The Spanish legislative authority has included a significant increase in taxes on real-estate profits in its planned series of comprehensive fiscal reforms from 2015 onwards. Fast action before the end of 2014 is therefore advisable, if you wish to save tax.

The so-called “update coefficients”, which increase the acquisition value of the property by taking inflation into account – thereby reducing the taxable profit derived from the difference between sale price and purchase costs – will cease to apply from 2015. If you are thinking of selling a property, fast action before the end of the year is likely to result in high tax-savings. Owners who bought their property before 1995 may in particular be liable for a large multiple of the present tax burden if they delay the sale by just a few months and let the operation run into next year. The “reduction coefficient” (coeficiente de abatimiento in Spanish) will likewise no longer apply from 2015 onwards. A slightly simplified example illustrates the shock that sellers are likely to face in 2015:

If you bought a property in 1984 for €100,000 and its 2014 value is €632,000, application of the update and reduction coefficients leaves a taxable profit of just €150,000. The tax burden for 2014 would therefore be ‘only’ €41,000. However, if you delay the sale until January 2015 or later, the tax burden derived from the new method of calculation comes to a massive €120,000; i.e. three times the original amount. This confirms that owners with a firm decision to sell should do so quickly, before the end of the year.

It once again appears that reform measures being touted by the government as “tax savings” are nothing of the kind. What they fail to say is that there will in fact been no net reduction in the tax burden, but rather a certain amount of relief in some individual cases, which will in any case be clawed back by imposing increases elsewhere. Given the wretched state of public finances, a reduction in overall tax revenues is currently something of a pipe-dream. Issued: 9/10/2014. 

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