Capital gains tax
#1
Just Joined
Thread Starter
Joined: Mar 2014
Posts: 3
Capital gains tax
We are selling our property in UK and expect completion day to be around mid May this year when we are moving to Spain, this means that we won't have been resident in UK for 183 days. In September/ October this year we have planned to visit family in the USA for 6 weeks meaning that we won't have been resident in Spain for 183 days either, would we be liable for capital gains tax on the property we are selling in UK.
The profit we have made since we bought the house 5 years ago has been cancelled out by the money we have spent on home improvements but unfortunately in preparation for moving to Spain we have shredded some of the receipts, would this be a problem.
Finally if our trip to USA is not classed as non residency in Spain would it be a good idea to delay applying for residency until 2015, thank you in anticipation of your responses.
The profit we have made since we bought the house 5 years ago has been cancelled out by the money we have spent on home improvements but unfortunately in preparation for moving to Spain we have shredded some of the receipts, would this be a problem.
Finally if our trip to USA is not classed as non residency in Spain would it be a good idea to delay applying for residency until 2015, thank you in anticipation of your responses.
#2
Re: Capital gains tax
Just count your days very carefully and keep them below 183. If you come out mid May and have 6 weeks in the US you will be just about be OK. Just make sure you keep all your tickets to prove when you arrived and how long you were away.
If you get it right, you will not be tax resident until next year and if you sold the house in 2014 you would not be liable for Spanish CGT.
If you get it right, you will not be tax resident until next year and if you sold the house in 2014 you would not be liable for Spanish CGT.
#3
Just Joined
Thread Starter
Joined: Mar 2014
Posts: 3
Re: Capital gains tax
Thanks Fred, if we had receipts or could get them re issued to prove we hadn't actually made a profit would the Spanish authorities accept that or is it just based on the buying and selling price, if it is based on that would it be wise to delay applying for residencia until 2015 or are there disadvantages in doing that.
#4
Re: Capital gains tax
From what you have said, you won't be resident in Spain this year - just make sure you count the days carefully.
In Spain, you can claim the expense of MAJOR improvement - like an extension, but not minor alterations and yes, if challenged, you would have to be able to prove it.
However, the tax declaration system in Spain is self assessment, so you just submit the amount of the gain, after any adjustments for improvements and any legal fees during the buying and selling process and agents fees.
It will only be challenged in the very unlikely event that they decide to investigate your tax situation.
Your best bet is to manage your dates and then relax about the tax issues.
In Spain, you can claim the expense of MAJOR improvement - like an extension, but not minor alterations and yes, if challenged, you would have to be able to prove it.
However, the tax declaration system in Spain is self assessment, so you just submit the amount of the gain, after any adjustments for improvements and any legal fees during the buying and selling process and agents fees.
It will only be challenged in the very unlikely event that they decide to investigate your tax situation.
Your best bet is to manage your dates and then relax about the tax issues.
#5
BE Enthusiast
Joined: Aug 2012
Location: Granada Province
Posts: 549
Re: Capital gains tax
Really interesting, not hi - jacking your topic, but to be clear IF I sell my house AFTER June of this year and move to Spain before December this year(the end of the Spanish tax year) not having been in Spain for more than 183 days during 2014 (not even potentially 90 days for the residencia rules), by the time I become TAX resident in Spain during 2015 having got Residence AND been there for more than 183 days, I won't owe CGT to Spain on the sale of the UK home in 2014, BUT alternatively, I should not sell in 2015 and then spent more than 183 days in Spain during 2015, when I work it out that I WOULD then have to pay CGT. Very grateful.
#6
Lost in BE Cyberspace
Joined: May 2009
Location: Alicante province
Posts: 5,753
Re: Capital gains tax
I live in the heart of expat land. They say a million of us live in Spain, mostly split between the Malaga and Alicante provinces. Most of us have problems with the new tax laws and want to stop the Spanish government from emptying our bank accounts back home, should they become desperate enough to do so.
What we don't understand is quite simple as exemplified in this short thread.
Who is counting the 183 days within the Spanish administration?
(We don't feel like being helpful to the diabolical Hacienda and their astounding incompetence).
What we don't understand is quite simple as exemplified in this short thread.
Who is counting the 183 days within the Spanish administration?
(We don't feel like being helpful to the diabolical Hacienda and their astounding incompetence).
#7
Re: Capital gains tax
Nobody is - they haven't got enough fingers!
You can get away with almost anything by not declaring it and will probably get away with it for years. However, if for some reason, Hacienda decide you might be cheating on them, they, just like HMRC in the UK, will take you apart.
