Property & income tax deductions in alicante

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Property & income tax deductions in alicante

  1. 1. Property and Income Tax Deductions in Alicante
  2. 2. Spanish Property Law For the most comprehensive analysis ofProperty Law in Spain written in English go to: Spanish Property Law 2
  3. 3. Income Tax Deductions in SpainThere are 17 autonomous communities or regions in Spainand each has competency to regulate tax exemptions anddeductions within it’s territory. 3
  4. 4. Income Tax Deductions in SpainHowever, the central state government also regulates incometaxes. 4
  5. 5. Income Tax Deductions in SpainBoth systems work together in a complex arrangement thatmeans that taxpayers pay a proportion of their taxes to thecentral government and the remainder to their localgovernment. 5
  6. 6. Income Tax Deductions in SpainSo when we refer to a tax deduction available in a particularregion, this may not be the whole story.Additional deductions, with different qualifying criteria, mayalso exist at a state level. 6
  7. 7. Income Tax Deductions AlicanteIf you have dealings with property and pay income tax inAlicante then you may be in line for a tax break. 7
  8. 8. Income Tax Deductions AlicanteThis overview provides a list of the different tax deductionsthat are available for those who are renting or buying aproperty in the Alicante and general Valencia area of Spain. 8
  9. 9. Income Tax Deductions AlicanteLocal tax laws in Alicante are enacted by the parliament inValencia with the most important provisions contained in Law14/2007 and Law 16/2008.The most noteworthy deductions are as follows: 9
  10. 10. Purchase/Renovation of Principal Private ResidenceIn addition to the deductions available at the state level, iffinancing is used to purchase or renovate a propertydestined to be the principal private residence of thetaxpayer then the following deductions may be made: 10
  11. 11. Purchase/Renovation of Principal Private Residence1) 3.3% during the two years following the purchase orrenovation2) 1.65% after the two years following the purchase orrenovation 11
  12. 12. Purchase/Renovation of Principal Private ResidenceThese deductions may not be applied to the construction ofa new home or the extension of an existing family home.The maximum deduction is €4507 annually and all financialoutlays may be included such as mortgage arrangementfees etc 12
  13. 13. Purchase/Renovation of Principal Private ResidenceThe mortgage should be of at least 50% of the cost of theproperty and no more than 40% of the mortgage may bepaid down during the three years following the purchase ofthe property 13
  14. 14. Purchase/Renovation of Assisted HousingA deduction of €104 of the cost of purchasing or renovating aproperty that is designated as subsidized housing where it isgoing to be the permanent private residence of the taxpayer. 14
  15. 15. Purchase of Housing by the YoungA deduction of 5% (apart from interest) of the cost ofpurchasing the first property that is going to be thepermanent private residence of the taxpayer, where: 15
  16. 16. Purchase of Housing by the Young1) The tax payer is under 35 years of age at the time theliability to pay the tax arose (e.g. when the property ispurchased)2) The taxable income of the tax payer purchaser must notbe greater than 2 x IPREM (for 2011 set at €6,390) 16
  17. 17. Purchase of Housing by the DisabledA deduction of 5% may be made where the taxpayerpurchaser of a principal private residence is disabled:1) To a degree > 65% in the case of physical or sensorydisability2) To a degree of more than 33% in the case of mentaldisability 17
  18. 18. Purchase of Housing by the DisabledOnce again the taxable income of the tax payer purchasermust not be greater than 2 x IPREM (for 2011 set at €6,390) 18
  19. 19. For those with variable rate mortgages A deduction may be made where the costs associated withvariable rate mortgages has increased Applies to those earning less than €25,000 individually or€40,000 jointly 19
  20. 20. For renting of the principal personal residence A taxpayer may deduct 15% up to a maximum of €459annually for the rental of their primary personal residence. A taxpayer may deduct 20% up to a maximum of €612annually for the rental of their primary personal residencewhere they are under 35 years old. 20
  21. 21. For renting of the principal personal residence The same deduction of 20% applies where the taxpayerhas a physical or sensory disability > 65% or mentally >33% A deduction of 25% may be applied up to a limit of €765where the tenant is under 35 years of age and is disabled. 21
  22. 22. For renting of the principal personal residenceIn all cases for the deduction for rental of the primarypersonal residence to be applied the following criteria mustbe fulfilled: The contract must have started after April 23 1998 and befor a period of at least one year 22
  23. 23. For renting of the principal personal residence The deposit must have been lodged in favour of theGovernment of Valencia Neither the tenant nor any family member own a propertyless than 100km from the rented property The tenant should not benefit in the same tax period fromany tax benefit for purchase of a family home 23
  24. 24. For renting of the principal personal residence The taxable income should not be greater than €27,790 iftaxed individually or €44,950 if taxed jointly 24
  25. 25. Renting principal private residence1) The taxable income of the purchaser is not over €19,000is taxed individually or €24,000 if taxed jointly2) The deposit must be lodged with the financial institutionas referred to under Art 36 Ley 29/1994 deArrendamientos Urbanos 25
  26. 26. Renting principal private residence3) The landlord is identified in the subsequent tax returnmade by the tenant (their NIF)4) That in the same tax year the taxpayer does not applyany relief for investment in a principal private residence,except for the special home investment bank accounts 26
  27. 27. Renting principal private residence5) Should the tax return be a joint return at least one of thetaxpayers should be comply with the age requirements 27
  28. 28. For renting of an additional residenceWhere the requirements of a job or self-employment requirethe rental of an additional property in an area other than theprincipal residence then 10% of the rental monies paid witha limit of €204 may be deducted, with the followingprovisos: The second home must be located in the Region ofValencia and be at least 100km from the principal residence 28
  29. 29. For renting of an additional residence The deposit paid on the property must be lodged in favourof the Government of Valencia as per Art 36.1 of Law29/1994 ( de Arrendamientos Urbanos) The tenant must not receive remuneration towards thecost of the rental property 29
  30. 30. For renting of an additional residence The taxable income should not be greater than €27,790 iftaxed individually or €44,950 if taxed jointly 30
  31. 31. For more information or assistance with legal or taxmatters from our network of local English-speaking property lawyers in the Valencia Region, go to: Property Lawyers in the Valencia Region Source AEAT 31

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