Non Resident individual person with property in Mallorca:

Do you plan to sell your property? Do it before 2015!

On Friday October 31st, 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.

 

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