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TAX ON REALISED GAIN (RESIDENTS)
Individuals (IRPF)
General regime (assets acquired after 31st December 1994)
1. Gain is calculated by deducting the base cost (acquisition price plus costs) from the disposal value.
2. In respect of real property (land and buildings) only, the base cost may be "actualised" by applying the relevant co-efficient extracted from the statutory table. The co-efficient allegedly adjusts the base cost for inflation, and differs according to the combination of the year of acquisition and the year of disposal. For example, the co-efficient for a disposal in 2009 of property acquired in 1995 is 1·3368, and of a property acquired in 1994 or before the co-efficient is 1·2653.
3. Where the period of ownership was of one year or less, the gain is added to general income and taxed at the normal rates
4. Where the period of ownership was over one year, the gain is taxed at the flat rate of 18%
Transitional regime (assets acquired 31 Dec 94 or prior to that date)
1. Gain is calculated by deducting the base cost (acquisition price plus costs) from the disposal value. Any "stuffing" of value (eg post-acquisition improvements to real property) are treated for purposes of calculation of tax due as separate investments. Note that in respect of real property only, the acquisition price is actualised by applying the pre-1995 co-efficient of 1·2653.
2. The gain thus calculated is then reduced by a factor depending on the type of asset and the number of years (or part thereof, however small) during which the asset was held.
3. The number of years is calulcated from date of acquisition (which must be not after 31st Dec 1994) up to 31st December 1996 (note, NOT 1994). From the resulting figure, two complete years are then deducted (giving the multiplicand "N").
4. The following reduction percentages, multiplied by "N", are then applied to reduce the taxable gain:
4.1 Real property 11·11% (from which it may be deduced that property held for ten years and a day prior to 31 Dec 96 is effectively exempt from tax on a disposal since (11-2) x 11·11% = 100%)
4.2 Shares etc quoted on an official stock exchange 25% (note FIFO system applied for calculation of term and gain). Note that shares in investment companies do not benefit from this percentage.
4.3 Other assets 14.28%
5. The resulting gain is taxed at 18%
Exemptions in both general and transitional regimes are available (note: for residents only) in respect of:
1. Sale or lifetime gift (transfers mortis causa are in any event exempt from tax on capital gains) of their main private residence by taxpayers over 65 years of age
2. Re-investment within Spain of the proceeds of sale of a main private residence into another main private residence within 2 years. This exemption may be apportioned if only part of the proceeds of sale are duly re-invested. Extraordinarily, where a residence was sold in 2006, 2007 or 2008, the re-investment period is extended to the 31st December 2010
Entities (IS)
Realised gains are essentially taxable as part of general profit. In respect of real property only (ie not other types of asset), some "actualisation" of base cost - designed to correct for monetary inflation - is provided by the application of a co-efficient, the calculation of which is wildly complex and depends in part on the taxpayer company's financial position as shown in the accounts.
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TAX ON REALISED GAIN (NON-RESIDENTS)
General (IRNR)
1. Where Spanish real property is transferred (by way of sale or otherwise) by a non-resident (individual or entity), the purchaser must withhold 3% of the price paid, on account of the vendor's potential liability to tax on realised gain (irrespective of whether a gain or a loss is to be realised). The 3% must be paid over to Hacienda (Spain's fiscal authority) and the receipt passed to the vendor for inclusion in his tax declaration (whether to pay the additional tax or recover some or all of the retention). If purchaser fails to retain, the property itself (now property of the purchaser) is charged with the retention due and may be auctioned to enforce payment of the retention by the purchaser.
Note: This requirement to withhold 3% of the transaction value may be claimed as an allowance against the 18% tax applied to the realised gain in the hands of the transferor.
2. Losses may not be offset against gains, whether in the same or a later year.
3. Both entities and individuals follow the rules (given further above) for resident individuals, except that
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Gains are taxed at a flat rate of 18%, whether the taxpayer be individual or entity and includes gains made on sale/gift or redemption of interests in Spanish investment funds.
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The age and re-investment exemptions are not available
EU residents: Normally an individual or company resident in the EU but without permanent establishment in Spain, nor operating through an offshore company, is not taxable in Spain on gains arising from the alienation of Spanish shares and financial instruments including state-issued bonds (other than those of a company whose principal activity is directly or indirectly in Spanish-sited real property). This exemption is not available where during the 12 months preceding the alienation, the taxpayer (and associated persons, such a family members) owned a participation amounting to 25% or more.
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