The taxation regime for capital gains on AL properties changed in 2021. We explain the main measures impacting property owners.
2020
At two times, taxes on equity appreciation were paid:
- when registering a property as Local Accommodation, in which the value at the time of acquisition and the value at the time of registration of the property in the AL regime was determined — with a tax of 50% being levied on the value.
- when removing a property from the AL regime, in which a difference was calculated against the value at the time the property was registered as local accommodation — with a tax of 95%.
2021
The new State Budget (OE) contemplates the end of the calculation of capital gains when you register for the AL regime or when you give up on being registered in it. The capital gain of the property is only taxed when the sale of the property is made to third parties. Therefore, when the property leaves the business universe and moves to the short term lease or private use regime, capital gains tax is paid.
New Tax in OE 2021
This new tax distinguishes taxpayers under a simplified regime and taxpayers under an organized accounting system, and the amount of the tax is divided to be paid over four years.
Simplified Regime
When the property leaves the local accommodation, tax is calculated on 1.5% of the taxable patrimonial value on the date it leaves the local accommodation, multiplied by the number of years the property has been subject to this regime.
Example: A property is worth 100,000 euros and I will withdraw it from local accommodation after 10 years. So: 1.5% of 100,000 euros, multiplied by 10. That would be 15,000 euros. The owner will add 3,750 euros (15,000 divided by 4) to the IRS tax base.
Organized Accounting Regime
When the property leaves the local accommodation, tax is calculated on all depreciation, impairments, loan charges and lease rents that occurred during the period in which the property is under this regime. Currently, from the income, only 2% is deducted from the value of the property's acquisition.
Example: If during the years in which the property was in the local accommodation the owner benefited from the deduction of 40,000 euros direct to the collection, he will add 10,000 euros (10,000 divided by 4) annually to the collection.
Sale of property that was in AL
Property is sold in less than three years after leaving local accommodation
If a property leaves the local accommodation and is sold within three years, the owner will be penalized. Here, the calculation of capital gains will be different from usual: they will be taxed entirely as Category B income (95% of the gain) and not Category G (50% of the gain), representing more costs to the owner.
And, in this situation, the total gain against the initial acquisition value is now considered.
Property is sold three years after leaving local housing
Only if the property is sold three or more years after leaving the local accommodation is the capital gain normally calculated, ie under the rules of Category G (50% of the gain).
In conclusion, if the owner does not want to be penalized, he has to wait three years to sell the property after having removed it from the local accommodation.
