183 day rule: Work in UK, wife and kids live in Spain

[coopster]

If my wife and children move to Spain and my wife works in Spain, and I stay in the UK to work full time over 183 days a year with a permanent residence in the UK how will the DTA treat me for tax residency purposes? Does the centre of personal interests rule trump the 183 days in the UK rule?
Thanks

[El Cid]

Yes, it does. If you are working in the UK and tax resident in Spain you would still pay tax in the UK if the income arose in the UK. You would also pay the tax in Spain, as you would be deemed tax resident in Spain because your family lives there and then deduct the tax paid in the UK.

A basic rule, that is often forgotten, is that you pay tax in the country where the income arises, even if you are not tax resident in that country. There are certain exceptions, such as pensions etc.

Sid

[coopster]

Thanks Sid.

The follow up question is if I sell my home in the UK in a tax year when I''m deemed tax resident in Spain, does the entire proceeds of the house need to be reinvested or just the equity, so that I will not be liable for CGT by virtue of purchasing a new home in Spain within two years. For instance, I bought at £250,000 with £200,000 mortgage, lived in the property for six years and am selling for £375,000 - do I need to buy for the € equivalent of £375,000 or do I have to reinvest a minimum of the proceeds released of £175,000, or the gain of £125,000?

[El Cid]

You have to invest the whole of the net proceeds of the sale in the new house. To arrive at the net figure, you can deduct the original costs of purchase and also the costs of selling and any outstanding mortgage on the property.

Sid