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taxes for non residents on selling a property on Mallorca (as of 1.6.2016)

The seller must also pay certain taxes such as the municipal capital gains tax (Plusvalia) and the profit tax as part of personal income tax.

Municipal capital gains tax (plusvalia)

The Plusvalía taxes the increase in value of land (not the buildings) since the last transfer operation.The amount depends on the cadastral value (as per the most recent municipal tax receipt) and the number of years during which the seller has owned the property. With effect from 01/01/2015 cadastral values were reduced in some communities (e.g Calvia, Andratx, Marratxi, etc.) in the Balearic Islands by 22%. This results in a corresponding reduction in the calculation of capital gains tax.

Whilst by law it is liable to be paid by the seller, in practice it is often contractually borne by the purchaser which is prohibited by the Consumer Protection Act, if the seller is a businessman.

profit tax/ income tax for non residents

The proceeds from the sale of a property are subject to income tax. The tax rate for non-residents is only 19%. The profit will be calculated based on the difference between the then purchase price and the selling price. The costs, taxes and expenses for value improvements are deductible. Furthermore, there are tax reliefs for the first € 400,000 if the property was acquired prior to 31.12.1994. If the seller is non-resident, the buyer is obligated to withhold 3% of the purchase price and pay an advance on the profit tax from the seller to the Spanish Treasury.

Profit tax on the sale of business shares under the new German/Spanish double taxation agreement

Before the 1st January 2013 and according to old the double taxation agreement, Spain had no entitlement to tax on the profit of the sale of shares to a Spanish company from a tax paying German resident. After the 1st January 2013, the new German–Spanish double taxation agreement was applicable whereby in such cases Spain has the right to tax as it is the situ state. The tax rate is 19%, in line with the corporate income tax on the sale of a property to a private individual.

In Germany the profit on the sale is subject to German income tax. There is a deduction of tax paid in Spain under the partial-income procedure,however not so if the holiday property used ' by the owner and his family'.Once again it is better to seek the advice of an experienced tax consultant regarding this complex legal matter.