Re-investing House Sale Money

Information and questions about the Law in Spain and Andalucia.
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scampicat
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Re-investing House Sale Money

Postby scampicat » Thu Jan 01, 2015 1:54 pm

Hi there, a long time no see.

What is the rule for selling a house and re-investing the profits in another? I know there used to be something about if you re-invested within a certain time you did not have to pay any tax. Can the house be in the UK?

(We don't actually owe any tax,it was paid up when we left (no 'black' money involved), but seeing as we have been asked for car tax that we do not owe, I'm just arming myself with the facts!).

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Re: Re-investing House Sale Money

Postby gerryh » Thu Jan 01, 2015 5:34 pm

scampicat wrote:... but seeing as we have been asked for car tax that we do not owe, .....
Can't help you on the house sale money part but if you were the registered owner of the car on 1st Jan then you are liable for the tax for that year.
If you sold the car before 1st Jan but the transfer of ownership didn't happen till after the 1st Jan then you are still the owner on the 1st Jan.
Happened to me a few years ago.
:thumbdown:
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scampicat
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Re: Re-investing House Sale Money

Postby scampicat » Thu Jan 01, 2015 6:03 pm

We sold the car (in the UK) in June 2012. I sent them the documents saying this. They then later asked us for car tax from January 2013. :crazy:

Having said that, I've heard nothing for about six months, hopefully they'll leave us alone now.

Thanks for the info :)

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Re: Re-investing House Sale Money

Postby gerryh » Thu Jan 01, 2015 6:10 pm

Sorry I assumed you lived in Spain and sold the car in Spain.
My reference re car tax was for that situation.
Not a clue what the UK situation is for car tax.
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Re: Re-investing House Sale Money

Postby Beachcomber » Thu Jan 01, 2015 6:39 pm

scampicat wrote:...What is the rule for selling a house and re-investing the profits in another? I know there used to be something about if you re-invested within a certain time you did not have to pay any tax. Can the house be in the UK?...
This only applies if you are tax resident in Spain at the time of the sale.

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Re: Re-investing House Sale Money

Postby Miro » Thu Jan 01, 2015 9:17 pm

scampicat wrote:We sold the car (in the UK) in June 2012. I sent them the documents saying this. They then later asked us for car tax from January 2013. :crazy:
Assuming (??) you are talking about a Spanish registered car - are you sure the transfer was correctly completed? Who are "they"? Tráfico, or your (old) town hall?

The time limit for reinvesting the proceeds of the sale (of your primary residence - i.e. you have to be resident in Spain for it to apply) is I believe two years. I understand that you can reinvest the proceeds in a new primary residence anywhere in the EU - although I'm not convinced Hacienda would accept it that easily. Would be interesting to know others' take on this.
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Re: Re-investing House Sale Money

Postby Beachcomber » Thu Jan 01, 2015 10:35 pm

If you have sold up and moved back to the UK and have purchased a property there, and with no other assets in Spain, I think AEAT would have rather a tough time getting a perceived payment for capital gains tax out of you.

Remember, you have to have been a fiscal resident to qualify for this exemption.

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Re: Re-investing House Sale Money

Postby Miro » Fri Jan 02, 2015 11:51 am

Not too sure what you mean by "perceived payment". Are you suggesting that Hacienda would not try to track you down and claim any CGT due? Thanks to the 720, they probably already know more about my UK assets than HMRC do. If I was to sell my home here today, and reinvest the funds in a home in the UK, I would surely have to still file IRPF for this tax year showing the sale, & purchase to offset against any potential CGT. If I didn't, they would surely come after me for the CGT arising from the sale.
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Re: Re-investing House Sale Money

Postby Beachcomber » Fri Jan 02, 2015 2:27 pm

I stand open to correction by Sid on this matter but you only have to pay the capital gains tax if you do not invest the entire proceeds in another property within two years by which time you will presumably have bought a property in the UK and will no longer be a fiscal resident of Spain.

If AEAT decided that purchasing a property in the UK did not count they would have to pursue you through the courts for the money and as the current perceived wisdom is that purchasing another property within the European Union is a legitimate re-investment of the proceeds of the sale in Spain they would obviously lose and probably would not bother.

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Re: Re-investing House Sale Money

Postby El Cid » Fri Jan 02, 2015 6:14 pm

I think you are absolutely right.

Assuming a gain was made, you declare it on the tax return for the year that you sold it. You also tick a box to claim the two year moratorium on paying the tax as you intend to reinvest it. At that stage the place that you intend to buy the new home is not an issue.

