Non Resident individual person with property in Mallorca:

On Friday October 31^st, after the pressures and criticisms generated by the announcement of the elimination of the diminishing rate and the price-level restatement for 2015, an amendment was passed to keep the diminishing rate of property purchases prior to 1994 for the year 2015, with some limitations: these coefficients can only be applied to the first 400.000.- € with regards to the transmission. Also, note that this limit of 400.000.- € is per taxpayer, not per year.

This measurement softens the effect that generated the previous proposal for taxpayers with little assets, but it is still important to analyze the effect which is generated because once exceeded the limit, the difference of the tax is substantial.

Example:

A taxpayer has the intention to sell a property which he bought before 1994 at a price of 300,000.- € and its current market value is € 450.000.

 

TAX BURDEN OF PROPERTY SALE BEFORE OR AFTER THE TAX REFORM

                         

Purchase price		300.000.-	Selling price	450.000.-
Date of purchase		01/01/1990	Selling price	0
			of former property
Date of sale		31/12/2014	Total selling price	450,000.-
			Date of sale from	01/01/2015

 

TAXATION IN 2014		TAXATION FROM 01/01/2015
Gross capital gain	150.000	Gross capital gain	150.000
Restatement rate	1,3299	Restatement rate	removed
Capital gain after restatement	51,030,0	Captial gain after restatement	150.000
Gain depending on diminishing rate	32,764,3	Gain depending on diminishing rate	85.598.51
Diminishing rate	55,55	Diminishing rate	55.55
Capital gain taxed by income tax	32,829,4	Capital gain taxed by income tax	102.450,00
Amount to be paid	8,144	Amount to be paid	23.468
	DIFFERENCE
	15,324.-€
	188,20%

 

 *Calculated by simulator cincodias.com

As we can see in the table above, if the taxpayer sells the property before 31/12/2014 the income tax amounts 8.144,00.- €. Otherwise, if he sells from 01/01/2015 the income tax will amount 23.468,00.-.

 

	2014	2015
Sale of property	8.144,00.-€.	23.468,00.-€.

 

It is obvious, that the difference between selling now or in 2015 is quite significant, so if you intend to sell the property should be sold still within the year 2014 in order to avoid the effect of this reform and possible surprises of your income tax in 2015.