Saturday, 9 June 2012

Tax can be……. Very taxing

I’m reprinting a letter I’ve received which I think gives its own explanation…….and a warning

  • Allow 10% / 12% extra when you are buying a property in Spain ?
  • Capital Gains tax when you make a loss?
  • Plusvalia tax when you sell
  • How much does it cost to sell?

Dear David

I’ve been reading your blog for sometime but I’ve not seen you cover the cost of SELLING an apartment in Spain.

The apartment cost the equivalent of €74,250 in pesetas in 2002. Due to the economic decline the final sale price agreed was €60,000, so clearly a LOSS. Despite that I had to pay TWO taxes based on an INCREASE in value.

In fact, after all costs and taxes deducted, I actually received €53,268 or 11% less than Sales Price.

The costs paid are as follows, all in Euros (€);

Legal Costs                                                    1,274.40
Estate Agent                                                  2,124.00
Retention for estimated Local Rates                  300.00              
Plusvalia (Tax to Local Council)                      1,234.24
Capital Gains Tax (3% to non-residents)         1,800.00

The costs, other than the taxes also include I.V.A. so there is actually a third tax. My solicitor says I can reclaim the 3% Capital Gains Tax but it ‘might take up to 18 months’ to recover!

Please publicise this TAX SCANDAL please, Mr Goodall

Name withheld
3% CGT withholding tax is a disgrace, does Spain no favours and in a falling market means they have to pay it back – eventually! Spain could drop this piece of discriminatory fiscal policy otherwise the EU Commission might do it for them.

I put this to a few of my Professional Connections and they agreed that at the ‘point of sale’ these costs were ‘about right’. However, with some careful planning, many could be AVOIDED.

Remember that this is a very modest apartment in Alicante province. As always you need professional advice and careful planning in ADVANCE.

Just ask

David Goodall
Financial Pages in Spain