CAPITAL GAINS TAX

I was considering purchasing off plan. At the start of my investigations into this I was told 2 things by the agent:
1. CGT in spain is reducing to 19% in January2007 and if you are a UK citizen you will only have to pay the 19% and not the 40% which I woul dhave to pay if the property was in the UK.
2. If you sell your property but buy another with the proceeds then you do not pay CGT.

I have since been advised that both of the above are incorrect.  Firstly a UK citizen is liable to UK CGT bo matter where the property is situated and therefore if you are a 40% tax payer then you will be liable for 40% CGT - although , I understand,that you may be allowed a tax credit for the CGT paid in Spain.
Secondly I was advised that the CGT is payable on the gain even though you are 'rolling' the profit into another property.

This makes a significant difference to any profit!!

You can see more about this at www.taxationweb.co.uk

 Spam post or abuse? Please let us know

Well, the info was not really correct.

Obviously, the tax liability in Spain would not be personal, and it comes determined by the place where the asset is located (Spain). CGT for selling your property as a non resident will be reduced to 18% next year. Then the personal obligation that ou may have in the UK comes determined by a personal obligation (being a national and/or domiciled)

Residents in Spain (regardless the nationality) who sell their first residency (usual home) will not have to pay CGT on the profit if they reinvest the proceeds in another first residency during the following 2 years.

I hope the info is useful. Regards.

 Spam post or abuse? Please let us know

Do you have to pay CGT in Spain and the UK if you put all the proceeds back into another Spanish property.? as yuo ahve not yet realised any profit at this stage?

 Spam post or abuse? Please let us know

Hi Mike,

As far as I am aware, if you sell within 3 years and take the money out of Spain, then you have to pay CGT.

If you re-invest in Spain, you don't.

That's my realisation of things, but please check with a solicitor as I am only a layman, well lady actually!

Regards,

 Spam post or abuse? Please let us know

Depends on your age too, doesn't it ? If you are over pension age you don't pay CGT, (I believe !) Help needed here from Maria.

 Spam post or abuse? Please let us know

Yes, but only if that is your habitual dwelling.

Best,

Maria

 Spam post or abuse? Please let us know

CGT is payable on all gains (have actually gone into a fair bit of detail on another thread) unless you are resident in Spain and the property is your principal residence. The proceeds of sale then have to be reinvested into another property in Spain as principal residence within a two year time frame. There is also an indexing factor relating to inflation but I dont know enough about it to explain. Any bills relating to the property for refurb, kitchens etc can be offset against the liability as long as you have paid IVA (i.e. it is on the radar).- I think you can deduct costs of purchase and costs of sale as well. Hence in my view it is always wise to have good professional representation - it goes without saying that it should be independent - unless of course Fibby can create another idiot proof guide - there you go a bit of homework for you while you are sipping the Glenmorangie and a fag in the other hand.

 Spam post or abuse? Please let us know

Crikey Smiley, that one's a bit out of my depth!

I will leave that to someone else thanks!

But maybe, just maybe, when I get to sell/buy, I might give it a go on my own!

 Spam post or abuse? Please let us know

This is part of an article that was in a magazine that my Spanish bank sent  me.

Spain intends to lower the Capital gains tax on the sale of property by non-resident owners from 35% to 18% from the 1st of January 2007. The bad news for resident owners is that Spain also plans to raise the present Capital gains tax of 15% for residents up to the same 18%. Note that the proposal refers to residents and non-residents, not to Spanish and non-Spanish owners.

Westport

 Spam post or abuse? Please let us know

Hi Westport it is lowered - also the retention at sale has been reduced to 3% from 5%.

 Spam post or abuse? Please let us know

I'm hoping Smiley can answer this one.  I have a property on the CB which I am selling in order to buy a new house for retirement.  As the new one I am buying is more expensive than the one I have at the moment, will I be liable for CGT as I am using all the money from the sale to reinvest in another property?  Will this depend on my residency status?  (Sorry, 2 questions).

