I am currently non-resident in Spain, and own an apartment here. I applied for my ‘residencia’ in October 2004, and understand that this may take up to a year to materialise.
In the meantime I wish to dispose of the apartment and need to know if I have to wait until my ‘residencia’ comes through in order to avoid the much higher rate of capital gains tax applicable, or is there some solution to this problem?
Secondly, is it legal to make a ‘compra-venta’ agreement which leaves the completion date open, subject to a solution of the above-mentioned?
When you are tax resident in Spain, you are considered resident for the entire calendar year and not only for the time you have been in Spain. This means that all the income obtained during the calendar year could be taxable.
Consequently, if you are going to sell your apartment in 2005, you will have to analyse your tax residency for the whole year, in order to know if the capital gain will be taxable as a Spanish tax resident or as a non-resident.
According to Spanish law, the taxpayer shall be considered to have his habitual residence in Spanish territory when any of the following circumstances exist:
1. Spending more than 183 days in Spain during the calendar year.
2. Having the principal centre of your business, professional or economic interests in Spain.
3. Having your spouse and under-age children permanently residing in Spain, except in cases of legal separation or other circumstances where you can prove that your tax residence is in another country.
Therefore, being tax resident in Spain is independent from obtaining a residence permit from the Spanish Home Office.
Once you are considered tax resident in Spain, the Spanish Personal Income Tax Law distinguishes between two types of capital gains or losses:
1. Those generated in less than one year. This would form part of your general taxable base and be taxed according to the progressive rate scale (at present, with a ceiling of 45%).
2. Those generated after one year, to be included in your special taxable base, taxed at a fixed rate of 15%.
In the case of selling your apartment as a non-resident in Spain, the tax rate applicable for capital gains is 35%.
Consequently, the fact of leaving open the date of completion is not decisive, provided that you will sell your apartment in 2005 and that you are considered Spanish tax resident for this year.