Tax residency

Information and questions about the Law in Spain and Andalucia.
elusive
Resident
Posts: 1018
Joined: Sat Apr 07, 2012 11:49 am
Location: frigiliana

Tax residency

Postby elusive » Mon Jul 25, 2016 4:12 pm

If are currently a spanish tax resident and own a U.K property which you want to sell how long do you have to be in the UK to become tax resident there and avoid CGT etc in spain.is it as soon as you fill in the form (the same one you can fill in to declare spanish tax residency) but stating you are leaving or is it the case where you are classed as resident for the entire year regardless of when you leave so you need to wait until the following January before you sell?

User avatar
peteroldracer
Andalucia Guru
Posts: 6655
Joined: Wed Oct 13, 2004 5:56 pm
Location: Los Alcázares, Murcia

Re: Tax residency

Postby peteroldracer » Mon Jul 25, 2016 7:34 pm

The latter...
The saddest people are those that cannot laugh at themselves

elusive
Resident
Posts: 1018
Joined: Sat Apr 07, 2012 11:49 am
Location: frigiliana

Re: Tax residency

Postby elusive » Mon Jul 25, 2016 8:45 pm

Thank you.

elusive
Resident
Posts: 1018
Joined: Sat Apr 07, 2012 11:49 am
Location: frigiliana

Re: Tax residency

Postby elusive » Tue Jul 26, 2016 7:32 pm

A follow up question as googling talks about selling a spanish property and the 3% retention but i cant see anything on the below situation.

If you sell a uk property as a spanish resident.the uk property being your only owned property (rent in spain) what Spanish CGT would you be looking on at house where the gain is around £120,000

El Cid
Andalucia Guru
Posts: 13491
Joined: Sun Oct 24, 2004 10:42 pm
Location: La Herradura, Costa Tropical, Granada

Re: Tax residency

Postby El Cid » Tue Jul 26, 2016 7:45 pm

At current rates, €26480. The rates vary from 19% to 23% on a sliding scale.

Sid

elusive
Resident
Posts: 1018
Joined: Sat Apr 07, 2012 11:49 am
Location: frigiliana

Re: Tax residency

Postby elusive » Tue Jul 26, 2016 8:12 pm

Ouch. Thanks cid (i think) :wink: and just to confirm as im been thick here its the gain you made from when you bought ie we bought for approx 60k and would sell for around 175-80 pounds.

Just a side thought would the tax amount be the same if you were moving back to the uk to sell (and live) that house to use the money to downsize so not reinvesting the full amount.but did all that while you were still offically a spanish tax payer even though you were back in the uk at that point

Miro
Andalucia Guru
Posts: 3306
Joined: Tue Feb 27, 2007 8:20 pm
Location: Merseyside, formally Torremolinos

Re: Tax residency

Postby Miro » Wed Jul 27, 2016 11:44 am

Sid will confirm this (or not!), but my understanding is that the relief on CGT when reinvesting the proceeds of a sale only apply to a principal residence - so as long as you are still officially a fiscal resident in Spain, it won't make any difference if you reinvest ALL the proceeds of the sale of your UK home, you'll be liable for CGT on the full gain. You need to become tax resident in the UK before selling to avoid CGT in Spain, but since we're already past the 183 days for this year, I think you'd have to hold off selling until next year.
Don't worry about what people think, they don't do it very often

"Acquiring a dog may be the only opportunity a human ever has to choose a relative," Mordecai Siegal 1935-2010.

El Cid
Andalucia Guru
Posts: 13491
Joined: Sun Oct 24, 2004 10:42 pm
Location: La Herradura, Costa Tropical, Granada

Re: Tax residency

Postby El Cid » Wed Jul 27, 2016 12:11 pm

You can only claim the reinvestment allowance if you sell your habitual residence in Spain and reinvest in another property, within two years, which is your new habitual residence either in Spain or elsewhere.

