|August 6, 2015||No Comments|
When we enter the month of August, the process of purchasing a property will be a slightly more expensive one, as the Spanish government is implementing new tax laws. Previously, the ‘wealth transfer tax’ was set at 8 per cent for a single property acquisition. However, from the 1st of August 2013 the tax will be set at 10 per cent. If the investor is under the age of 32, the tax would be set at 5-7 per cent, depending on their situation. Spanish tax authorities have estimated that the government will yield approximately 150 million euros with these changes, which should help improve the bottomless deficit they are facing at the moment. New laws that have recently been installed dictate that residents in Spain who have assets worth more than €50,000, have to report it to the authorities. This has turned out to be somewhat of a ‘witch hunt’, as residents feel their privacy has been breached by tax collectors. Retired foreigners in Spain, who received their residency through the acquisition of a property, are reluctant to reveal their fortunes at home as they have enjoyed the free ride in Spain. As a result, foreign investors, in particular British people, who received residency before the emergence of the new tax laws, are now fleeing the country to avoid the taxes they have to pay for their assets at home. Perhaps this is a prediction for the future, that the Spanish real estate market is becoming exclusively a commercial housing market. As it is now, Spain is a mess. There is no growth, GDP per capita fell by 1 per cent in 2012, interest rates are at an embarrassing 0.5 per cent and consumption is not rising. The implementation of these regulations is a good start to Spain embracing a brighter future, as it will create a more organised and intelligible system. These reforms have been supported by regulations that will make residency more obtainable for investors outside of the EU zone. For only €500,000 or by purchasing 2 million euros worth of government debt, an investor can provide himself and his family with Spanish residency. Up until now, it has been a struggle to receive residency without waiting months for a reply. Hopefully, with a change in government attitude this reform will be successful, and more ‘real money’ will enter the market, steadily increasing housing prices. This bombardment of new reforms and tax regulations is a shout out to the Spanish people and foreign investors. The ‘hidden’ economy is about to be revealed, and people are leaving for that reason. If the government can eliminate tax fraud and implement transparency, then maybe in Spain can become a reliable place for investment.