Article written by Jaime Navarro Serrate, expert in real estate taxation
A few weeks ago we reviewed the buyer's taxation and today we focus on that of the seller. The joint reading shows that the administrations are interested in the market moving, since they charge all: State, Autonomous and Local. The seller must assume two taxes: personal income tax and municipal capital gain.
The seller will pay personal income tax on the savings basis if he obtains a capital gain according to the following table:
|Total income from savings
|Up to € 6,000
|From € 6,000 to € 50,000
|From € 50,000 to € 200,000
|From € 200,000
How can we lower the tax bill? We are going to enunciate some possibilities, remembering that it is essential to check with an advisor the fulfillment of all the requirements
- The capital gain or loss is calculated by subtracting the acquisition value from the transmission value. We can reduce this benefit if we add inherent expenses to the acquisition value and subtract them from the transmission value. Let's see some examples of expenses: tax that was paid for the acquisition (ITP or VAT, Successions and Donations), the commission of the real estate, agency, lawyer, experts, notary and Property Registry, energy efficiency certificate. We can also consider the expenses related to the mortgage, including the appraisal of the property or cancellation, but never the interest. If the apartment we sell has been for rent, we must subtract the amortization, therefore increasing the profit. Whether or not we have deducted that amortization. You also have to take into account the investments or improvements that have been made in the property.
- Let's pay attention to coach Maturana who said that losing is winning a little. So, since we have had losses, let's choose the times well to at least take advantage of them fiscally. Capital gains and losses are taxed accumulatively, so we can reduce the base if we have generated losses, for example with the sale of shares or investment funds. In the exercise itself or in the previous four. We can also offset, if any, negative returns on movable capital with 25% of earnings.
- The profit is exempt if the amount of the sale is reinvested in the purchase of a new habitual home within a period of two years. If the reinvestment is partial, the exemption is proportional to the reinvestment made. Let us remember here that habitual residence will be one that has been a habitual and effective residence for 3 years, except for causes that necessarily justify a change (and be careful that in this the Treasury has a very restrictive conception). If the acquisition is financed with a loan, the Treasury considered reinvestment only what had actually been paid in the two years after the sale of the home. However, the Supreme Court has qualified the criteria, establishing that the reinvestment is the money from the loan applied to the purchase of the new home. Therefore, the entire acquisition value of the new home will be taken into account regardless of whether its amount has been satisfied or financed.
- The American physician, poet and Supreme Court judge, Oliver Wendell Holmes, said that: "The young know the rules, but the old the exceptions", and there are two that must be known.
The income for the habitual residence is exempt for people over 65 years of age and people in a situation of severe dependency or great dependency . The exemption also applies to the transfer of the bare ownership of the habitual residence by its owner, reserving the life usufruct.
If one is close to that age, formulas can be found to transfer the property after the 65th birthday, because it is not worth having a birthday in the same year of the transfer, you have to sell from the day of the birthday.
And beware that the advantages of those over 65 have not yet ended. If what is sold is the mountain house, not the habitual residence, it will also be exempt for taxpayers over 65 years of age if they reinvest the amount obtained in life annuities, subject to certain requirements .
- Abatement coefficients. There is also a discount on the tax bill if the house was bought before the Barcelona Olympics. It is complex to detail, but the more years before 1992 the purchase was, the less will be paid for the profit. It is an old norm and it is already very limited, but it can still give you some little joy.
- Another joy will be taken by those who bought their property between May 12 and December 31, 2012 , because 50% of their profit will be exempt. To understand the origin of this strange measure we have to go back to 2012. That year the national team played very well, but the national economy was doing very badly, especially the real estate sector. And that measure was taken to encourage buyers who were thinking about it, but taking the tax impact to the following years (when they sell).
There are other exemptions related to dation in payment or donation to certain entities.
The municipal capital gain is colloquially called the Tax on the increase in the value of urban land, which must be paid by the buyer in onerous transfers.
This tax has given much to talk about these years, in short, for the following. It was a beautiful country whose land was continually rising in value. The legislator, with the intention of making things simpler, established a formula to calculate this increase in value: multiply the cadastral value by a few percentages based on the time that it has been owned. The problem is that this formula does not contemplate what happens if the properties did not increase in value or even fell.
But everything that goes up goes down and that country, although it did not stop being beautiful, did see how its properties began to decrease in value. However, the formula continued to multiply the cadastral value by a percentage and compliant taxpayers continued to pay for the capital gain, even though they had actually experienced a loss.
As in the fable of the deaf frog, who did not listen to the other frogs who told them that what he was trying to do was impossible and that is why he succeeded, some brave prosecutors remembered that the Constitution says that you must contribute according to your ability economical. And they began to question whether it made sense to pay taxes for being poorer.
The first battles were lost, but the final battle was won: the Constitutional Court ruled that the articles that established this formula were unconstitutional to the extent that they subject to tax situations of non-existence of increases in value. He also urged the legislator to change the law.
The legislator has not found the time since 2017 to establish another formula. So the situation right now is that the taxpayer has to prove to the municipalities that the land has not gained value. How? Well that depends. Some offer the possibility of not paying if the deeds are provided as evidence, others ask for appraisals, and with others you have to pay and then go to court.
Finally, remember that, for IBI purposes , it is advisable for the seller to try to pass on the proportional amount of the year in which the property is no longer his.