 Spam post or abuse? Please let us know

Hi we only completed our purchase at the notary in april 07, we have since got it on the market , I was reading that if a property is sold within the first year you don't pay CGT . And if you do do you pay CGT on the whole of the amount you sell it for or just on the profit you have made?

 

We want to know this and a solicitor won't tell me unless I pay him upfront and sign documents saying I'll use him befofe he gives me any advice.

 

 

Anyone got any ideas on how much we would pay if we paid 160 euro and sell for 210 bearing in mind we will have to pay a big mortgage back of 117 so not gonna be left with much

 

 

 

Hope somebody can help

 

 

 

 Spam post or abuse? Please let us know

Hi Cazzdrazz,

As far as I understand (please correct me if I'm wrong) that CGT is payable on any increase in the declared selling price even if the sale takes place within the year of first purchase?
If in your case you made a €50,000 profit then you would pay tax at 18% or €9,000. You can I understand deduct expenses such as agency selling fees and solicitors costs both at the purchase and selling stage. Unfortunately, Any interest paid against any mortgage is NOT deductable!
It's also normal practice for the solicitor to hold back 3% of the gross selling price on completion to be held over by the local tax authority pending submission of documents to confirm what profit if any was made. You would at this point be well advised to use the services of a Spanish qualified tax accountant to confirm the exact liability?

Mike T

 Spam post or abuse? Please let us know

Basically Mike is correct there is automatically a 3% retention at Notary of the sale price of the property. It is then your responsibility to either pay the CGT due (at 18% of capital gain) or to claim back the over retention if the 3% is more. Thus in your example the CGT due is higher (less deductibles) than the retention. If you never intend to set foot in Spain again then there is little or nothing they can do about it. If you intend buying further property they will pursue for the difference and there is a possibility (albeit unlikely) that you could get stopped at passport control on entry to Spain on any future visit to settle the difference - only two dead certs in life "death and taxes"

 Spam post or abuse? Please let us know

Cazzdrazz, If you are selling the property in the same year you purchased it then there is no reason to make the declared price any higher than your original purchase price. The tax authorities cannot expect a price increase inside 12 months. Just declare a few thousand euro´s more than you paid for it and expect to lose a 3% retention that your lawyer should claim back for you.

 Spam post or abuse? Please let us know

I know where you are coming from Ken but that assumes that the buyer is willing to declare at less than the real sale price and I gotta say it is something we always recommend against with the new procedures being followed and Land Registry and Hacienda talking to one another - lets hope the buyer doesnt look at this site.

 Spam post or abuse? Please let us know

I don´t think we are in any danger of the buyers looking in smiley - that usually comes later when things go wrong ;+)) A couple of points though - I´m sure things are much more regulated in your area smiley, lawyers here never bat an eyelid in CC and CB - well not yet anyway. But the main point is CazzDrazz is looking to sell at €210,000. He may get a shock when the first offer comes in, so the black element could almost become negligable.

 Spam post or abuse? Please let us know

Yeah mate agreed but Big Brothers arm is starting to stretch further and further and LR and Hacienda certainly in cahoots in Valencia, CDS, Barcelona and to the North coast as well - have been some instances inland in more rural areas here too so why they would forget all about sleepy old Murcia I dont know!!

As you say it may all be academic if he doesnt get his buyer at 210k anyway.

 Spam post or abuse? Please let us know

smiley quote "Yeah mate agreed but Big Brothers arm is starting to stretch further and further "

Now there`s a thought, "Big Brother" - I hope we get Jade Goody as our tax inspector, she would never find us

 Spam post or abuse? Please let us know

Couldnt even find herself and I was referring to the Aldous Huxley version (or was it Orwell - seems as if I am a bear of very little brain these days - perhaps I should stick to Pooh Sticks) - not that drivel on Channel 4!!

 Spam post or abuse? Please let us know