Income Tax Deductions on Property Alicante

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Buying Property in Spain: Tax Deductions

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Income Tax Deduction Analysis Buying Property in Alicante If you have dealings with property and pay income tax in Alicante then you may be in line for a tax break.

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With so many foreign nationals now based in this area of Spain it is worthwhile setting out a list of the different tax deductions that are available for those who are renting or buying a property in the area. Spanish Property Law

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All tax laws in Alicante are enacted by the parliament in Valencia with the most important provisions contained in Ley 14/2007 and Ley 16/2008 The most important deductions available are as follows:

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Purchase/Renovation of Principal Private Residence Where financing is used to purchase or renovate a property destined to be the principal private residence of the taxpayer then the following deductions may be made: 1) 3.3% during the two years following the purchase or renovation 2) 1.65% after the two years following the purchase or renovation

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Purchase/Renovation of Principal Private Residence These deductions may not be applied to the construction of a new home or the extension of an existing family home. The maximum deduction is €4507 annually and all financial outlays may be included such as mortgage arrangement fees etc

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Purchase/Renovation of Principal Private Residence The mortgage should be of at least 50% of the cost of the property and no more than 40% of the mortgage may be paid down during the three years following the purchase of the property

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Purchase/Renovation of Assisted Housing A deduction of €104 of the cost of purchasing or renovating a property that is designated as subsidized housing where it is going to be the permanent private residence of the taxpayer.

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Purchase of Housing by the Young A deduction of 5% (apart from interest) of the cost of purchasing the first property that is going to be the permanent private residence of the taxpayer, where:

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Purchase of Housing by the Young 1) The tax payer is under 35 years of age at the time the liability to pay the tax arose (e.g. when the property is purchased) 2) The taxable income of the tax payer purchaser must not be greater than 2 x IPREM (for 2011 set at €6,390)

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Purchase of Housing by the Disabled A deduction of 5% may be made where the taxpayer purchaser of a principal private residence is disabled: 1) To a degree > 65% in the case of physical or sensory disability 2) To a degree of more than 33% in the case of mental disability

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Purchase of Housing by the Disabled Once again the taxable income of the tax payer purchaser must not be greater than 2 x IPREM (for 2011 set at €6,390)

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For those with variable rate mortgages A deduction may be made where the costs associated with variable rate mortgages has increased Applies to those earning less than €25,000 individually or €40,000 jointly

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For renting of the principal personal residence A taxpayer may deduct 15% up to a maximum of €459 annually for the rental of their primary personal residence. A taxpayer may deduct 20% up to a maximum of €612 annually for the rental of their primary personal residence where they are under 35 years old.

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For renting of the principal personal residence The same deduction of 20% applies where the taxpayer has a physical or sensory disability > 65% or mentally > 33% A deduction of 25% may be applied up to a limit of €765 where the tenant is under 35 years of age and is disabled.

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For renting of the principal personal residence In all cases for the deduction for rental of the primary personal residence to be applied the following criteria must be fulfilled: The contract must have started after April 23 1998 and be for a period of at least one year

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For renting of the principal personal residence The deposit must have been lodged in favour of the Government of Valencia Neither the tenant nor any family member own a property less than 100km from the rented property The tenant should not benefit in the same tax period from any tax benefit for purchase of a family home

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For renting of the principal personal residence The taxable income should not be greater than €27,790 if taxed individually or €44,950 if taxed jointly

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For renting of the principal personal residence 1) The taxable income of the purchaser is not over €19,000 is taxed individually or €24,000 if taxed jointly 2) The deposit must be lodged with the financial institution as referred to under Art 36 Ley 29/1994 de Arrendamientos Urbanos

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For renting of the principal personal residence 3) The landlord is identified in the subsequent tax return made by the tenant (their NIF) 4) That in the same tax year the taxpayer does not apply any relief for investment in a principal private residence, except for the special 'home investment bank accounts'

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For renting of the principal personal residence 5) Should the tax return be a joint return at least one of the taxpayers should be comply with the age requirements

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For renting of an additional residence Where the requirements of a job or self-employment require the rental of an additional property in an area other than the principal residence then 10% of the rental monies paid with a limit of €204 may be deducted, with the following provisos: The second home must be located in the Region of Valencia and be at least 100km from the principal residence

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For renting of an additional residence The deposit paid on the property must be lodged in favour of the Government of Valencia as per Art 36.1 of Ley 29/1994 ( de Arrendamientos Urbanos) The tenant must not receive remuneration towards the cost of the rental property

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For renting of an additional residence The taxable income should not be greater than €27,790 if taxed individually or €44,950 if taxed jointly

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Simply put, property transactions in Spain is unique to this country with legal assumptions made here that just don't exist elsewhere Pitfalls Dealing with Property in Spain

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If you would be interested in a free and comprehensive guide that will help you to avoid the typical pitfalls the foreign buyers of property fall into as well as dealing with issues such as... Guide to Dealing with Property in Spain

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To find out how to deal with such issues as... Which legal checks on a property are vital to avoid any problems The step-by-step process of buying a property in Spain

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As well as... Typical ploys to watch out for to avoid being defrauded. Property taxes you pay and those you don't!

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And much more... Download the myAdvocate Spain guide to Dealing with Property in Spain by clicking on: Secrets to Dealing with Property in Spain Or for further information on the property purchase process specifically go to: Real estate lawyer Spain

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If you need legal advice in Spain but are concerned about dealing with lawyers about which you have little or no background information, then get peace of mind at no additional cost by using the: 'Look before you leap' Lawyer Verification System myAdvocate Spain™

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More information and contact details: www.myadvocatespain.com [email protected] Tel. +34 931 845 073

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