Spanish property problems continue

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SPANISH house sales went up for the third month in a row, although this was widely put down to a rush to complete transactions before tax breaks expired.

Meanwhile British expats living in Spain have had to comply with a new law requiring residents to declare overseas assets worth over €50,000, including bank accounts and other financial information. Failure to make an accurate declaration can lead to large fines.

As relatively few Spaniards have assets outside Spain, some Spanish politicians have said they regard the new requirement as discriminatory. They fear it may lead to an exodus of expats, putting further pressure on the property market.  

One piece of potentially good news is that the European Commission has decided to refer Spain to the EU’s Court of Justice for discriminatory real estate tax rules that prevent non-residents from enjoying the same tax benefits as residents.

According to the Spanish legislation, capital gains from the sale of a permanent residence are exempt for tax if the money is used to buy another permanent residence.

However, this provision only applies to Spanish residents, therefore discriminating against non-residents who can end up paying much higher taxes.

In practice if a person living in Spain moves to another member state, and sells a permanent residence in Spain to buy a new house in another member state he or she will be taxed on the capital gains made on the sale.

Conversely if he or she had stayed in Spain and bought a new house there, he would not be taxed.

The Commission considers that this is an obstacle to free movement of persons, workers and self-employed, and therefore breaches the EU Treaties. 

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