Capital Gains Tax query

Information and questions about the Law in Spain and Andalucia.
Nuflow
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Capital Gains Tax query

Postby Nuflow » Sun Jul 23, 2017 11:04 pm

We are having to return to the UK and selling our main residence (villa) here in Spain along with a small apartment.

Due to property price changes we will lose at least €90,000 on the apartment purchased in 2005, but will have a capital gain on approx €50,000 on the villa purchased in 2013.

Does anyone know if we can submit our capital gains tax return and offset the loss on the apartment against the gain on the villa, or do we have to declare the info on both properties separately?

Many thanks

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costakid
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Re: Capital Gains Tax query

Postby costakid » Mon Jul 24, 2017 8:02 am

I am sure if both properties are owned by the same person or company you can offset the loss against the gain. They can’t have there cake and eat it surely.

Gasman
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Re: Capital Gains Tax query

Postby Gasman » Mon Jul 24, 2017 10:02 am

Normally separate properties bought at different times will have to be dealt with separately. Cant see any way out of that. Since the capital gain is on your principal residence, if you are buying in the UK you can claim back the capital gains tax on the purchase of your next principal residence (even if it is outside Spain).

Miro
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Re: Capital Gains Tax query

Postby Miro » Mon Jul 24, 2017 6:24 pm

Nuflow wrote:(can) we submit our capital gains tax return and offset the loss on the apartment against the gain on the villa

By capital gains tax return, do you mean your annual IRPF (personal income tax return)? I'm not aware of any specific return for capital gains tax. You simply declare the sale of the properties on your 2017 tax return (which you will have to file next year before June 30th); the loss on one property will not be offset against the gain you make on the other. Unless, of course, you are non-residents, in which case you're talking about filing a 210 non-resident tax return to reclaim, or pay additional tax, after the 3% retention has been withheld on both sales. As far as I know, you would have to submit a separate 210 for each property, because the 3% retentions will be under separate 211 references. I'm not 100% sure about that, though. Either way, I'm 99.99% certain you cannot offset the gain against the loss.
And don't forget, you will be liable for plus valia on both properties, regardless of the actual gain or loss.
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El Cid
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Re: Capital Gains Tax query

Postby El Cid » Mon Jul 24, 2017 7:25 pm

Sorry I don't agree. The Blevins Franks advice is that gains and losses in the same year can be offset. Also, they say that a net loss in one year can be carried forward for 4 years against any further gains.

Also note that after Brexit a reinvestment in a house in the UK will not be allowed as that only applies to reinvestments within the EU.

Sid

Nuflow
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Re: Capital Gains Tax query

Postby Nuflow » Mon Jul 24, 2017 8:43 pm

Thank you all for your responses, I'm currently non resident but my OH is resident, until we relocate back to UK permanently at the end of the year. Yes, we submit our annual tax returns (mine December and OH June), so yes we would declare the capital gains on each respectively.

I just wondered about offsetting one property against the other and it doesn't appear that there is a consensus on this amongst "official representatives" and on the forum.

I think to be on the safe side we will just pay it and then won't find that a few years on we have a shock and owe tax + fines to the Hacienda.

Thank you all again for your input on this.

El Cid
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Re: Capital Gains Tax query

Postby El Cid » Mon Jul 24, 2017 10:44 pm

If you declare both transactions, the tax program will work out what tax is payable. Hopefully you will find that one was offset against the other.

Incidentally, if you both live here and say that the house was your principal residence, how can you not be tax resident?

Sid

Paddy Pumpkin
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Re: Capital Gains Tax query

Postby Paddy Pumpkin » Mon Jul 24, 2017 11:03 pm

Incidentally in both Spanish and UK tax law it is very difficult for spouses to have tax residence in different countries...as a spouse is resident in one country the other half will almost definitely also be judged as resident. Consequently without knowing all the facts it is most likely you will both end up with tax resident in both UK and Spain. I can go in to more detail if you want but be orepared to read a double taxation agreement

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Re: Capital Gains Tax query

Postby AkoAko » Tue Jul 25, 2017 8:11 am

El Cid is correct . This year was the first time i have had to include CGT on our declarations and its the NET gain your taxed on , i had 6 capital gain entries on our 2017 declaration for last year .

