figure on what you made on the property, the second includes the real costs on the property. In both cases you made the same money except in the second by including the real costs you were able to lower the figure the government perceived as your profit and thus actually saved 5,580 Euros.

And this is only the start, NEARLY EVERYTHING you have had done to the property, if backed up with invoices, can be treated as cost and can be set against the perceived profit. Tiling the roof, new doors, air-conditioning, light fittings, etc…. This is especially the case for those of you who have had the property for many years and have at one stage or another modernized your home.

For those who have not had the hindsight of saving your invoices, another option would be to come to an agreement with the buyer and set a price for all that is being left. Maybe if the agreed purchase price is 250,000, agreeing that the furniture, fittings, etc… have a value of say 20,000 Euros. That way on the title deeds it is stated that the property is being purchased for 230,000 with 20,000 for everything being left. This would benefit both parties by lowering both the buyer and vendors taxes slightly.

With the way the market is, I thought anything that can help you squeeze a bit more out your sale would be helpful. But remember this is just my guide, as always seek the assistance of your gestor or lawyer to see how else you can make some savings.

Andrew Belles

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