Sid

elusive
Resident
Posts: 1018
Joined: Sat Apr 07, 2012 11:49 am
Location: frigiliana

Re: Tax residency

Postby elusive » Wed Jul 27, 2016 1:22 pm

Thank you both. thought that was the case. So its a case of make sure you are back in the uk before january if you intend to sell in the coming year

What about if the owners of the property are O.A.P which they are. thought they didnt have to pay any CGT .would they be covered by that allowance regardless of not reinvesting all the money

Miro
Andalucia Guru
Posts: 3306
Joined: Tue Feb 27, 2007 8:20 pm
Location: Merseyside, formally Torremolinos

Re: Tax residency

Postby Miro » Thu Nov 17, 2016 7:08 pm

El Cid wrote:You can only claim the reinvestment allowance if you sell your habitual residence in Spain and reinvest in another property, within two years, which is your new habitual residence either in Spain or elsewhere.

Sid


Sid, I know I've asked about this before, sorry to be a bore, but this is suddenly really important to me. We've just bagged ourselves a buyer (only took 3 years :crazy: ) and were talking to our gestor (who has always done our IRPF, 720 etc. and who I usually trust to know what he's talking about) and he mentioned the possibility of us being liable for CGT. I said we'd be reinvesting all the proceeds in another primary residence, albeit in the UK, and he dropped a bit of a bombshell, being very adamant that the exemption only applies if buying another property in Spain. WTF? I will probably seek out a second opinion from another "professional" - no point in asking at Hacienda, nobody there knows a damned thing, they couldn't even tell me how much CGT is last time I asked. But I'd really appreciate a pointer to some official source that backs up what you say and what I've long believed - that as long as we reinvest in another primary residence within the EU, we'll be exempted.
Ta!
Don't worry about what people think, they don't do it very often

"Acquiring a dog may be the only opportunity a human ever has to choose a relative," Mordecai Siegal 1935-2010.

El Cid
Andalucia Guru
Posts: 13491
Joined: Sun Oct 24, 2004 10:42 pm
Location: La Herradura, Costa Tropical, Granada

Re: Tax residency

Postby El Cid » Thu Nov 17, 2016 7:38 pm

There is nothing in the tax guide to say that the "new" habitual residence has to be in Spain, but there is nothing specific to say that it can be outside Spain.

Blevins Franks, whose guidance I respect, specifically state that it can be outside Spain.

The process for claiming exemption is straightforward. You declare the gain on your tax return and tick a box that says that you claim the exemption and you will reinvest the money within two years. Of course, by the time the two years are up you would be happily back in the UK and a UK tax resident, and no longer submitting Spanish tax returns.

I would not lose any sleep over it unless at some point in the future, you intend to return to Spain and become tax resident again.

Sid

Miro
Andalucia Guru
Posts: 3306
Joined: Tue Feb 27, 2007 8:20 pm
Location: Merseyside, formally Torremolinos

Re: Tax residency

Postby Miro » Thu Nov 17, 2016 7:51 pm

Thanks Sid, that's a big help. I think I might even hit the hay now, before I think of something else to worry about!

On the other hand, while you're there.....!

Over 65 / pensioner when selling habitual residence (owned for 12 years) - exempt anyway from CGT??
Completing the sale in May 2017 - we will be out of Spain before 183 days is up and therefore presumably no longer tax residents for 2017, so would it even be worth the bother of filing a tax return for 2017 (in 2018, when we'll be long gone)?
Hoping Hacienda won't give us any bother over fiscal tax certificates, since we will be filing tax returns for this year (2016) before the sale completes. So there should be no 3% retention.

A million other questions between now and then - I can join Concorde in her tizz!
Don't worry about what people think, they don't do it very often

"Acquiring a dog may be the only opportunity a human ever has to choose a relative," Mordecai Siegal 1935-2010.

