muttymutt

I just wondered if anyone out there could give me some advice? We moved over to Spain last Jan. We purchased our property in May and have been living here permenantly, with no ties in the UK. Neither myself or my husband are residents. We are thinking of selling our house but are very worried about the issue of Capital Gains Tax. we have quite a large mortgage on the property and like so many others we under decleared the real purchase price (not by much i might add)
Can someone advise us on how we may be able to get around this 35% thing. I just cannot believe that we may loose all our profit of the house because of the high tax,am i thinking along the right lines and this 35% is the case?
:scared: :scared: :scared: :scared: :scared: :scared: :scared:
We have no intention on buying another house over here so basically we want out of spain all together.Is it possible to avoid the tax if someone pays cash out right for our house?
Does the tax depend on how long we have had the property, i.e. if we stayed here longer could the tax be less or is it a fixed amount.
I would be very grateful for some good advice here as my head is spinning
cheers

jdr

I think you only pay 35% of the difference in buying and selling price.
So because you bought it under priced you will pay more tax, unless you can get a buyer to buy it under priced also.
Sorry to say this, but the whole idea of the 35% tax is aimed at people like you, who want to make a killing on property prices, and then take the money out of Spain.
You cant have your cake and eat it.
Take legal advice before you do anything.

muttymutt

Thanks for the info jdr. We are not 'people like that' we have just realised that Spain is not what we thought. We are finding it very difficult to adjust, and everything is such an effort. Just as we seem to get on our feet some other problem appears and we are back to square one. We have two children and we just don't want to waste time fumbling around we want to be secure and happy.
Don't get me wrong we have tries, spanish lessons, getting to know our neighbours and trying to 'fit in' but things just don't seem to be working our. So we are not after making a killing on property prices and doing a runner lifes just too short to put up with so many problems.

Mercedes

To help keep costs down dont go through an estate agent if you can help it some charge 5%-12% and of course you would have lawyer fees also. Dont sell it for a profit just enough to have covered the 10% fees you paid initially. Best of luck, make sure you have a damn good lawyer though, and you can find out by asking loads of different expats, one name should come up frequently if they are any good. Hopefully the lawyers can sort you out.

sibsie

You can claim back the costs of moving, including the commission charged by the estate agent any changes-improvements you made to the property that go beyond cosmetic and claw it all back that way.

It does take about a year to get the money back, you do need someone to act for you who's familiar with the Spanish tax system and make sure you get receipts for everything.

Remember that on the day of sale you don't pay 35% of the profit. 5% of the PURCHASE price is retained from the sale by the Notary. That usually works out to the same as the 35% cap gains on the profit and you then apply to pay CGT deducting the costs I listed above.

muttymutt

god sibsie, you are a wealth of knowledge!! but still don't quite understand the tax thing I understand that the 35% is on the profit and no the complete price and that if we find a cash buyer it may be easier? what i don't get is this 5% thing we have to put 5% up front to the notary??? then what???
how do we claw the money back??? who do we do that through and how do we ask to do that? the only thing we have had do to the property is central heating put in, we were going to to some extensions but not now. so how can we claw money back?
sorry for being thick, but Spain and it's systems just confuse me constantly!!
i think i need a step by step guide how to get the hell out of this place without losing money (hopefully gain some?)
neither of us our residents and the house is the only tie we have over here, so we would like to leave and wipe the slate clean, knowing that nobody is gonna come after us because we haven't paid for something.

Hope that makes some sense, all info gratefully received.

sibsie

I've only recently sold my place so I'm a bit more up to date I guess.

They retain 5% of the sale price., that's the DECLARED price. It's retained by the vendor and given to the notary on the day of sale so you never see that money yourself. They get the 5% as a way of making sure they have some money from us foreign buyers who are more likely to do a runner and pay no CGT at all.

If you work out your own figures, you'll more than likely see that 5% of the sale price works out to more or less 35% of the profit. They are clamping down on the declared values and the advice in Valencia seems to be never underdeclare beyond 75%.

Find a decent lawyer in your area (a Spanish one) who will talk you through it all. Your lawyer will file the forms for you to pay CGT. If it works out to be more than the 5% retained on sale then you get the 5% back. If your 5% for example is €10,000 and your CGT would be €7,000 then you pay the difference minus the amount retained so your CGT. So you would have already "lost" €10,000 and would get a refund of the difference of €3,000.

This system does require you to pay the wealth tax but that can be done after you've sold and is a really small amount.

Remember to make sure you get receipts from the sale including for the commission. Don't let the agent walk out without giving you a written receipt.

pathfinder

One way of getting round it is by becoming resident and then you get tax returns of about 10 %

for the general calculation on what you'll be taxed on follow the steps below.

You Start With The Value Declared In Your Escritura

In all cases you start with the value declared in your "escritura de compra/venta" (title deed of purchase/sale).

To this value can be added the costs of acquisition, (the transfer taxes paid - IVA or ITP -, notary fees and registration costs).

Allowance For Inflation

Then on the total costs of buying the property, you apply the coefficients for inflation. Since the inflation varies every year, it is logical that the coefficients are being determined in the yearly state budgets.

The Additions To Be Made For Inflation

In the state budget for 2002 the following coefficients were established:
For properties bought in 1997: 1,1016
For properties bought in 1998: 1,0802
For properties bought in 1999: 1,0608
For properties bought in 2000: 1,0404
For properties bought in 2001: 1,020
For properties bought in 2002: 1

Deduct Sales Costs From The Sales Price Declared In The New Escritura

Then you take the sales price declared in the new escritura, and you subtract the sales costs (advertising costs, sales commissions, costs of a lawyer and 75% of the municipal Plus Valia Tax).

Finally, Deduct The Value Of Old Escritura From Value Of New Escritura (adjusted for costs)

Subtracting the value in the old escritura + registration costs, from the value in the new escritura - the sales costs, you have the brut capital gains.


we are a company specialising in relocating to spain. Hope the above is of use. www.relocatingtoandalucia.com

All the best
Danny