Tax Increases for 2010

In an effort to reduce Spain’s huge budget deficit brought about by the recession, taxpayers at all levels in Spain are going to be faced with a stricter regime and tax increases this year.

CAPITAL GAINS TAX
The tax on Capital Gains made on the sale of homes and other assets has increased with effect from 1st January 2010 from a single rate of 18% to 19% on the first €6,000.00 of any gain to, and on any gain above this amount to 21%.


For those who are non-resident for tax purposes, who sell property such as holiday homes, the Notary dealing with the completion of the sale will still be obliged to retain 3% of the total sale price as security for the Capital Gains Tax, until the necessary forms to calculate the exact amount of tax due have been filed with the tax authorities and any additional payment or refund has been made.
When deciding whether a seller is resident or non-resident, Notaries will now only accept a certificate from the tax office as to the tax status of a seller.  No other form of certificate is acceptable.  If you are selling a property you will have to obtain this certificate from your local tax office before completion.  Remember, you may have owned your property for many years and regard yourself as physically resident in Spain, but if you have not been resident here for tax purposes, the Notary will be obliged to withhold 3% of the sale price on completion.

TIME RUNNING OUT FOR CAPITAL GAINS TAX REFUNDS
If you are non-resident in Spain for tax purposes and sold a property before 31st December 2006 and were unlawfully charged 35% Capital Gains Tax on the proceeds of sale or have not had the correct proportion of the 5% of the sale price that was retained on completion returned to you, time is now running out for making a claim for any refund of tax that may be due to you.   At the latest, claims must be filed by 31st December this year, otherwise you will have lost your right to claim a refund, but the exact date depends on the precise date when you completed your sale.
If you believe that you may be still be entitled to a refund, then without delay you should gather together copies of the deeds for the purchase and sale of your property, the forms filed with the tax authorities at the time of the sale, and the receipt from the Notary of the 5%of the tax withheld at the time of the sale.

VAT INCREASES
For all of us, VAT will increase this year from 1st July 2010.  
The general rate of VAT on services, consumer goods, fuel and power, and most other manufactured goods, As well as ‘de luxe’ hotels and restaurants will increase from 16% to 18%.  The rate on processed foods, transport, ‘normal’ hotels and restaurants and newly built homes will increase from 7% to 8%.  The Promoters and Builders Association of Spain (APCE) estimates that the average price of a new home will rise by some €1,924.00.  The bottom rate of 4% VAT for basic foods will remain unchanged.

INCREASES IN RETENTIONS
Where you have to pay tax on behalf of, say a landlord of business premises, where you previously retained 18% of the amount and paid this direct to the tax authorities, this amount will now increase to 19%.

INCOME TAX
The income tax system has been adjusted so that tax allowances and benefits will be more progressive and favour the less well off.

SUMMARY
For all of us, life is going to become more expensive this year, but this makes it even more important to make sure that you take qualified advice and put your affairs in order to avoid paying more than is properly due in our harsh new environment.

Written by Michael Olmer of  Link Point Legal & Business Services on Tuesday 16th February 2010