Also as suggested do a deceleration online and it will show as you input the date the tax calculation , what your being charged , you will also have fulfilled your obligation and declared everything , if they require any more information they will write to you ,, ours was accepted without question as the information required on the declaration was sufficient for them .

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Re: Capital Gains Tax query

Postby Miro » Tue Jul 25, 2017 10:07 am

Happy to stand corrected!
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Nuflow
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Re: Capital Gains Tax query

Postby Nuflow » Tue Jul 25, 2017 11:58 am

El Cid, not really relevant to explain myself to you, but I don't live here... I work in the UK so return here intermittently. I understand the fiscal and resident rules. However, my OH is retired and lives here permanently.

Miro
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Re: Capital Gains Tax query

Postby Miro » Tue Jul 25, 2017 1:01 pm

Like I said, happy to admit when I'm clearly wrong (although the likes of BF have also been spectacularly wrong in the past when I've consulted them about CGT issues), but I will be interested to know how this one pans out. If Hacienda accept that one partner is fiscally resident while the other is not, I still wonder how the non-resident partner declares the two sales. Does it have to be two separate 210s? The 3% retention (presumably in this case on only 50% of the sale prices) will be submitted on two separate 211s by the buyers. Does the 210 have the facility to enter more than one property sale per declaration? And if so, will the loss be automatically offset against the gain? Genuinely got no idea how this works.
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.

AkoAko
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Re: Capital Gains Tax query

Postby AkoAko » Tue Jul 25, 2017 1:11 pm

The retention is 50% , i know this only from buying a property which was owned by two guys , one was resident here the other a UK resident , i have to add that it was a while ago and the retention then was 2.5% .

Cant be of much help with the non resident partner however the Normal Tax Declaration which CGT is declared for Fiscal Residents had the facility to add a lot of things , theres a drop down box to add as many as you want , well i think as many as you want , i had six to declare , some in my name , some in my Wifes and some jointly , was straight forward , mine went on my form , hers on her form and the joint half on each .

Paddy Pumpkin
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Re: Capital Gains Tax query

Postby Paddy Pumpkin » Wed Jul 26, 2017 6:52 pm

Without wishing to dwell on a point, both halves of the marriage will be resident in Spain if one half is. The basic rules for residence are as follows, with particular attention to point C


A. You are in Spain for more than 183 days in any one CALENDAR year. These do not need to be consecutive days but are 183 days in total.

B. Your "centre of interests" is in Spain. Generally this assessment is carried out on your economic circumstances. ​​Is Spain where your main business or professional activities are based.
Is Spain your "centre of vital interests".

C. Do your Spouse live in Spain? If yes, even if you are in another country for 365 days a year, you will be considered tax resident by the Spanish authorities.

It is also possible to be resident in more than one country with Spain for example falling within the rules to be tax resident in both Spain and the UK. Then you need to refer to the DTA for your exact circumstances and which country gets to tax what. The rules for UK tax residence are similar so if one spouse is resident in UK then the other will also be deemed resident in the UK

How all that exactly affects CGT ....I don't have a clue, but I am pretty sure the base assumption of one half being non resident is not correct (However as my other half often reminds me....I am not always right!)

El Cid
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Re: Capital Gains Tax query

Postby El Cid » Wed Jul 26, 2017 7:12 pm

That's exactly my understanding of the situation.

Many people assume that you are tax resident in one country or another. The residency rules in the UK are very much stricter than in most other countries. Depending on the circumstances, you can be UK tax resident if you spend only a few days there in a year. The best case is only 90 days. As a result, many people end up being tax resident in both countries.

As Paddy said, the DTA is there to sort out what you pay and where. The good news is that in most cases you can deduct taxes paid in one country for the tax paid (on the same income) from tax paid in the other.

Another point, often missed, is that income arising in the UK is taxed in the UK irrespective of tax residency - for example rental income. There are certain exemptions to this, notably pension income.

Sid


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