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current taxes for selling a property in Spain

current taxes for selling a property in Spain

Old Sep 14th 2008, 8:42 pm
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Smile Re: current taxes for selling a property in Spain

Originally Posted by iant
Just out of interest, where in Spanish tax legislation does it actually say that gains from the sale of one's principal residence are taxable if taken out of Spain, even when proof can be provided that the sale proceeds have been reinvested in a new principal residence abroad?

iant
Its odd but Portugal will allow you to export the gain to another EU country if it is to be re-invested in a "principal residence" probably in accordance with some EU directive on tax thet Spain/France ignore.
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Old Sep 14th 2008, 8:59 pm
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Default Re: current taxes for selling a property in Spain

It probably is based on the assumption that if your place of permanent residence is not in Spain then you must be tax resident in the other country so you are treated as non resident in Spain and do not get the exemption.
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Old Sep 14th 2008, 9:09 pm
  #18  
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Default Re: current taxes for selling a property in Spain

Originally Posted by Fred James
It probably is based on the assumption that if your place of permanent residence is not in Spain then you must be tax resident in the other country so you are treated as non resident in Spain and do not get the exemption.
This is true about your second residence in Spain, but the issue in question is when a tax resident of Spain takes their money from the sale of their principal residence out of Spain. Are they obliged by law to pay this CGT or not? My understanding is yes but a previous posting has questioned this.
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Old Sep 14th 2008, 9:50 pm
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Default Re: current taxes for selling a property in Spain

Originally Posted by Jules Europe
This is true about your second residence in Spain, but the issue in question is when a tax resident of Spain takes their money from the sale of their principal residence out of Spain. Are they obliged by law to pay this CGT or not? My understanding is yes but a previous posting has questioned this.
I understand the issue raised and I would agree with you that, unless over 65, you have to pay CGT unless you reinvest it in your permanent home - which as far as I can see, cannot be in another country if you are resident for tax purposes in Spain.

I doubt that you will find any specific reference to this situation in the actual law as it will just be assumed that, by definition, the permanent residence is in Spain.
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Old Sep 14th 2008, 10:18 pm
  #20  
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Default Re: current taxes for selling a property in Spain

Originally Posted by Fred James
I understand the issue raised and I would agree with you that, unless over 65, you have to pay CGT unless you reinvest it in your permanent home - which as far as I can see, cannot be in another country if you are resident for tax purposes in Spain.

I doubt that you will find any specific reference to this situation in the actual law as it will just be assumed that, by definition, the permanent residence is in Spain.
The problem is that a lot of things are assumed here as law regarding taxes etc referring to property, as they constantly being changed or ammended. The worrying thing is that somebody could end up paying the 18% CGT on the sale of their property because they are investing it in another EU country. Then for example 2 years later Spain may switch over and do what Portugal does (as stated by somebody else) and abolish this rule. That there is no CGT tax if re-investing in another EU country.
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Old Sep 15th 2008, 4:47 am
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Default Re: current taxes for selling a property in Spain

If you are tax resident you merely enter the sale of the property on your next tax declaration and tick the box that says you are intending to buy another property and wish to defer the tax. That gives you at least two years before you need to pay the tax so at least you can leave the country with a bag of money!

As long as you don't return to Spain you will probably get away with it!
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Old Sep 15th 2008, 5:44 am
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Default Re: current taxes for selling a property in Spain

Originally Posted by Fred James
It is contained in the Spanish tax law - Ley 35/2006. Articulo 33 4b

You can download a copy here.

http://sid.usal.es/idocs/F3/LYN10170/3-10170.pdf

It makes wonderful bedtime reading
One thing to remember, when the property is jointly owned by the husband and wife, BOTH have to be over 65 to gain absolute exemption, otherwise 50% of the gain is subject to tax.

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Old Sep 15th 2008, 5:59 am
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Default Re: current taxes for selling a property in Spain

Originally Posted by Fred James
If you are tax resident you merely enter the sale of the property on your next tax declaration and tick the box that says you are intending to buy another property and wish to defer the tax. That gives you at least two years before you need to pay the tax so at least you can leave the country with a bag of money!

