capital gains tax

[swerve]

Capital Gains Tax changes for 2007

Legislation to reduce Capital Gains Tax for non-residents from 35% to 18% (and increase it for residents from 15% to 18%) has been approved by the Spanish Government. These new regulations also reduce the withholding provision that non-residents pay when selling property in Spain from 5% to 3%, the new regulations come into force in January 2007
Some news for those that are freeezzzzziiiinnnggg in costa del sol. For residents it may not be good news but at least it equals the balance out for non residents.

[El Cid]

It was approved by the government some time ago but it has yet, to my knowledge, to become law.

I believe there is now some concern that it may not be in place by Jan 1 next year.

Sid

[concorde]

If you are U.K resident and also have a second house/holiday home in U.K when you sell that you are liable for C.G T. less your allowance. and are taxed at 40%.
My belief was, if you owned a second house abroad, you are still liable for C.G.T. in the U.K. as well as Spain, therefore 35% Spain 15% U.K. so the reduction to say 15% in Spain will still leave you to pay the remaining 25% in U.K. Not sure if this works out better or worse.as there won't be such generous allowances in Spain.
Not sure if this makes sense and I'm typing it!

[Beachcomber]

The fiscal reform bill of 20th January 2006 was passed by parliament on 2nd November but not all of the proposals in the bill were passed. So far the actual law has not appeared in the BoE and I have not been able to find out which proposals were rejected.

Swerve, could you please state your source for the information.

Concorde, yes I believe you are correct so you will still be paying the difference in the UK.

[Faire d'Income]

Beachcomber - are you sure? Given that there is a double taxation treaty in place between the two countries, then I can't see how the Inland Revenue could legitimately claim your liability for CGT in the UK if it has already been paid in Spain? Additionally, there are differences between the two CGT systems with tapered relief being an option in the UK, whilst Spain allows for relief on any building costs.

[El Cid]

Beachcomber - are you sure? Given that there is a double taxation treaty in place between the two countries, then I can't see how the Inland Revenue could legitimately claim your liability for CGT in the UK if it has already been paid in Spain? Additionally, there are differences between the two CGT systems with tapered relief being an option in the UK, whilst Spain allows for relief on any building costs.

Double taxation treaties do not necessarily mean that you cannot pay tax in both countries.

You can offset the tax from one country to the other, so if the CGT in the UK is higher than in Spain, you have to pay the difference.

Sid

[Beachcomber]

The fiscal reform bill was approved in congress on 2nd November not in October as stated in the link you gave. It is natural to assume that the reduction in non-resident CGT was included but five of the proposals were NOT adopted and I do not know which ones.

I gather that CGT in the UK is 40% and that the difference must be paid on the sale of a property located in a foreign country. I know this to be a fact because I have a friend who sold his property in Spain, paid the balance of the 35% CGT to AEAT then had to pay the remainder to HMRC.

In that case it makes no difference what the rate is in Spain because you will be paying the difference in the UK assuming you declare the sale, of course.

[ashtondav]

Yes you will still pay the tax in UK. Its not 40% though, its at your highest marginal tax rate, 10%, 22% or 40%. Also you can deduct your allownace of nearly £9,000 and, of course, any CGT paid in Spain. You will be better off most of the time under this new spanish tax.

Now, will this mean a glut of properties coming on to the market in 2007. I would have thought the answer is yes.

[Lavanda]

Yes, I would think there'll be more properties for sale as a result of this ... but ... there's a more interesting side. There'll be no need for vendors to ask so much in order to cover the 35% CGT if it's only going to be 18%. Couple that with the 2% VIVA commission initiative and I think property prices might just fall a bit. Good news? Bad news?