To say that Spanish capital gains tax is complex would be an understatement. Not only are the calculations difficult but the tax has had a few changes over the years. At one point we had a different rate of tax for non resident and resident. The non residents were being hammered for 35% while residents payed 15%. However, after a few clashes regards fairness etc this was changed to be the same for both non resident and resident and settled at 18%. Good for the non residents as they had a reduction of 17% but not good news for residents who had to fork out an additional 3%.

When you bought is also important as the laws changed a couple of times. Anything bought prior to December 1986 is exempt but the legislation ended in 1996 so anything bought between 1986 and 1996 is only partially exempt and anything bought after 1996 pays the full sum.

To make things even more complicated the cost of acquisition and expenditure on improving the property is allowable as a deduction when calculating the net gain. Then there is an indexation co-efficient that increases the allowable costs for inflation. This part of the calculation is based on how long you have owned the property.

Fair to say most people by now will be confused and the need for an accountant to work it all out is self evident but the new capital gains ruling is very welcome and applies no matter when you sell the property in the future. For those buying a new property they not only gain from the 50% reduction in IVA but also from this reduction in capital gains. A double whammy so to speak.

One thing to consider – lets hope the government in ten years time are prepared for the drop in income they may suffer as a result of this new ruling when today´s purchasers become tomorrow´s sellers.