Property & income tax deductions in valencia

Property and Income Tax Deductions in Valencia

For the most comprehensive analysis of

Property Law in Spain written in English go to:

Spanish Property Law

Spanish Property Law

2

Income Tax Deductions in Spain

There are 17 autonomous communities or regions in Spain

and each has competency to regulate tax exemptions and

deductions within it’s territory.

3

Income Tax Deductions in Spain

However, the central state government also regulates income

taxes.

4

Income Tax Deductions in Spain

Both systems work together in a complex arrangement that

means that taxpayers pay a proportion of their taxes to the

central government and the remainder to their local

government.

5

Income Tax Deductions in Spain

So when we refer to a tax deduction available in a particular

region, this may not be the whole story.

Additional deductions, with different qualifying criteria, may

also exist at a state level.

6

Income Tax Deductions Valencia

If you have dealings with property and pay income tax in

Valencia then you may be in line for a tax break.

7

This overview provides a list of the different tax deductions

that are available for those who are renting or buying a

property in the Valencia and general Valencia area of Spain.

Income Tax Deductions Valencia

8

Local tax laws in Valencia are enacted by the parliament in

Valencia with the most important provisions contained in Law

14/2007 and Law 16/2008.

The most noteworthy deductions are as follows:

Income Tax Deductions Valencia

9

Purchase/Renovation of Principal Private Residence

In addition to the deductions available at the state level, if

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:

10

Purchase/Renovation of Principal Private Residence

1) 3.3% during the two years following the purchase or

renovation

2) 1.65% after the two years following the purchase or

renovation

11

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

12

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

13

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.

14

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:

15

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)

16

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 17

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)

18

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

19

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.

20

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.

21

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

22

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 home23

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

24

Renting principal private 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

25

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'

Renting principal private residence

26

5) Should the tax return be a joint return at least one of the

taxpayers should be comply with the age requirements

Renting principal private residence

27

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

residence28

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

Law

29/1994 ( de Arrendamientos Urbanos)

The tenant must not receive remuneration towards the

cost of the rental property

29

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

30

For more information or assistance with legal or tax

matters from our network of local English-speaking

property lawyers in the Valencia Region, go to:

31

Property Lawyers in the Valencia Region

Source AEAT