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SPANISH TAX REFORM 2015

The Spanish Government passed in November 2014 various regulations which include important amendments to Spanish Corporate Tax, Personal Income Tax.

Also minor changes with respect to VAT and taxation of nonresidents.

In this latter case the amendments aim to adapt the legislation to the EU law and also to the changes introduced in the personal Income tax applicable for Spanish residents.

These regulations came into force in January 2015 and the main aspects introduced for non residents are as follows:

Tax rate for non residents without permanent establishment in Spain.

The general tax rate on income to be received by a non resident is reduced from 24.75 percent to 24 percent.

EU and Economical European Area residents will benefit from a reduced tax rate of 20 percent in 2015 and 19 percent in 2016.

This tax rate is applicable for example to the presumed income for the use of the property by a non Resident owner, or if the property is rented out to the income for rental received.

The tax rate for dividends interest and capital gains is also reduced from 21 percent to 20 percent in 2015 and to 19 percent in 2016.

Summarising we have the following Rates:

Rates 2014 2015 2016
General Tax Rate 24,75% 24% 24%
Tax rate applicable to EU and EEA residents 24% 20% 19%
Tax on dividends interest and capital gains 21% 20% 19%

 

Transfer of Spanish Property by a Non Resident.

The Tax Reform eliminated, when calculating the capital gain obtained by the owner of a Spanish property who sells same the application of coefficients which update the purchase value of the property depending on the acquisition date of the property to take into account the inflation.

This results in an increase of the capital gain and thus of the tax to be paid.

They are maintaining an inflation relief for properties purchased before 1994, ,however this will be only applicable for those assets where the sale’s price does not exceed 400.000 Euros.

On the other hand the reduction on the tax rate as indicated above which has fallen from 21 to 20 % and will in 2016 go down to 19% mitigates slightly the tax increase.

Transfer permanent residence in compliance with UE law.

When a Spanish resident sells his home and reinvests the proceeds in a new one the capital gains in the sale is tax exempt, this now also applies to any former Spanish resident who purchases his new property in the UE or European Economic Space , no capital gains tax on the sale will become due.

No tax exemption on dividends.

The tax exemption on the first 1.500 Euros dividends to be received by a Non resident has been eliminated in line with the amendments made in the Income Tax for residents.

Changes to the Inheritance and Gift Tax in compliance with the UE law.

Non-resident individuals that are tax resident in a EU or EEA member State are now entitled to apply the tax reliefs approved by the Autonomous Region where the assets or rights concerned are located, instead of the State legislation, which is normally more burdensome.

This way Spain has eliminated the different tax treatments between resident and non resident, for which Spain was denounced before the European Court of Justice.

Please note the information provided in this article is of general knowledge only and is not to be construed or intended as substitute for professional legal advice.