Selling House and Capital Gains Tax

[scampicat]

Am I right in thinking that if someone is Tax Resident in Spain and has owned a house for five years, that if they sell it and buy another main home within the EU, using all the proceeds, that they do not have to pay any CGT?

What other taxes are involved?

Thanks.

[El Cid]

I seem to remember that this came up before.

According to Blevins Franks it is possible to claim the rollover exemption on a house outside Spain if it is your new permanent home.

I also seem to remember that David Searl did not agree.

You will not have to pay the CGT when you sell the house as you have 2 years to reinvest the money. You declare the sale and gain on your annual tax return and claim temporary exemption. When you buy the new house you declare it on the tax return for the year in which you bought it and pay any tax that might be due (if, for example, you didn't reinvest all the proceeds).

If you are over 65 at the time of the sale there is no tax to pay anyway.

Of course, these rules only apply to tax residents. Non residents pay the 3% retention at the time of sale and if that doesn't cover the tax, they pay the balance later.

Sid

[scampicat]

Thanks Sid

We are in the process of submitting a tax return at the moment, our abogado is doing it for us.

We will be buying a new main home in the UK (if we sell the Spanish one). We know where we want to buy and it will be about the same price or slightly more than the proceeds from the sale.

We put the house up for sale a fortnight ago, expecting nothing to happen, and lo and behold we have a viewing on May 8th from someone who soulnds interested, so thought we had better find out!

We are 61 and 62 and initially did not intend to sell until we were 65, but feel that the market will get worse rather than better, so put it up for sale now.

Thanks again and wish us luck!

[Mowser]

I believe that after the two years you can apply for a one year extension.

ps - best of luck.

[scampicat]

Thanks! to both of you.

[scampicat]

Could anyone tell me how much tax there might be if we made a Capital Gain of 80k euros? (Just in case it is deemed that we do have to pay it). We have owned the house since 2003.

[Mowser]

It all depends! If you have done any "legal" alterations and have the receipts, you can offset the tax.

[scampicat]

I have counted everything that can be counted. That is where I got the £80k Capital Gain from.

[Mowser]

Tax is 18% for residents and non-residents alike. Check the co-efficient tables and you can work it out from there. Remember to add in costs of buying/selling/lawyer etc.

You will find the coefficients below:-
http://www.malagalaw.com/taxation/spaincgt.asp

[katy]

It all depends! If you have done any "legal" alterations and have the receipts, you can offset the tax.

They have to be official receipts with IVA no. Although I have heard that they don't always ask to see them.

[Beachcomber]

The tax is now 19% not 18.

[El Cid]

The tax is now 19% not 18.

And after the first €6000 it is 21%

Sid

[El Cid]

It all depends! If you have done any "legal" alterations and have the receipts, you can offset the tax.

They have to be official receipts with IVA no. Although I have heard that they don't always ask to see them.

You may also need to provide a copy of the building licence.

Sid

[scampicat]

Tax is 18% for residents and non-residents alike. Check the co-efficient tables and you can work it out from there. Remember to add in costs of buying/selling/lawyer etc.

You will find the coefficients below:-
http://www.malagalaw.com/taxation/spaincgt.asp

Thanks, I can't work it out though....don't understand what the co-efficient is.

Didn't realise you could deduct buying/selling costs....that will bring it down a bit. Although we are buying another main home so shouldn't have to pay it at all....

[Beachcomber]

You apply the coefficient to the purchase value. The coefficient for 2003 is 1,1488 so if your purchase price was, say, €120,000.00 applying the coefficient would give you a figure of €137.856,00 which you deduct from the sale price together with all of your justifiable expenses.

You add the purchase expenses (transfer tax, registration, legal fees, etc) to the original purchase price and deduct the selling expenses from the sale price.

Don't forget the CGT percentage is now 19%.

Are you a fiscal resident or non-resident? (ie is the 3% retention being applied?)

[scampicat]

Thanks to all.

We are tax resident.

[Beachcomber]

So the question of paying CGT will not arise until two years time by which time you will presumably have severed all links with Spain.

[scampicat]

So the question of paying CGT will not arise until two years time by which time you will presumably have severed all links with Spain.

Yes.....this is what my husband says, but I am sitting here panicking that they will come after me for thousands of euros.

However I have come up with a worse-case scenario and made plans for that, which has made me feel better.

I wiill probably ring someone like Blevins Franks and see what they say. It's worth half-an-hour's consultation fees.

[Beachcomber]

I would be inclined to calculate the amount that you think may be due and invest it for two years so that you have the funds available in the unlikely event that they pursue you for payment and that you lose your claim that the payment is not due as you have invested the proceeds in another primary residence.

I certainly wouldn't lose any sleep over it.

[katy]

You are a resident, just leave Spain and don't put in any more Tax returns there. The authorities are not that efficient.