Increase in property buying tax to 10 per cent from the 1st of August - by Felix A. Monberg
Thursday, June 27, 2013 @ 7:49 PM
[Author : I am a student of Politics and Economics in England. I have been writing professional articles regarding the Spanish economy and the real estate market]
When we enter the month of August, the process of purchasing property will be a slightly more expensive one, as the Spanish government is implementing new taxation laws.
Previously, the 'wealth transfer tax' was set at 8 per cent for a single property acquisition. However, from the 1st of August in 2013 the tax will be set at 10 per cent unless the investor is below the age of 32, which in that case would be 5-7 per cent depending on their situation. Spanish taxation 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.
Recently, new laws have been installed which dictate that residents in Spain who have assets worth more than €50000, have to report it to authorities. This has turned out to be somewhat of a 'witch hunt', as residents feel their privacy has been breached by tax collectors. Foreign retired people 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 taxation laws, are now fleeing the country. People are doing so to avoid the taxes they have to pay for their assets at home. This is perhaps 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 and GDP per capita fell by 1 per cent in 2012. In addition to that, the interest rate is at an embarrassing 0.5 per cent and consumption is not rising. If Spain is willing to embrace a brighter future, then the implementation of these regulations is a good start as it will create or more organised and intelligible system.
These reforms have been supported by regulations that will make residency more obtainable for investors outside the EU zone. For only €500000 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 and help steadily increase housing prices.
This bombardment of new reforms and taxation regulations is, clearly, 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 the future Spain will become a reliable place for investment.