Most British owners of Spanish property remain unaware of tax changes that occurred there at the start of the year, says the Schmidt Report. Capital gains tax is no longer higher for non-resident individuals and companies: it has been cut from 35% to 18% for everyone. The withholding tax on the sale of property by a non-resident has been cut from 5% to 3%. This doesn’t mean you can avoid UK tax, says David Budworth in The Sunday Times. But if you elect your Spanish home as your principal private residence a few weeks before selling, the final three years of growth are free from UK tax.
The other news isn’t so good. New anti-avoidance rules dictate that a company registered in a tax haven which holds property in Spain is likely to be deemed resident there even if it is managed overseas. To avoid local taxes (Spanish property-holding companies now have to pay 25% corporate tax on the first e120,000 of profits and 32.5% thereafter) the company has to prove it is non-resident, “possibly by demonstrating that it holds assets in other jurisdictions as well”. So if you own property in Spain, it’s worth reviewing your tax situation now.