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In general the recent changes to taxes in Spain have brought about substantial benefits for the non-resident investor. Here is a summary of some of the most significant ones:
Non resident individuals with property investments in Spain
Capital gains will be taxed at 18% (previously 35%)
Withholding taxes on the sale of property is reduced to 3% (previously 5%) but be aware that this is a payment on account for any potential capital gains tax liability.
Rental income will be taxed at 24% on the gross amount received (previously 25%)
Dividend income and interest will be taxed at 18% (previously 15%) unless the taxpayer is a resident in a country with a double tax treaty with Spain.
Resident individuals:
Personal allowances have been increased and for a joint declaration amount to €8,450 and for separate declarations the amount of €5,050 is applicable.
The new child allowances are:
For the first child €1,800
For the second €2,000
For the third €3,600
For the fourth and more €4,100
The lowest rate of Income tax is raised to 24%, and the highest is lowered to 43% (See Table Below)
All Capital gains are charged at 18% irrespective of the period of ownership.
Dividends are taxed at 18% (the first €1,500 are exempt)
Interest is taxed at 18% (except between related parties)
| Taxable Base Up To(€) |
Tax Due(€) |
Remaining Taxable Base Up To |
Rate Applicable% |
| 0 |
0 |
17,360 |
24 |
| 17,360 |
4,166.40 |
15,000 |
28 |
| 32,360 |
8,366.40 |
20,000 |
37 |
| 52,360 |
15,766,40 |
Onwards |
43 |
Company Tax
Corporation tax will be reduced from35% to 32.5% for 2007 and to 30% from 2008. For small companies (turnover under €8,000,000) the tax will be reduced from 30% to 25% up to €120,202 of profits, the excess over €120,202 will be taxed at 30% (previously 35%)
Non resident companies
Such companies with properties in Spain will be taxed at 18% (previously 35%) on the gain.
The rate of withholding tax on the sale will be reduced to 3% (previously 5%)
Rental income will be taxed at 24% on the gross amount received (previously 25%)
Dividende and interest will be taxed at 18% (previously 15%). Unless the company qualifies for a DTTC or CEE directive exemption and can provide a certificate of tax residence in that country.
NOTE: Offshore companies will, in principle, qualify for the 18% rate on the capital gain obtained in Spain on the sale of a property. However, it is probable that the Government will introduce changes to the application of this rate.
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