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It is important to remember that the Spanish tax year runs from 1 January to 31 December.
As we approach the end of the Spanish tax year, I often see people making decisions that inadvertently increase their tax bill for the current year. If you do not want to pay more tax than necessary, here are some guidelines to help you reduce your tax bill.
What can increase your tax bill?
Sales and certain transfers of assets before 31 December may be taxed in the current tax year.
Sales
Some taxes are cumulative. If you continue selling assets that have increased in value, the tax rate will be based on your total gains for the whole year.
The tax rate will also depend on which Autonomous Community you are resident in. For example, the top rate of tax on gains in Catalonia is 30%.
If you think your savings, or perhaps that second property, have performed well, the result can look very different once the tax bill is taken into account.
Selling a second property, or selling your main residence if you are under 65 at the point of sale, can create a significant tax bill.
If you have only one property to sell but have already made significant gains from other sales this year, should you consider completing the property sale in the new tax year instead?
The profit from the sale of vested shares received through share option schemes can result in either income tax or capital gains tax. The constitution and terms of the share option scheme will determine which tax treatment applies.
We regularly see shares being sold soon after they have vested. If you have share options vesting, you can reply to this email to find out more and discuss whether you should sell in this tax year or the next.
Transfers
Making transfers of assets between people before the end of the year can also increase your tax bill. These transfers can include:
- Gifts to individuals who are tax resident in Spain
- Gifts to non-resident individuals involving assets located in Spain
- Transfers of non-EU pensions (for example, UK pensions) into European-based pension schemes
A pension transfer can potentially be taxed on the whole transfer value by adding it to all your other income. The result can be a very significant tax bill — potentially tens of thousands of pounds on a relatively modest pension.
Get specialist advice before you act
To ensure you receive the best possible support and advice, we can also call upon lawyers, who we have worked with 14 years, as needed.
What you should do in relation to a sale or transfer will depend on your personal circumstances. There is no one-size-fits-all answer.
To avoid making costly mistakes, you are welcome to book a call at a time that is convenient for you using my online booking system. You can tell me about your personal circumstances, and we can then advise you on what you should consider doing.
The right course of action will follow from there.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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