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Tax Advantages for Residents:
Foreigners often think that taking out an official residence permit in Spain will cost them money and expose them to Spanish taxes which non-residents can avoid.
The truth is often the reverse. The resident property owner has a number of tax advantages over the non-resident.
- · If you are a resident and more than 65 years of age, and you have lived in your home for three years, you will not be subject to Spanish capital gains tax when you sell it, no matter how great your profit.
If you are a resident, your maximum capital gains tax is 18 per cent, and it can be even less, whereas the nonresident pays 35 per cent.
If you are a resident and you sell your property, you are not subject to having 5 per cent of the total purchase price withheld and deposited with Spain’s tax agency as a guarantee against your tax liabilities.
If you are a resident and you bequeath your home to a spouse or child who is also a resident, you can probably avoid Spanish inheritance tax on 95 per cent of the valuation. The conditions are that you have owned and lived in your home for a minimum of three years. The inheritor must be a resident and must undertake not to sell the property for 10 years, while continuing to be a resident. Top limit on the 95 per cent reduction is €120,000. Over that, you must pay
Spanish property owner’s imputed income tax does not apply to the owner’s principal residence. A resident of Spain also has an exemption on the first €108,000 of valuation for Spanish capital assets tax, “wealth tax”. The non-resident pays from the first euro of valuation. If a husband and wife jointly own a property worth €120,000 and they are non-resident, they will pay a non-resident property owner’s income tax of €600 each year plus €240 of Spanish wealth tax, a total of €840 per year. The resident is exempt from these taxes. For wealth tax, the exemption is €108,000 each for husband and wife. (see section on Taxes for more details)
If you really live most of the year in Spain, you are violating the law if you do not obtain a residence card. The law says that your tourist stay, even as a European Union citizen, is limited to 180 days per year. You can be fined €300 if you over stay this limit.
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