Capital gains tax

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gus
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Capital gains tax

Postby gus » Mon Sep 27, 2021 10:46 am

We have just sold a holiday property for €275000 and our lawyers has held a retention of just under €9000. We paid approx €165000 when we bought the house.
Roughly how much more tax will we need to pay and how do we declare this - if we need to?
We are UK resident.

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Re: Capital gains tax

Postby Pamela1 » Mon Sep 27, 2021 1:02 pm

Just wanted to say congratulations on your sale Gus, you will be relieved to have sold. :)

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Re: Capital gains tax

Postby Miro » Mon Sep 27, 2021 1:54 pm

Congratulations on the sale.
As non-residents, the buyer (or their lawyer) should have retained 3% of the sale price, and must submit this to the tax office within 1 month of the sale, using form 211. Once your lawyer has a copy of that, they should file a form 210 on your behalf within 3 months of the date the 211 was filed, declaring the sale, the capital gain accrued, the retention already held, and make payment of any additional tax due.

As far as I know, the tax on capital gains for non-EU citizens is currently 24%. (I may be out of date, so you should check/verify this). I'll let you do the maths!

You will almost certainly be liable for plus valia tax as well, which is payable to your town hall.
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Re: Capital gains tax

Postby gus » Mon Sep 27, 2021 2:07 pm

Thanks for the responses. We first “looked at “ selling back in February 2020 but had to take a pause during COVID.
We managed to get back out to Spain in late June this year and put it up with a local estate agent. She managed to get a Swedish buyer pretty promptly and the whole process was completed last week 🥳🥳🥳
Our lawyer had POA and sent us the final invoice this morning having accounted for the 3%retention and Plus Valia of just over €11,000.
So, all pretty quick process eventually 👍

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Re: Capital gains tax

Postby gus » Mon Sep 27, 2021 2:08 pm

Oops - I forgot the size of the emojis.

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Re: Capital gains tax

Postby Miro » Mon Sep 27, 2021 2:12 pm

Just thought you were very happy with the sale! :D
I forgot this link which may be helpful: https://www.agenciatributaria.es/static ... _en_gb.pdf
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Re: Capital gains tax

Postby El Cid » Mon Sep 27, 2021 3:31 pm

Most non residents just pay the 3% retention and ignore any excess tax due. Thats why the retention is there. Unless you are planning to buy again in Spain just pay the retention.

Sid

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Re: Capital gains tax

Postby Miro » Mon Sep 27, 2021 3:40 pm

Personal choice I guess. I personally would not feel comfortable skipping town knowing that I owe a considerable amount of tax, and couldn't with a clear conscience advise anyone to do so.
I wonder if there is an amount below which the Spanish tax department will not bother chasing abroad?
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Re: Capital gains tax

Postby El Cid » Mon Sep 27, 2021 4:15 pm

I’m pretty sure the 3% is the figure especially as decent gains on property are a thing of the past.

What they may lose on the 3% is offset by the fact that in many cases the 3% is more than the tax and people don’t want to take the arduous route of reclaiming the difference.

Sid

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Re: Capital gains tax

Postby Miro » Mon Sep 27, 2021 4:26 pm

OP bought for €165,000, sold for €275,000. Gain of €110,000.
3% of sale price = €8,250
CGT = €26,400
Difference owed = €18,150

Am I missing something?
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Re: Capital gains tax

Postby El Cid » Mon Sep 27, 2021 5:00 pm

No.

Sid

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Re: Capital gains tax

Postby Miro » Mon Sep 27, 2021 5:10 pm

OK. So it's just me, who would be nervous about owing that much in tax and deliberately avoiding it?
I have often been accused of being over-cautious; maybe I'm also too honest :?
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Re: Capital gains tax

Postby El Cid » Mon Sep 27, 2021 5:15 pm

I would not assume that AEAT would not try to pursue me for the money, but I certainly would not pay it without it being demanded with threat of Bank embargoes (if applicable).

Beachcomber will know whether this is likely.

Sid

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Re: Capital gains tax

Postby katy » Mon Sep 27, 2021 11:28 pm

Agree with Sid :|

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Re: Capital gains tax

Postby Beachcomber » Tue Sep 28, 2021 5:59 am

I don't know if there is a threshold but I do know that sellers who have not paid the balance of capital gains tax have been persued in their country of subsequent fiscal residence and the funds recovered through a collaboration between AEAT and the tax authority of the country concerned.

I would take issue with Sid on the matter of recovering the 3% retention (or a portion of it). This is a fairly simple procedure carried out by the submission of a form 210 so people who have been paying their non-resident taxes and have saved the file generated can just import the file, add the name and NIE number of the purchaser and enter the calculation.

