3 Year rule on selling/buying another property

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JAKE M
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3 Year rule on selling/buying another property

Postby JAKE M » Sat May 23, 2015 11:37 am

Just been to our gestor to pay taxes. Whilst there, we discussed the possibility of selling our house and buying another house. To avoid C.G.T. we need to wait to have 3 years residency and put the total value received for this house towards the purchase of the new house.
We got our residency cards in May 2014 but the gestor said it is the date we registered on the padron which in our case was November 2013.
Does anyone know the correct version?

Thanks in advance
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El Cid
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Re: 3 Year rule on selling/buying another property

Postby El Cid » Sat May 23, 2015 12:05 pm

When did you first put it (which tax year) on your income tax declaration as your habitual residence?

Sid

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Re: 3 Year rule on selling/buying another property

Postby Mowser » Sat May 23, 2015 6:52 pm

We came to live here full time in April 2004. We popped over here in February 2004 to finalise matters regarding residency. Our first tax return was from February 2004.
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Re: 3 Year rule on selling/buying another property

Postby El Cid » Sat May 23, 2015 6:58 pm

When you become tax resident, you are deemed resident for the whole year.

So, if you came to Spain in February, you would pay tax on your income for the whole year, so you actually pay tax for some months where you were non resident.

In the UK they allow split tax years where you only pay tax for the period you were actually physically resident, but in Spain, it's for the whole year.

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Re: 3 Year rule on selling/buying another property

Postby Mowser » Sat May 23, 2015 7:11 pm

I stand corrected Sid. Our gestor said she'd have to work out sums as the UK tax year is different from the Spanish one. What she meant was of course, the interest we had on savings. Complicated I know.
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Re: 3 Year rule on selling/buying another property

Postby El Cid » Sat May 23, 2015 7:25 pm

I know what you mean - it makes P60s pretty useless!

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Re: 3 Year rule on selling/buying another property

Postby JAKE M » Sat May 23, 2015 9:23 pm

When did you first put it (which tax year) on your income tax declaration as your habitual residence?

Sid

Hi Sid, we moved here April 20th 2014. We are in the process of paying our taxes for 2014. So I guess it will be our May 2014 green card residencia date we will use and not the padronamiento of 2013 as our gestor says?

Thanks for the replies guys.
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Re: 3 Year rule on selling/buying another property

Postby Mowser » Sat May 23, 2015 9:36 pm

JAKE M wrote:Just been to our gestor to pay taxes. Whilst there, we discussed the possibility of selling our house and buying another house. To avoid C.G.T. we need to wait to have 3 years residency and put the total value received for this house towards the purchase of the new house.
We got our residency cards in May 2014 but the gestor said it is the date we registered on the padron which in our case was November 2013.
Does anyone know the correct version?

Thanks in advance
I assume you paid non resident tax for 2013. Maybe you could say to your gestor that this was a mistake. Ask the gestor to submit a resident tax for 2013. As Sid says, yor residency would count from January 2013.
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Re: 3 Year rule on selling/buying another property

Postby El Cid » Sat May 23, 2015 9:52 pm

JAKE M wrote:
Hi Sid, we moved here April 20th 2014. We are in the process of paying our taxes for 2014. So I guess it will be our May 2014 green card residencia date we will use and not the padronamiento of 2013 as our gestor says?
Although legally you are only allowed to sign on the Padron if your habitual residence is in the locality, this has been abused for years by local councils as the funding they get from central government is based on the number of people on the Padron. As a result, the fact that you are on the Padron will not necessarily be acceptable to the tax office when you are trying to prove tax residency.

As I said before, you are tax resident for the whole of the year that you became tax resident under the 183 day rule, which in your case is the 1st January 2014. So, your house will qualify as your habitual residence on the 1st January 2017. If you sell it before that date it will not qualify for the CGT exemptions.

I suspect that the Gestor (I assume he is Spanish) is thinking in Spanish terms. For an already tax registered Spaniard, the Padron date is probably acceptable as there would be no question of when he became tax resident so the date that he moved into his new house would be very relevant.

Sid

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Re: 3 Year rule on selling/buying another property

Postby JAKE M » Wed May 27, 2015 6:38 pm

Thanks for the info sid.
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Re: 3 Year rule on selling/buying another property

Postby JAKE M » Fri Jun 05, 2015 9:51 am

Hi Sid, just to clarify, if we sold our house today and bought another using all of the money from this house, are we still due to pay C.G.T. even though we have bought another house in Spain? as our main residence?
regards,
Jake
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Re: 3 Year rule on selling/buying another property

Postby El Cid » Fri Jun 05, 2015 11:29 am

You must have owned the house as your habitual residence for 3 years before you can claim the exemption, so in your case, if you sell it now you will pay CGT even though you are going to live in the new house.

The only exceptions to this are if you have to move because of your employment, or for medical reasons plus a couple more odd ones.

Sid

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Re: 3 Year rule on selling/buying another property

Postby JAKE M » Fri Jun 05, 2015 11:45 am

Thanks for the clarification Sid. We'll just chill out until January 2017!! It won't be long.
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