El Cid
Andalucia Guru
Posts: 13491
Joined: Sun Oct 24, 2004 10:42 pm
Location: La Herradura, Costa Tropical, Granada

Re: Tax residency

Postby El Cid » Thu Nov 17, 2016 7:57 pm

Even if you leave in May 2017, you will have been tax resident in 2016 so a tax return should be done which you intend to do in 2017. As for 2017, as you will no longer be tax resident, there is no reason to submit a return in 2018.

Yes, as over 65 and tax resident, your habitual residence is exempt from CGT. As far as I can deduce from the RENTA declaration, unlike the reinvestment exemption, you do not have to declare the capital gain at all.

Sleep well!

Sid

Miro
Andalucia Guru
Posts: 3306
Joined: Tue Feb 27, 2007 8:20 pm
Location: Merseyside, formally Torremolinos

Re: Tax residency

Postby Miro » Thu Nov 17, 2016 8:09 pm

Thanks again!
I've just found this on the AEAT website (their English version, my bold):
"Exemption for reinvestment in habitual residence by taxpayers of the EU, Iceland and Norway (applicable to gains accrued from 1 January 2015):
In the case of taxpayers resident in a member state of the European Union or the European Economic Space with effective exchange of tax information, the capital gains obtained by the transfer of what has been their habitual residence in Spain may be excluded from taxation, provided that the total amount obtained through the transfer is reinvested in the purchase of a new habitual residence."


Whilst it doesn't quite say precisely that you can reinvest in another EU country, it also, as you say, doesn't say you can't, and it does talk specifically about EU citizens etc. so I think it's pretty well implied. I think my gestor is stupid. Confusingly, the very next paragraph talks about modelo 210 and the 3% retention for non-residents though :shock:

http://www.agenciatributaria.es/AEAT.internet/en_gb/Inicio/La_Agencia_Tributaria/Campanas/_Campanas_/Fiscalidad_de_no_residentes/_Impuesto_sobre_la_Renta_de_no_residentes_/Sin_establecimiento_permanente/_INFORMACION/Informacion_General/Cuestiones_sobre_bienes_inmuebles/Ganancias_patrimoniales_derivadas_de_la_venta_de_un_inmueble.shtml
Don't worry about what people think, they don't do it very often

"Acquiring a dog may be the only opportunity a human ever has to choose a relative," Mordecai Siegal 1935-2010.

El Cid
Andalucia Guru
Posts: 13491
Joined: Sun Oct 24, 2004 10:42 pm
Location: La Herradura, Costa Tropical, Granada

Re: Tax residency

Postby El Cid » Thu Nov 17, 2016 8:34 pm

Miro wrote: I think my gestor is stupid. ]


No, he is not stupid, but like most Spanish gestors in Spain he knows nothing (or cares) about anything that concerns other countries or tax agreements. - neither do the people in the tax office!

Please don't tell me he is British! To be fair, most tax advisors in the UK would have no idea about Spanish tax rules.

Sid

Miro
Andalucia Guru
Posts: 3306
Joined: Tue Feb 27, 2007 8:20 pm
Location: Merseyside, formally Torremolinos

Re: Tax residency

Postby Miro » Thu Nov 17, 2016 8:45 pm

No, he's Spanish, although a large part (probably most) of their business is with foreign residents. With that in mind, I think he really should know about double taxation treaties, EU laws & rules etc., but at the end of the day, the only person you can trust 100% is yourself, which is why I've always done my best to be as well informed as possible. Your help, and that of others here on A.com, sharing information etc., has been invaluable over the years. We may be leaving Andalucia (all being well, touch wood etc.!) but I hope to stick around in spirit here for a good while yet :wave:
Don't worry about what people think, they don't do it very often

"Acquiring a dog may be the only opportunity a human ever has to choose a relative," Mordecai Siegal 1935-2010.

