11/06/2012 Extension of 50% taxation on profit generated by urban real estate properties acquired during 2012
Royal Decree-Law 18/2012 on reorganization and sale of real estate assets held by the financial sector was published in the Official State Gazette on May 12, 2012. This is the second initiative of the current Government after the Royal Decree Law 2/2012 published in February, aimed to the cleanup of balance sheets of the credit entities that are negatively affected by deterioration of assets linked to the real estate sector.
The adopted measures aimed at restructuring of balance sheets of credit entities and transfer of real estate assets received as payment of debts to the companies that specialize in asset management, include tax incentives aimed at stimulation of real estate sales.
This measure applies to the Corporate Income Tax (“CIT”), Personal Income Tax (“PIT”) and Non-Resident Income Tax (“NIT”) on 50% income obtained from the transmission of the acquired real estate properties between May 12 and December 31 of 2012.
Exemptions related to CIT and PIT shall not be applicable to real estate properties acquired without valuable consideration, although NIT does not expressly clarify the obligatory nature of acquisition in exchange for valuable consideration and thus could apply to acquisitions brought by succession or donations. The exemptions shall not be applicable when the sale is carried out between related parties or entities.
Moreover, one of the criteria for CIT exemptions requires that real estate properties subject for sale are deemed non-current assets or have been classified as non-current assets held for sale. This exemption shall be compatible, as the case may be, with deduction of reinvestment of extraordinary income under Article 42 of the Revised Text of the Spanish Income Tax Law.
Lastly, as a special feature of PIT, it is stated that if the real estate property was used as the habitual place of residence and the exemption for the reinvestment into the habitual place of residence is applicable, the current exemption shall apply first, and the remaining 50% of income shall be exempt in proportion to the reinvested amount.
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