They have far bigger fish to fry than a few UK pensioners in Spain and sadly they don't seem to be doing a decent job chasing the big fish.
If you are tax resident and put in an annual tax return, however untrue it may be, so long as you pay some tax, you are far more likely to get a Xmas card from Hacienda that a tax inspection!
You can get away with almost anything by not declaring it and will probably get away with it for years. However, if for some reason, Hacienda decide you might be cheating on them, they, just like HMRC in the UK, will take you apart.
They have far bigger fish to fry than a few UK pensioners in Spain and sadly they don't seem to be doing a decent job chasing the big fish.
If you are tax resident and put in an annual tax return, however untrue it may be, so long as you pay some tax, you are far more likely to get a Xmas card from Hacienda that a tax inspection!
#8
Re: Capital gains tax
Nobody is - they haven't got enough fingers!
You can get away with almost anything by not declaring it and will probably get away with it for years. However, if for some reason, Hacienda decide you might be cheating on them, they, just like HMRC in the UK, will take you apart.
They have far bigger fish to fry than a few UK pensioners in Spain and sadly they don't seem to be doing a decent job chasing the big fish.
If you are tax resident and put in an annual tax return, however untrue it may be, so long as you pay some tax, you are far more likely to get a Xmas card from Hacienda that a tax inspection!
You can get away with almost anything by not declaring it and will probably get away with it for years. However, if for some reason, Hacienda decide you might be cheating on them, they, just like HMRC in the UK, will take you apart.
They have far bigger fish to fry than a few UK pensioners in Spain and sadly they don't seem to be doing a decent job chasing the big fish.
If you are tax resident and put in an annual tax return, however untrue it may be, so long as you pay some tax, you are far more likely to get a Xmas card from Hacienda that a tax inspection!
#9
Re: Capital gains tax
You are missing the point. It is up to you to prove otherwise if they think you are tax resident.
As far as Hacienda are concerned, you are guilty until you can prove you are innocent.
#10
Lost in BE Cyberspace
Joined: May 2009
Location: Alicante province
Posts: 5,753
Re: Capital gains tax
When British expats started flooding into Spain, they formed many self-help organisations like Neighbourhood Watch and a plethora of others, which were needed against an adversarial Spanish justice system.
Around ten years ago expats lost a third of their British earnings when the pound fell, and seven years ago their Spanish properties lost half their value.
The current scare for those remaining is the new tax law and nobody knows where that is going.
There are many extremely helpful self-help groups all over expat Spain who dispense proper advice, yet still they come, buying into a falling market and queuing up all over the place for bits of paper they don't need and which will positively harm them in the future.
The authorities will try to take money from you every time you fill out a Spanish form, if you've filled out the 720 and have any assets in the UK you need shooting.
Around ten years ago expats lost a third of their British earnings when the pound fell, and seven years ago their Spanish properties lost half their value.
The current scare for those remaining is the new tax law and nobody knows where that is going.
There are many extremely helpful self-help groups all over expat Spain who dispense proper advice, yet still they come, buying into a falling market and queuing up all over the place for bits of paper they don't need and which will positively harm them in the future.
The authorities will try to take money from you every time you fill out a Spanish form, if you've filled out the 720 and have any assets in the UK you need shooting.
#11
Forum Regular
Joined: Oct 2013
Posts: 46
Re: Capital gains tax
HBG,
I understand where you’re coming from with your last paragraph. But if you keep your UK home (as a safety net) and rent it out to top up your income, HMRC will have those figures. IF the Spanish tax office chooses to cross reference, they’ll see you have UK sourced rental income...and irrespective of whether it’s been declared as an income to them, they’ll have you on failing to declare that property on 720.
And with fines of up to 130% of the value of the undeclared asset, it’s a hell of a risk to take. I’d be forever looking over my shoulder, waiting for the dreaded envelope to land on my mat.
I guess if you never rent out the UK property and don’t sell it whilst in Spain (so there would be no HMRC involvement with rental income tax or CGT), your statement could make sense. But if you rent it or sell it whilst a resident of Spain without declaring it on 720, that’s a HUGE gamble on your lifesavings.
I understand where you’re coming from with your last paragraph. But if you keep your UK home (as a safety net) and rent it out to top up your income, HMRC will have those figures. IF the Spanish tax office chooses to cross reference, they’ll see you have UK sourced rental income...and irrespective of whether it’s been declared as an income to them, they’ll have you on failing to declare that property on 720.