Next year, as you are no longer tax resident, you don't submit a tax return. The following year you are obliged to either state where you reinvested the money or pay the tax. Of course, in that year as well, you will not be tax resident so no normal tax return is required.

By then you are almost certainly off the radar so can probably ignore it. The Spanish tax authorities have shown little inclination in the past to chase for back tax so I cannot see it being an issue over this - just look at their record for chasing foreign registered cars!

Sid

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Re: Re-investing House Sale Money

Postby katy » Fri Jan 02, 2015 6:22 pm

good post Sid, spot on :thumbup: :thumbup:

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Re: Re-investing House Sale Money

Postby Miro » Fri Jan 02, 2015 6:34 pm

El Cid wrote: Next year, as you are no longer tax resident, you don't submit a tax return. The following year you are obliged to either state where you reinvested the money or pay the tax. Of course, in that year as well, you will not be tax resident so no normal tax return is required.
Sid
I agree too, but this is the bit I'm unclear about. How & when do you "state" where you reinvested the money, if not submitting a tax return (as, like you say, there's no need to anymore)?
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Re: Re-investing House Sale Money

Postby Beachcomber » Fri Jan 02, 2015 6:44 pm

I think I would only do that in the unlikely event that they ask me!

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Re: Re-investing House Sale Money

Postby katy » Fri Jan 02, 2015 6:51 pm

Just scribble not known at this address and repost :D

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Re: Re-investing House Sale Money

Postby Miro » Fri Jan 02, 2015 6:56 pm

I would have agreed 5 years ago (that it's unlikely they'd ask) but not now - not after the recent experiences I've had with the barstewards.
There's a box to check on your IRPF to defer the payment of any CGT until the following year. Do you really think they would not follow up on that a year on?
I was asked to provide justification of the figures on my tax return for the sale (and profit) on a trastero sold for € 3,500 - 18 months after the event.
Don't worry about what people think, they don't do it very often

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Re: Re-investing House Sale Money

Postby El Cid » Fri Jan 02, 2015 7:28 pm

Surely you didn't make the mistake of giving them your new address!

Sid

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Re: Re-investing House Sale Money

Postby Miro » Fri Jan 02, 2015 7:41 pm

Come on guys, I'm being serious!
Of course they can track you down these days, and the govt's finances are in such a mess, I've every confidence they will.
Let's just hypothesise for a moment and imagine you're the kind of person who prefers to (try) to do everything correctly...
How & when do you declare the purchase of your new home, thereby ensuring that you have satisfied the criteria for exemption from CGT?
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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Re: Re-investing House Sale Money

Postby El Cid » Fri Jan 02, 2015 9:16 pm

If you decided to follow the rules you would have to ultimately make a tax declaration showing the details of the new purchase. That might be a problem if you were officially nonresident but I am guessing that if you had applied to change your tax residency status, which you should do, that it would be refused as there is a potential tax charge if you don't reinvest.

Of course, they do have the ability to track you down, but even though the country is broke they don't seem to bother to chase any of the tax dodgers.

They could easily identify thousands of residents who have not registered and don't make a tax declaration. They steadfastly ignore the opportunity to tax and fine the drivers of UK vehicles. They allow the black economy to continue to flourish when they could easily reduce it. Even lawyers and architects will accept cash with no IVA or resultant income tax. What about the 3% retention for non residents? How often have they chased up the balance that might be owing if a significant profit was made? I could go on!

Yes, occasionally they hang out a big fish to dry, but bearing in mind the built in corruption that is endemic in Spain this happens all too rarely.

If I had sold a house in Spain for a profit and returned to the UK I would hardly be shaking in my boots about the possibility of the man from Hacienda knocking on my new door!

Sid

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Re: Re-investing House Sale Money

Postby Miro » Fri Jan 02, 2015 9:40 pm

Very interesting answer, Sid. I value and respect your opinion, and when it finally happens, I may well simply do as you suggest. Certainly if I was hoping to avoid a huge CGT bill I might feel like taking the chance. The thing is though, I will actually be reinvesting the sale proceeds in another property, so I won't be trying to hide anything. But as you point out, trying to do the Right Thing could well lead to complications. Which rather nicely sums up in a nutshell why I've had enough! :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.

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Re: Re-investing House Sale Money

Postby El Cid » Fri Jan 02, 2015 11:17 pm

I can understand your concerns.

If you do decide to do nothing and take a chance then just make sure you keep the tax due to one side (plus 20% to pay the fine) and then just wait and see!

Sid


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