Homebuyers' Concessions Phased Out In Spain's Stimulus Package

by Lorys Charalambous, Tax-News.com, Cyprus

15 May 2009

The Spanish government has proposed tax amendments to reduce unemployment, which is currently the highest in the EU at 17%. The stimulus package will see tax concessions on house purchases phased out in 2011 for all but lower earners, the introduction of subsidies for car purchases and a reduction in the corporate income tax rate for small- and medium-sized Enteprises (SMEs).

The main section of the stimulus package, the phasing out of tax breaks on home purchases, is expected to encourage prospective homebuyers to invest despite the crisis. The Spanish economy has been dealt a significant blow during the crisis in that the once-booming Spanish property market has become defunct, leaving over 800,000 new properties empty. The Spanish government believes that the measure will mean that 1,000,000 properties and flats will be purchased or rented before January 1, 2011. The concession, which currently offers a tax allowance of EUR9,015, will still be available after 2011 for those with incomes below EUR17,000 or households with incomes below EUR24,000.

Also within the government’s stimulus plan, the corporate income tax rate will be cut, to 20% from 25%, for small- and medium-sized businesses with fewer than 25 employees and with a turnover of under EUR5m, providing they maintain or increase their workforce up until December 2009.

Spain’s car industry also stands to benefit from the stimulus package; the government has announced that it will contribute towards a scheme that will subsidise new car purchases. The cost of purchasing a new car in Spain will be reduced by a one-off EUR2,000 cash sum, a quarter of which will be financed by the government, with EUR500 financed by local councils, while car manufacturers will put forward the remaining EUR1,000. The measure is expected to enter into force on June 1, 2009, and will apply to vehicles worth less than EUR30,000.

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