And with fines of up to 130% of the value of the undeclared asset, it’s a hell of a risk to take. I’d be forever looking over my shoulder, waiting for the dreaded envelope to land on my mat.
I guess if you never rent out the UK property and don’t sell it whilst in Spain (so there would be no HMRC involvement with rental income tax or CGT), your statement could make sense. But if you rent it or sell it whilst a resident of Spain without declaring it on 720, that’s a HUGE gamble on your lifesavings.
#12
BE Enthusiast
Joined: Aug 2012
Location: Granada Province
Posts: 549
Re: Capital gains tax
I suppose it all boils down to individuals attitude to risk. I am NOT a 'ninny' but experienced the Haciendas wrath when I bought in Spain two years ago. Through no fault of my own, they simply assumed I had under declared (I didn't, it was a genuine bargain) and hit me with a 3000 euro tax demand. Bullish was not the word for them.
Its doesn't matter where you live in the World, you can nick an old ladies life savings and probably get a slap on the wrist, but DON'T go messing with the Government coffers. And Government Depots do share info, but usually when someone pops up over the radar I have to say.
If I can avoid all the crap at my age, I will. That's why I think my idea regarding my house (above) is okay, as far as I can see!!!!
Its doesn't matter where you live in the World, you can nick an old ladies life savings and probably get a slap on the wrist, but DON'T go messing with the Government coffers. And Government Depots do share info, but usually when someone pops up over the radar I have to say.
If I can avoid all the crap at my age, I will. That's why I think my idea regarding my house (above) is okay, as far as I can see!!!!
#13
BE Enthusiast
Joined: Jun 2013
Posts: 990
Re: Capital gains tax
When British expats started flooding into Spain, they formed many self-help organisations like Neighbourhood Watch and a plethora of others, which were needed against an adversarial Spanish justice system.
Around ten years ago expats lost a third of their British earnings when the pound fell, and seven years ago their Spanish properties lost half their value.
The current scare for those remaining is the new tax law and nobody knows where that is going.
There are many extremely helpful self-help groups all over expat Spain who dispense proper advice, yet still they come, buying into a falling market and queuing up all over the place for bits of paper they don't need and which will positively harm them in the future.
The authorities will try to take money from you every time you fill out a Spanish form, if you've filled out the 720 and have any assets in the UK you need shooting.
Around ten years ago expats lost a third of their British earnings when the pound fell, and seven years ago their Spanish properties lost half their value.
The current scare for those remaining is the new tax law and nobody knows where that is going.
There are many extremely helpful self-help groups all over expat Spain who dispense proper advice, yet still they come, buying into a falling market and queuing up all over the place for bits of paper they don't need and which will positively harm them in the future.
The authorities will try to take money from you every time you fill out a Spanish form, if you've filled out the 720 and have any assets in the UK you need shooting.
#14
Lost in BE Cyberspace
Joined: May 2009
Location: Alicante province
Posts: 5,753
Re: Capital gains tax
I don't know the numbers (if they're even available) but guess that the great majority of expats in Spain have not filled out the form 720 and only slightly smaller numbers have not registered anywhere - they're holiday home owners who pay their proper taxes back in the UK where they are registered as tax residents. Non resident taxes don't really apply, they're peanuts.
As Fred pointed out earlier - Hacienda is not doing any counting and are hardly going to bother with the average expat pensioner already paying his taxes in the UK. Maybe I've got my fingers crossed while writing the last sentence, but I'm taking the fifth amendment whatever happens.
As Fred pointed out earlier - Hacienda is not doing any counting and are hardly going to bother with the average expat pensioner already paying his taxes in the UK. Maybe I've got my fingers crossed while writing the last sentence, but I'm taking the fifth amendment whatever happens.
#15
BE Enthusiast
Joined: Jun 2013
Posts: 990
Re: Capital gains tax
I don't know the numbers (if they're even available) but guess that the great majority of expats in Spain have not filled out the form 720 and only slightly smaller numbers have not registered anywhere - they're holiday home owners who pay their proper taxes back in the UK where they are registered as tax residents. Non resident taxes don't really apply, they're peanuts.
As Fred pointed out earlier - Hacienda is not doing any counting and are hardly going to bother with the average expat pensioner already paying his taxes in the UK. Maybe I've got my fingers crossed while writing the last sentence, but I'm taking the fifth amendment whatever happens.
As Fred pointed out earlier - Hacienda is not doing any counting and are hardly going to bother with the average expat pensioner already paying his taxes in the UK. Maybe I've got my fingers crossed while writing the last sentence, but I'm taking the fifth amendment whatever happens.