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Property Tax News On Spanish Algarve

15th December 2009: Spanish Algarve Property News

A recent tax bill has been approved by the Spanish Government and is under study by Parliament; the general terms are expected to come into force by January 1 2010 although the new VAT modifications should be in force from July 2010. At the moment it is only a bill and its content may change in its processing through Parliament.


One of the most significant new features is the modification of capital gains tax to be applied to residents and non residents. There is to be a new tax rate if the law is finally approved that will be established as follows:

* 19% capital gain tax up to 6,000 Euros * 21% capital gain tax onwards of 6,000 Euros

In summary, if this bill is approved, then in the case of property sales after January 1, 2010, the capital gain produced from the sale of assets will be taxed at 19% and the excess of 6,000 Euros at 21%.


The same 19% rate mentioned above is applied to the dividends and other returns arising from a participation in the equity shareholding of an entity and to the interest and other returns obtained through an assignment of equity capital to third parties. This rate is the same as the one applied to residents in Spain.


The VAT modification (increase) is to come into force the 1st of July 2010. General VAT should be increased by 2 points (from 16% to 18%). The reduced VAT rate is to be 8%, which means an increase of 1% is applicable.

It is important to take into account that the reduced VAT rate is applicable to the purchase of newly constructed properties and therefore we think the Regional Government will also increase the Transfer Tax for second hand transmission to 8%.

Despite these changes Spain remains one of the cheapest countries in the EU from a tax perspective.

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