At present, many people are wondering about the tax reform 2015 whose approval is planned by the current Government and that would enter into force in the financial year of 2015. At present, the law is being studied by the Senate and is almost certain to be finally approved.
To quote the Government itself, the reform to be approved introduces a decrease in Spanish Personal Income Tax of around 12.5% in 2015 and 2016, a tax that the Government itself drastically increased in 2012.
The aim of the reform is to create jobs, encourage economic growth and promote competitiveness, all of which lead to a fairer tax system. Thus, the most significant amendments regarding Spanish Personal Income Tax, consist in decreasing rates, decreasing the amount of tax brackets or increasing the individual and family minimum and, with regards to Spanish Company Tax, there is a proposal to decrease the tax rate of the current 30% to 28% in 2015.
However, not many people talk about how this tax reform will affect the second hand sale of movable assets. The reality is that, whether a property is sold before the year ends or afterwards is going to lead to a very different tax situation. This is due to the fact that, from 2015 and as a consequence of the tax reform, the amortization or update coefficient would be eliminated, two tax benefits that currently decrease the payment of the capital gain tax in the Spanish Personal Income Tax generated by sales of assets, like immovable goods and shares, bought many years ago.
Tax payments shall be increased, overall, for properties acquired before the 31st of December 1994, as there could be both amortization coefficients and currency correction.
As an example (with approximated calculations), if you bought a property in Marbella in 1990 for € 750,000 and decided to sell it on the 31st of December 2014 for € 1,500,000, capital gains tax shall be € 85,000; although if you decide to sell it on the following day, that is on the 1st of January 2015, capital gain tax shall be € 179,000, with a difference of € 94,000 from a practical point of view.
However, some exceptions are foreseen. Neither tax payers older than 65 years old that sell their main residence, nor those that use capital gains to reinvest in another property where they live shall pay taxes.
If you intend to sell your property and would like to know the tax consequences related to the sale, please do not hesitate to contact our legal team in order to be informed about taxes to be paid before or after the reform, as well as any other query, as we are at your complete disposal.