Recent changes in tax regulations in Spain affect both residents & non-resident individuals

Share Diana Morales | Jan 22 2007

As of January this year a new set of amendments have come into effect with regard to taxation and personal income tax for residents, non-residents and Spanish companies.

Many of the changes are geared towards greater clarity and simplification, such as the income tax system, which has seen one of its five tax brackets abolished, and the application of a flat rate of 18% for capital gains and investment income.

The maximum income tax rate has been dropped by two points to 43%, while the minimum rate has risen nine points to 24%, with the maximum income level for those exempt from submitting a tax return increasing from €3.400 to €9.000. As you see, a lot of it is good news, as is the fact that Capital Gains Tax for non-residents selling their Spanish property has been cut from 35% to 18% and the withholding tax upon sale has dropped from 5% to 3%.

Corporation Tax, likewise, has been lowered to between 32.5% and 25%, with further reductions expected in 2008. The bad news is that properties held through companies (sociedades patrimoniales) have seen their 15% tax rate on capital gains abolished and are now taxable as stated above but on the whole both industry professionals and buyers have reacted positively to the new tax regime, as it is particularly favourable to non-residents.


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