The National Fiscal Information has issued an interpretation in which it confirms that when planning to purchase a property in Spain and financing the transaction with funds from the sale of the property in Poland, there is no tax liability on the income from the sale of the flat in the country.
Purchase of a flat in Spain and residential purposes
This is important information for those who plan to finance the purchase of a flat on the Iberian Peninsula, having previously sold a flat in Poland. The interpretation relates to the owner’s desire to sell one of her five properties in Poland and use the funds to finance the purchase of a flat in Spain. As the author of the application points out, the sale and purchase of the flat do not take place as part of a business activity.
The question, addressed to the tax authorities, concerned the issue of taking advantage of the housing allowance, i.e. exemption from paying 19% tax on the income from the sale of one flat, in a situation where all of the proceeds would be used to purchase a flat in Spain – used for 4-5 months during the autumn and winter period.
The National Fiscal Information confirmed that, in this situation, it is possible to take advantage of the relief, as the flat in Spain will be purchased for the owner’s own residential purposes. An important element in the interpretation issued is the fact that the four other flats in Poland, purchased much earlier, are retirement security for the owner, are not rented and are not used for profit-making purposes.
Spain attractive to property buyers
In the interpretation of the tax authorities, we read that the meaning in the regulations is to indicate that the income from the disposal of a flat against payment is to be spent on “own residential purposes”. The prefixing of the expression “housing purposes” with the adjective “own” shows that the legislator, by providing the basis for the application of the exemption and adding this adjective, determined that the overriding aim is to be able to take into account, when calculating the exempted income, only such expenditures which were incurred to satisfy the taxpayer’s own housing needs.
Investment in Spanish real estate is also being encouraged by the Andalusian authorities with attractive legal and tax measures. One of these is the indefinite extension of the tax reduction on property purchases in the region. A 100 per cent property tax rebate is also very beneficial for property buyers on the Costa del Sol. Foreign buyers of property in Spain can also obtain a loan for between 50% and 60% of the investment value.
