CGT and a "10 year rule"?

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Jool
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CGT and a "10 year rule"?

Postby Jool » Tue Jun 29, 2010 8:23 pm

Has CGT changed in the last 10 years? Was there ever a situation whereby you would have zero or seriously reduced CGT liability if you owned the same property for over 10 years? Is there anything relating to 10 years and CGT that is of benefit to a property owner?

I have ordered David Searl´s latest book as mine is many years out of date but it has not arrived yet........anyone have any info please?

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Re: CGT and a "10 year rule"?

Postby El Cid » Tue Jun 29, 2010 9:32 pm

The law changed in 1996. Before that date there was an annual allowance for inflation of about 11% so that after 10 years there was no CGT to pay.

After that date the allowance was brought in line with inflation at about 2% - 3% each year.

If your property was purchased prior to 1996 then you can claim some of the old 11% allowance and some of the new allowance.

When you get David's book all will be explained!

sid

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Re: CGT and a "10 year rule"?

Postby Jool » Tue Jun 29, 2010 10:37 pm

Thank you Sid - one more question - can you add on all the purchase taxes and Notary fees when you bought to offset against CGT when you sell?

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Re: CGT and a "10 year rule"?

Postby Beachcomber » Tue Jun 29, 2010 11:06 pm

The method for calculating this is contained in the instructions that accompany the form 212.

I remember when this law was changed in the days when I used to listen to a now defunct English language radio station based in Marbella. They used to have a 'legal expert' on every week and someone sent a detailed fax (no emails in those days) followed by a telephone call by the person who had written it about the proposed changes in CGT and its implications for non-resident property owners who sold in the future.

I particularly remember this because it was rudely dismissed out of hand with some kind of fatuous comment about the caller not understanding the implications of the new law but the 'legal expert' must have carried out some belated research into the subject because the following week, in what was laughingly referred to as the 'Corrections and Clarifications' section of the programme, he admitted that every point mentioned in the fax of the previous week was, in fact, correct.

Since then giving any credence to the opinion of 'legal experts' has been pretty low on my list of priorities.

You can add legal expenses and taxes on purchase and deduct them from the sale price as long as you can produce receipts for them.

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Re: CGT and a "10 year rule"?

Postby El Cid » Wed Jun 30, 2010 7:32 am

Jool wrote:Thank you Sid - one more question - can you add on all the purchase taxes and Notary fees when you bought to offset against CGT when you sell?


As Beachcomber said, you add the purchasing costs to the purchase price and you subtract any selling costs from the selling price.

Beachcomber, are you going to tell us the name of this legal expert? :wink: :wink:

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Re: CGT and a "10 year rule"?

Postby Beachcomber » Wed Jun 30, 2010 8:27 am

Image
However I do have a recording of that programme and the one the following week and this has prompted me to try to find it but it is obviously on a cassette long before the days of having a list of neatly catalogued MP3s on a computer.

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Re: CGT and a "10 year rule"?

Postby casita-bonita » Wed Jun 30, 2010 3:25 pm

El Cid wrote:The law changed in 1996. Before that date there was an annual allowance for inflation of about 11% so that after 10 years there was no CGT to pay.

After that date the allowance was brought in line with inflation at about 2% - 3% each year.

If your property was purchased prior to 1996 then you can claim some of the old 11% allowance and some of the new allowance.

When you get David's book all will be explained!

sid


Does this also apply to other means of capital gain, e.g sale of shares in a company?
Regards

Bob

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DavidSearl
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Re: CGT and a "10 year rule"?

Postby DavidSearl » Fri Jul 02, 2010 11:22 am

FROM DAVID SEARL

FOR CASITA-BONITA AND JOOL AND BEACHCOMBER

Thanks for the references, all. Yes, Casita-Bonita, there are similar reductions for shares and stocks and other investment vehicles. The reduction amounts are different and apply for different time periods and this is not well covered in You and the Law in Spain. If you bought Telefonica 20 years ago and want to sell it now, I suggest you consult a Spanish asesor fiscal to do the calculation for you.

As a note, you will find that the capital gains tax is now declared in a separate section of your Spanish income tax declaration generally titled "ahorros" or savings. Your top rate of tax is 21 per cent, as of this year.

Good luck with it, David Searl
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Re: CGT and a "10 year rule"?

Postby casita-bonita » Fri Jul 02, 2010 8:20 pm

Thanks for the info David.

These are shares in a UK company bought and fully paid 16 years ago. I am now Spanish resident and taxpayer so as you suggest probably best locate myself a Spanish tax specialist and find out how to minimise the damage :-)
Regards

Bob

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DavidSearl
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Re: CGT and a "10 year rule"?

Postby DavidSearl » Wed Jul 07, 2010 6:24 pm

FROM DAVID SEARL

FOR BEACHCOMBER AND EL CID ET AL

I just LOVE your Smiley, Beachcomber. Yes, we all love it when the Expert is caught out. Don't tell the others, but it has even happened to me, once in front of an audience of 300 people in Mijas. How embarrassing it was.

Best Regards, David Searl
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Re: CGT and a "10 year rule"?

Postby Miro » Thu Feb 16, 2012 7:16 pm

Searched for some relevant info and decided to resurrect this thread rather than start a new one. Quick question, hopefully someone can give an approximate answer / basic summary on this: property bought in 2004, if sold now, how much is CGT, what deductions (for inflation etc.), when does the gain have to be declared / paid, how long do you have to re-invest the funds to avoid CGT etc.?? (Spanish resident). Any pointers appreciated. Thank you.
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Re: CGT and a "10 year rule"?

