Are my Capital Gains calculations right??!!!

Hi,

I want to sell my apt in order to reduce/remove my mortgage and reinvest in a smaller property in the same area.  I am worried about capital gains.  Please could you look at my calculations and tell me whether I have calculated correctly and not missed anything out.

Original apt price - 124,115.01 (115,995.34 + 7% iva 8,119.67).  Costs I paid when I bought the apt - mortgage opening fee - 459.77, Notary - 2,008.82 (this inc. plus valia of €24, registry of €255 and 0.5% stamp duty of €579).

These 3 things added up total 126,583.60. So if I sell the property at 190,000 - 126,583.60 that leaves 63,416.40.

Does this mean that as long as I buy something for more than 63,416.40 (declared price on paper) I won't be taxed capital gains?

For your information, I've had my current apt for 7 years and I'm a resident.

Many Thanks and Regards

Debbie

I'm not 100% certain but this is what I believe the rules to be.

In calculating your allowable acquisition costs you cannot claim mortgage costs (mortgage opening fee, notary costs that relate to mortgage deed, tax relating to mortgage etc).

You can however increase you acquisition/purchase costs by a coeficiente de actualizacion which from 2003 until 2010 is approx 1.125 - sorry I don't have exact rates to hand. This is meant to increase your historical acquisition cost to present value. So multiply your acquisition/purchase cost by 1.125 approx

You can also deduct costs of disposal such as estate agent fees etc to arrive at a net proceeds of sale.

To claim roll-over relief there are some conditions:-

1 - Must be resident

2 - Have lived in the house for 3 years

3 - Buy a main residence within 2 years

The tax relief is based on the proportion of the total sales proceeds re-invested in the new home. So if you only re-invest half the proceeds of sale then only half is deferred.

If you are 65+ then I believe the gain is tax free and there is no need to re-invest.

Thanks for your response, Faro. 

Does this look more realistic?

Original apt price - €125,000 plus €858 spent on plus valia of €24, property registry of €255 + 0.5% stamp duty of €579 = €125,858 x 1.125 (coeficiente example) = €141,590.  If I sell the apt for €199,000 - €141.590 acquisition costs that leaves €57,410 net proceeds. As long as I buy something within 2 years that has an official price of €57,410 or more then am I right in thinking that I won't have to pay any capital gains?

Once again, thanks for your time.

Deb

As I understand the rules to totally defer the gain you must re-invest the full proceeds of sale (ie EUE199k).

If you decide to buy a property for say EUR100k then you defer only 50% of the gain.

Faro;  1 - Must be resident    PLUS have an up to date tax certificate otherwise the buyer is required to deduct 3% from the purchase price & pay it in to the Hacienda in the sellers name to cover CGT liability.

Guslopez - very good point!

Chicadeb - worth checking out you satisfy the conditions of being tax resident as we all know tax offices in any country seem to make up their own rules.

I always find it quite amusing when on one hand tax residency is one of fact and not choice but then when you are in actual fact resident the tax office when they think you are trying to gain some advantage start arguing you are/were not resident!!!!