Miro
Andalucia Guru
Posts: 3306
Joined: Tue Feb 27, 2007 8:20 pm
Location: Merseyside, formally Torremolinos

Re: Tax residency

Postby Miro » Thu Oct 26, 2017 8:28 pm

I can't now find the thread(s) on which I posted in more detail about our dilemma of whether to sell as fiscal residents or not, so to quickly recap: as fiscal residents, we could have sold in May this year and left Spain, and avoided any CGT liability by reinvesting the sale proceeds in the purchase of a new primary residence (within the EU), but this meant we would have had to file tax returns (IRPF) as usual next year, for 2017, which would have resulted in us paying income tax in Spain. After much thought we decided, since we were selling before 183 days of this year had passed, to sell as non residents, accept the 3% retention, but reclaim it via modelo 210 by reinvesting the funds (as former residents entitled to exemption from CGT under the same terms mentioned). We won't pay any income tax in Spain, since we effectively declared ourselves non-residents for this year, nor the UK since our income will fall below the UK personal allowances.
That's the theory, anyway, but of course since lodging our 210s in July (after completing the purchase of our new home and including the details of the reinvestment on the forms) we've been wondering when or if we'll ever get our €4.5K or so back from Hacienda. We did it this way with eyes wide open, knowing (from bitter past experience) that the Spanish authorities basically despise us, but I'd still rather know they owe us, than the other way round. Even so, it would be nice to get it back.
Our gestor informed us yesterday that Hacienda have been in touch asking for us to supply fiscal residency certificates from our new country of residence. I take this as a positive: they haven't yet filed us in the basura! Of course, in all the documentation and instructions & examples on how to complete the 210 in our circumstances there's absolutely no mention of any requirement to prove anything other than that you've purchased another property - but it doesn't surprise me at all that they're looking for any hoops they can to make us jump through. Fortunately, I don't think there'll be any problem getting certificates from HMRC - I've already applied for them online and can't see any reason why they'd refuse them, since we declared ourselves resident here to them as soon as we arrived in the UK. I'll update this as and when, for those who are interested.

Coincidentally, I've just read Franz Kafka's The Trial - hard going, but it prompted me to Google the definition of "Kafkaesque", and I came upon this:

"Describing something that is horribly complicated for no reason, usually in reference to bureaucracy" and I suddenly realised - he was writing about Spain :lolno:
Don't worry about what people think, they don't do it very often

"Acquiring a dog may be the only opportunity a human ever has to choose a relative," Mordecai Siegal 1935-2010.

Manchesteral
Resident
Posts: 902
Joined: Wed Mar 12, 2014 11:48 pm

Re: Tax residency

Postby Manchesteral » Fri Oct 27, 2017 6:57 pm

Interesting post Miro, I have long resisted the temptation of becoming tax resident in Spain, I see no reason for it, financially there is no gain, it's swings and roundabouts, the bulk of my stash for want of a better description is in the U K, property, investments, pensions etc and I will keep it that way, on my demise I do not want the recipients of my will to be bogged down with foreign bureaucracy, so in my opinion it's better the devil you know !

El Cid
Andalucia Guru
Posts: 13491
Joined: Sun Oct 24, 2004 10:42 pm
Location: La Herradura, Costa Tropical, Granada

Re: Tax residency

Postby El Cid » Fri Oct 27, 2017 7:50 pm

I don’t see how you can “resist the temptation” of tax residency. It is a matter of fact, not choice. Do you mean that you are very careful about the length of your visits or are you choosing to act illegally - you won’t be alone in that!

Sid

Manchesteral
Resident
Posts: 902
Joined: Wed Mar 12, 2014 11:48 pm

Re: Tax residency

Postby Manchesteral » Sat Oct 28, 2017 9:55 am

What I mean is that I have chosen to not become a long term resident ie more than 183 days which would necessitate tax residency.

I'm probably breaking the law by 2 or three weeks in the long term but I come and go and do not live here permanently for the reasons stated in my original post.

So far in 2017 I've spent 17 weeks in Gran Canaria and will probably return there around xmas time !


Return to “You & the Law in Spain”

Who is online

Users browsing this forum: No registered users and 9 guests