Postby El Cid » Thu Feb 16, 2012 7:47 pm

Miro wrote:Searched for some relevant info and decided to resurrect this thread rather than start a new one. Quick question, hopefully someone can give an approximate answer / basic summary on this: property bought in 2004, if sold now, how much is CGT, what deductions (for inflation etc.), when does the gain have to be declared / paid, how long do you have to re-invest the funds to avoid CGT etc.?? (Spanish resident). Any pointers appreciated. Thank you.


Deductions for inflation are now very small. It is quite complicated to work it out and since you have only owned it since 2004 I suggest you ignore it as it will be insignificant if any.

You can deduct the costs of buying ans selling plus the cost of improvements (not just repairs) and these need to be substantiated with building licences and recentness.

You declare it on your annual tax declaration and you have two years to reinvest. When you fill in the declaration you tick a box which puts the gain into abeyance for the two years.

Remember that if you are over 65 and resident in it as your family home for 3 years there is no tax to pay.
Sid

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Re: CGT and a "10 year rule"?

Postby Miro » Thu Feb 16, 2012 7:53 pm

Thanks
Don't worry about what people think, they don't do it very often

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Miro
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Re: CGT and a "10 year rule"?

Postby Miro » Thu Feb 16, 2012 9:02 pm

Sorry to "tax" you on this, but could you tell me what rate CGT is?
Another thing - what would happen if you returned to the UK within the year, bought a property there to live in and were therefore a tax resident of the UK by the time your next tax return (in Spain) would be due? Are you still liable for CGT back in Spain? Would they chase you for it? or would the gain now be taxable in the UK?
Don't worry about what people think, they don't do it very often

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Re: CGT and a "10 year rule"?

Postby El Cid » Thu Feb 16, 2012 11:15 pm

Miro wrote:Sorry to "tax" you on this, but could you tell me what rate CGT is?
Another thing - what would happen if you returned to the UK within the year, bought a property there to live in and were therefore a tax resident of the UK by the time your next tax return (in Spain) would be due? Are you still liable for CGT back in Spain? Would they chase you for it? or would the gain now be taxable in the UK?


CGT is taxed at the same rate as savings income.

It used to be a flat 18% but that has now changed. It is now 21% on the first 6000 then 25% on the bit from 6000 to 24000 and 27% thereafter.

According to some experts the roll over relief applies to property bought anywhere in the EU.

The tax liability on the gain is determined by your tax residency at the time of the gain so it would be liable for Spanish tax if you were resident at the time of the gain.

If you took the rollover option and didn't pay the tax and then returned to the UK you would still be liable for the tax at the end of the 2 year period. The tax became due at the time of the gain in Spain - all you did was defer the collection of that tax.

Whether you would be chased for that tax would be a risk you took.

Sid

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Re: CGT and a "10 year rule"?

Postby Miro » Fri Feb 17, 2012 1:01 pm

Sid, thank you for your replies, as usual, most helpful.
"According to some experts".... :crazy:
I popped into my gestoria this morning and posed the same questions to the nice lady who we have entrusted our annual declarations to for the last decade or more. After scouring her notes etc., she told me the entire gain (we're looking at around 36k after deductions for gastos etc.) would be taxed at 21%. I asked about the stepped levels that you mentioned, and she said those apply to interest earnings and "other" such gains, but was fairly certain (as certain as any so called expert ever is) that a capital gain on a property would be taxed at a flat 21%.
Mmmm....
So I went along to Hacienda. Might as well get it from the horse's mouth, so to speak. Result? First 6k taxed at 19%, the rest at 21%.
WTF? :shock:
Makes one think the best thing to do is just screw the lot of them and don't even bother decalring it, since nobody really seems to know anything for certain anyway. God, this place can be SO frustrating!
Anyway, thanks again for your info, at least I now have a best and worst case scenario to work with!
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Re: CGT and a "10 year rule"?

Postby El Cid » Fri Feb 17, 2012 1:18 pm

The gestor clearly doesn't know what she is talking about (what a surprise!)

Hacienda are almost correct. Those figures apply to any gains last year which will be declared in June this year.

They went up for the current year, the declaration for which will be next year. Since you are planning to sell in 2012 these rates will apply.

Sid

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Re: CGT and a "10 year rule"?

Postby Miro » Fri Feb 17, 2012 1:43 pm

That's one helluva a difference from last year to this in that case.

On a gain of 35k:
Sale last year - 6k @ 19% = 1140
29k@ 21% = 6090
Total 7230

Sale this year - 6k @21% = 1260
18k@ 25% = 4500
12k@ 27% = 3240
Total 9000

Am I getting this right?
Don't worry about what people think, they don't do it very often

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Re: CGT and a "10 year rule"?

Postby El Cid » Fri Feb 17, 2012 1:52 pm

Miro wrote: Am I getting this right?


I'm afraid so.

It's all part of the new "austerity" measures passed by the government at the end of last year. The basic income tax rates have gone up as well by as much as 7% on very large incomes.

If you divide the CGT bill by the number of years you have owned the house you won't feel so bad about it :) :)

Sid

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Re: CGT and a "10 year rule"?

Postby Miro » Fri Feb 17, 2012 2:05 pm

I tried your suggestion, and......
Nope, still feel like ****!
This info has just put the death knell on whether or not I choose to accept an offer on my place. Coupled with seeing a nice new 2/2 apartment this morning offered direct from the promoter for the mind-boggling sum of 245,000€, it's hard to see how this stupid economy is ever going get started again.
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.


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