Welcome reduction in Capital Gains Tax

The Spanish government have announced a very welcome reduction in capital gains tax (Plusvalia) on second homes or investment properties purchased between May 11th and Dec 31st 2012. The reduction will be applied when the property is sold.

The announcement was made by Ana Pastor, head of Public Works, which includes the housing department, and could be a welcome boost for the property market.

Everyone is entitled to the reduction, both individuals and companies, residents and non-residents, but it will not apply to sales between parents and their children, nor will it apply to main residences which already benefit from a reduction.

The current capital gains tax rates for 2012 are as follows:

Residents

0-6,000 euros – 21%
6,000 – 24,000 euros – 25%
24,000 euros or more – 27%

Non-residents

Flat rate of 21%

All of the rates above will benefit from a 50% reduction if the property being sold was purchased between the specified dates.

This is a welcome stimulus for the property market that has been struggling to recover from the bubble which burst in 2007 leaving thousands of empty, unsold or incomplete properties all over Spain.