For income tax purposes, securities are dealt with as follows:
DIVIDENDS
For Income Tax purposes, dividends are considered income from savings and are subject to flat rate withholding tax, meaning that, in practice, the customer is freed from further tax obligations.
The amount withheld and the tax rate for income from savings is 18% throughout Spain..
The first €1,500 is tax free.
SHARE TRANSFERS
When shares are transferred, there is a capital variation, gain or loss, which is the difference between the value of the transfer or sale of the shares and the value of purchase or subscription
Capital gain or loss = Sale value – Subscription value
In the Autonomous Community of the Basque Country, the purchasing price of the shares is multiplied by an updating coefficient which varies according to the year of subscription. It is understood that the shares purchased first are transferred first, i.e. the FIFO (First-in-First-out) system is applied.
There is a transitory rule of capital gains reduction applicable to capital gains from cashing in after the 1st of January 2007 any shares corresponding to subscriptions prior to the 31st of December 1994. This rule applies abatement coefficients of 25% per year, rounding up, when there are more than two years between the date of subscription and the 31st of December 1996. These reduction coefficients are applied as follows:
- if the transfer value is greater than the average trading value of the shares in the last quarter of 2005 (2006 for taxpayers in the Autonomous Community of the Basque Country and Navarra), then the reduction is applied to that part of gain generated up to this average trading value.
- if the transfer value is lower than the average trading value of the shares in the last quarter of 2005 (2006 for taxpayers in the Autonomous Community of the Basque Country and Navarra), then the reduction is applied to all the capital gains.
Capital gains from share transfer, reduced by the abatement coefficients if relevant, are subject to 18% withholding tax..
These capital gains can be offset against capital losses (from the sale of shares in mutual funds, other shares and/or real estate) and the result, if positive, forms part of the savings base, liable to a flat-rate tax of 18% regardless of the period over which the capital variation occurs.
In Navarra, capital increases are tax free when the sum of the transfers which take place in the year (sum of mutual funds, shares and real estate) does not exceed €3,000 per taxpayer. In the case of a married couple in community of property, the amount is €6,000.