If it is done properly it will be repaid within six months and, in most cases, much more quickly. I have submitted six applications recently and in every case the money was refunded, in full, within less than three months.

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Re: Capital gains tax

Postby elusive » Tue Sep 28, 2021 1:56 pm

Intresting thread as I read the below just the other day in relation to CGT.


Another informative post by Anne Marsh on Ladies of Spain. Sharing with permission.

Sale of property. I have had a couple of cases recently where people have been landed with large capital gains tax bills as a result of incorrect declaration of property sales.
When you sell as a tax resident it is declared on the annual renta no problem, however when you sell as a non tax resident, the final step is often being overlooked.
If you sell as a non tax resident 3% of the sales price is withheld by the buyers lawyers on account of cgt, this 3% is nothing to do with outstanding bills, plus valia or anything else.
The purchasers lawyers pay the 3% to the hacienda on a modelo 211, all good no problem, what is missing is the final declaration of the capital gain/loss on the sale of the property.
Within 3 months of the date of sale the vendors must submit a modelo 212, especially important if you sell at a loss by the time other costs are taken into account, in order to reclaim some or all of the tax withheld, however it should strictly also be submitted if you have made a gain and the gain is larger than the 3% withheld on sale.
You may think if you are selling up in Spain and returning to the UK that you can just pay the 3%, the hacienda could if they wished come after you in the UK for the additional tax owed up to 4 years later, so if you sold as a non resident in 2017 then they have until 30 June 2022 to catch up with you.
The problems I am seeing are where properties are being sold as non resident when the vendor is actually tax resident in Spain (whether they have realised it or not) where the hacienda are coming 4 years down the line to recover outstanding tax of 30k plus interest and penalties.

https://www.facebook.com/10123661847338 ... 363315576/

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Re: Capital gains tax

Postby Beachcomber » Wed Sep 29, 2021 6:05 am

The post is largely correct but there are some errors.

The form 212 was discontinued several years ago and the final tax declaration for non-residents is now made on form 210, the same form as the annual non-resident tax declaration.

The purchasers or their representative must pay the amount of the retention to AEAT within a month of the date of purchase and then the sellers have a further three months from the date of that payment in which to present their capital gains tax declaration. It is NOT three months from the date of the sale. (This was correctly stated by Miro in a previous post).

Although the 3% retention is essentially on account of any capital gains tax payable, any refund due will not be paid unless the seller is up to date with annual non-resident tax declarations.

The period for AEAT to claim any unpaid tax, whether from a resident or non-resident, is four years plus the whole of the current fiscal year ie 31st December not 30th June.

Just a further note on the OP's original post. When calculating the gain you can add expenses on purchase to the original purchase price (notary, lawyer, property registry, transfer taxes etc) and deduct expenses from the sale price including the commission of the estate agent and plus valía etc. but you must be able to justify the expenses with corresponding invoices.

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Re: Capital gains tax

Postby markwilding » Wed Sep 29, 2021 8:29 am

Would house improvement such as installing a new kitchen and bathrooms count as expenses as someone would want to pay less for for a house that would need to be brought up to standard than one that had everything already in place and would factor it into the price when the property is sold on?

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Re: Capital gains tax

Postby Beachcomber » Wed Sep 29, 2021 10:00 am

I have never put that to the test. As both the resident and non-resident declarations are 'self assessments' you can claim whatever you wish and it may, or may not, be accepted by AEAT. At the very least there would need to be appropriate invoices and approval of a licence for minor building works.

My own personal thought is that the only expenses for improvements etc that can be claimed are those which are subject of an escritura de obra nueva.

I don't think they check physically every declaration but if the correlation between the actual and revised purchase and sale prices exceeds a certain percentage it is flagged for inspection.

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Re: Capital gains tax

Postby Miro » Wed Sep 29, 2021 10:12 am

Beachcomber wrote: Tue Sep 28, 2021 5:59 am If it is done properly it will be repaid within six months...
Perhaps worth noting that when they exceed the 6 months, they also pay interest; I think it is fair to assume therefore that if any outstanding CGT is not paid within the specified time limit, they will also add interest to the amount owed - not to mention presumably a late payment fine.
Beachcomber wrote: Wed Sep 29, 2021 6:05 am... any refund due will not be paid unless the seller is up to date with annual non-resident tax declarations.
...and presumably if the seller has been correctly filing non-res declarations, AEAT will have all the necessary details to pursue them for any undeclared / unpaid CGT?

Again, personal choice I suppose, but if it was me.....
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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