The owners starting next year sold homes purchased before December 31, 1994 at prices below € 400,000 will continue to benefit from the tax advantages now reduced by capital gains taxation. Finance Minister Cristobal Montoro has yielded to political and citizens’ complaints and revisited a chapter of the tax reform that supposed to quadruple bill income tax if capital gains as a home, stock or other property is disposed of in certain circumstances .
The PP parliamentary group recorded in the Senate late Thursday an amendment to the reform of the income tax with the elimination of so-called “coefficients” rectified. It is a mechanism created 17 years ago and substantially tax exempt leave a portion of the proceeds collected from the sale of houses, shares or other securities, provided that they remain in the taxpayer’s assets from before 1995. The scope of this tax reduction varies depending on the age of the property and reaches its maximum when dating from 1986 or earlier in the case of housing. The bill also includes tax reform eliminating other factors designed to correct the currency depreciation in valuing capital gains, which are taxed at the rate of savings.
The end of those bonuses had effects that can be illustrated with the following example developed by fiscalist Ana Valverde:
| The existing system. who in October 1986 had purchased a home for 60,000 euros and sold in 2014 for 300,000, is freed from tax on profits generated prior to 2006 (154,406 euros) and only pay for those that are attributable to the years later; income tax bill amounted to 17,046 with current savings rates
. | Reform of Montoro. The draft will be amended in the Senate supposed to pay taxes from January 1, 2015 for all goodwill (240,000 euros corresponding to the difference between the purchase price and selling price). The tax bill would shoot up to 56 480 euros
. | Amendment. The proposal maintains the PP offset coefficients when the value of the property transferred is less than 400,000 euros. As the tax reform also lowers tax rates on savings income, income tax bill (16,091 euros) will be even lower than the current in the example discussed.
Happen thus despite Amendment of PP keeps removing monetary correction coefficients, which are now used for the calculation of all capital gains, regardless of the time elapsed since the acquisition of housing or transmitted.
The Ministry of Finance had justified the abolition of tax relief that now enjoyed by owners due to concerns with tax equity (not justified by this criterion, someone pay more or less taxes at the date of acquisition selling floor). Montoro department also argued that the number of potential victims was small, almost marginal, and consists of owners who have more than home ownership. Current law already exempts income tax over 65 years of tax on capital gains collected from the sale of the residence. Also exempt are those with any age also stem from the main residence and reinvest the money in the acquisition of another.
Despite these exceptions, the political parties of the opposition, led by the PSOE, Montoro accused of inflicting punishment new tax the middle class to the removal of diminishing rates. Within the PP and the Government itself also sounded critics Montoro criteria.
The Ombudsperson, Soledad Becerril, also demanded that chapter of the tax reform reconsideration. He stressed in a particular situation: large fiscal effort required to those with modest incomes who were forced to sell their homes by economic difficulties
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