The Law in Spain - Why it pays to register for Spanish residency
It’s quite a common perception for expats who move to
Spain to believe that, by registering as a resident, they will be exposed to harsher and more stringent tax obligations. In fact, the opposite is true – a resident property owner has a number of tax advantages over the non-resident.
Exemption from Capital Gains Tax
In certain circumstances, residents are exempt from paying Capital Gains Tax. These circumstances apply when:
The resident is over 65 – If you are an official resident of
Residents reinvest profits in a new home – If you are a resident who sells their property but reinvests all of the proceeds from the sale into the purchase of another property in
You are a holder of Usufruct – Yes, usufruct. It’s a real estate term that applies to people who have the right to live in a property until they die. So if you are aged 65 years and over and have signed a contract with a company who will buy your principal residence in exchange for allowing you a lifetime right to inhabit it, then the tax is not due. This makes it a rather attractive deal to turn home ownership into lifetime income for older people of modern means – although your children and grandchildren might not see it that way!
95 per cent reduction in Inheritance Tax
If you own property as a resident in
There are three conditions that apply:
- You must have held an official residence permit for at least three years
- The property you bequeath must be your main residence, and you must have lived in it for at least three years
- Your heirs must agree not to sell the property for ten years. If they do, they are subject to taxation.
This rather generous reduction only currently applies to a maximum of €120,000. Properties over this value will be subject to the full weight of inheritance tax, unless the dwelling is left to a brother or sister aged 65 or over and who has been living with the property owner for the previous two years.
Imputed Income Tax
As a resident property owner, your inputed income tax does not apply to your official residence.
Non-residents who live in
If you live in
“it pays, in more ways than one, to register as a resident in
Capital Gains as Income Tax
Obtaining a Residence Permit
EU citizens can obtain a Residence Permit at their nearest police office or town hall. The document also contains your NIE number, so it’s a good way of killing two birds with one stone. See here for more information about obtaining a residence permit in Spain and why it´s a good idea.
By journalist, editor and former