Good news on the tax front for property investors in Spain
Article Date : 26 January 2006
It appears that the discriminatory property tax in Spain will finally be addressed after the European Commission announced it is to refer the Spanish government to the Court of Justice.
The current complaint is that official Spanish residents are only required to pay 15 per cent tax on gains from property sales, while non-residents are taxed at an astounding rate of 35 per cent.
Figures from Sociedad de Tasacion recently showed that property prices in Spain's provincial capitals increased by 10.1 per cent last year, indicating that the impact of the unfair taxation system has not managed to damage the country's property market beyond repair.
Nevertheless, there has been a slowdown in growth over the last few years and an increasing number of UK property investors have complained that the system is simply stifling investment projects.
If, as expected, the Court of Justice rules that Spain has been flouting European law, the government will have to reform the entire system and reduce tax rates for non-residents.
The impact on property investment in Spain is likely to be immense, as UK residents in particular return to their favourite investment location, safe in the knowledge that they will not be taxed extortionate amounts when they decide to sell a property.
The news comes just a week after Standard & Poor's chief European economist Jean-Michel Six tipped the property market in Spain to enjoy a strong 2006 and so a prospective alteration to the taxation system can only add to the optimism. Mr Six has predicted "healthy growth" throughout 2006 and believes Spain to be "certainly a market to watch".
A number of experts have recently highlighted the Costa del Azahar as a particular area of growth and those looking to make significant gains may make the most of the prospective tax alterations by snapping up property at competitive prices in the coming months.
The area will also be boosted if the Valencia 'land grab' law is changed although the Spanish government has been slow on reacting to advice from the European Union on this issue too. Currently, property investors and holiday homeowners are often charged for local developments without any prior warning while others are forced to forego sections of their land without compensation.
Meanwhile, this year's Homebuyer Show will include a Spanish auction house alongside traditional property agents for the first time. Inez Rix, director and auctioneer at Direct Auctions, has observed a rising trend in this type of transaction.
"We have seen many British buyers using our service because they recognise that buying a property at auction can save them money and time," said Ms Rix.
"When you buy a property at auction you know you are paying its market value based on what it is worth to the people bidding, and not what an estate agent or owner would like it to be worth, and our fees are just an open commission rate of 2.5 per cent compared to regular estate agents' fees which can be three times that."
There are clearly risks involved in this method, however, and experts at the Homebuyer Show have advised buyers to be especially careful in their research and preparation.
Source: Assetz News
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