Editor’s note: This article was first published in September 2012, as news about a reform then being announced by Mariano Rajoy’s government. Gains on assets held up to a year were taxed in the general income base from 2013, and this was reversed from 2015; the 24-month holding period mentioned as under study does not appear to have been adopted.
Spain’s Prime Minister, Mariano Rajoy, has announced that the reform of the tax on stock market capital gains will penalise investors who sell their shares within the first year, with a historic increase that could reach up to 30 points above the current rate.
Once again, of course, this is a revenue-raising measure, supposedly aimed at cornering speculators, which will end up letting the real speculators off the hook and hit private individuals hardest, because the reform will be carried out through a rise in IRPF (Impuesto sobre la Renta de las Personas Físicas, Spain’s personal income tax). Sales of shares within the first year will be taxed at a marginal IRPF rate of up to 56%, depending on amounts and brackets.
What’s more, the tax authorities are studying the possibility of penalising shareholders who sell their shares before 24 months, in other words, forcing investors to hold on for one more year if they don’t want to pay 56% on their capital gains.
This measure has been done the Spanish way, as only we know how to do things: the reform leaves companies and foreign investors out of the tax, precisely the ones who are speculating in the market to the point of driving Spanish investors out, because they can’t stand the volatility they cause.
On the other hand, the well-known investment funds (the ones we never recommend) will come out ahead, since they have tax advantages: they let you defer paying tax until you cash in the investment, and savers can move their money from one investment fund to another without paying anything to the taxman.
And that’s where things stand. Now we really can say that if you buy a share, you’d better be ready to marry it for life, because even a stock market divorce is going to end up being expensive.
Featured image: Heparina1985, CC BY-SA 4.0, via Wikimedia Commons.
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