As long as you don't return to Spain you will probably get away with it!
You may well indeed get away with it. But the interest that the debt accrues will increase over the years and you could end up with a very large debt. If you remain in the EU you are always within reach of the Spanish tax authorities so this may not be a good option to avoid this tax.
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Old Sep 16th 2008, 10:12 pm
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Default Re: current taxes for selling a property in Spain

Tax evasion is never a good thing, but some people may want to take the risk. The statue of limitations runs out after 4 years provided the amounts unpaid are not in excess of 120,000 €. If this should be the case, the period extends to 15 years, as it will be considered a criminal offence.

Regarding the issue on whether you get an exemption on CGT if you reinvest the proceeds of the sale abroad, I agree with Fred James. Residents can get CGT exemption on the sale of their property if:
  1. The property they are selling is their main residence, in which they have lived as residents for at least 3 years.
  2. They reinvest in another property which will be their main residence (this is not applicable for residents of 65 years, who are exempt regardless of whether they reinvest or not).
In order for a property to be considered a main residence (residencia habitual), it has to be located in Spain. We may see this changing in the following years to comply with EU regulations, as I believe it is being contested in the European Court of Justice.
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Old Sep 16th 2008, 10:34 pm
  #25  
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Default Re: current taxes for selling a property in Spain

Originally Posted by Inigo
Tax evasion is never a good thing, but some people may want to take the risk. The statue of limitations runs out after 4 years provided the amounts unpaid are not in excess of 120,000 €. If this should be the case, the period extends to 15 years, as it will be considered a criminal offence.

Regarding the issue on whether you get an exemption on CGT if you reinvest the proceeds of the sale abroad, I agree with Fred James. Residents can get CGT exemption on the sale of their property if:
  1. The property they are selling is their main residence, in which they have lived as residents for at least 3 years.
  2. They reinvest in another property which will be their main residence (this is not applicable for residents of 65 years, who are exempt regardless of whether they reinvest or not).
In order for a property to be considered a main residence (residencia habitual), it has to be located in Spain. We may see this changing in the following years to comply with EU regulations, as I believe it is being contested in the European Court of Justice.
Thanks this seems to be very good information and good advice. Its also no surprise that this is going to the European Court of Justice to comply with EU law.
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Old Sep 16th 2008, 10:54 pm
  #26  
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Smile Re: current taxes for selling a property in Spain

Originally Posted by Inigo
Tax evasion is never a good thing, but some people may want to take the risk. The statue of limitations runs out after 4 years provided the amounts unpaid are not in excess of 120,000 €. If this should be the case, the period extends to 15 years, as it will be considered a criminal offence.

Regarding the issue on whether you get an exemption on CGT if you reinvest the proceeds of the sale abroad, I agree with Fred James. Residents can get CGT exemption on the sale of their property if:
  1. The property they are selling is their main residence, in which they have lived as residents for at least 3 years.
  2. They reinvest in another property which will be their main residence (this is not applicable for residents of 65 years, who are exempt regardless of whether they reinvest or not).
In order for a property to be considered a main residence (residencia habitual), it has to be located in Spain. We may see this changing in the following years to comply with EU regulations, as I believe it is being contested in the European Court of Justice.
I must say I agree with this since the EU forced the harmonisation of the CGT rate at 18% for residents/non-residents and if a challenge is already in it might be here in a couple of years.
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Old Sep 17th 2008, 5:24 am
  #27  
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Default Re: current taxes for selling a property in Spain

Originally Posted by Inigo
Tax evasion is never a good thing, but some people may want to take the risk. The statue of limitations runs out after 4 years provided the amounts unpaid are not in excess of 120,000 €. If this should be the case, the period extends to 15 years, as it will be considered a criminal offence.

Regarding the issue on whether you get an exemption on CGT if you reinvest the proceeds of the sale abroad, I agree with Fred James. Residents can get CGT exemption on the sale of their property if:
  1. The property they are selling is their main residence, in which they have lived as residents for at least 3 years.
  2. They reinvest in another property which will be their main residence (this is not applicable for residents of 65 years, who are exempt regardless of whether they reinvest or not).
In order for a property to be considered a main residence (residencia habitual), it has to be located in Spain. We may see this changing in the following years to comply with EU regulations, as I believe it is being contested in the European Court of Justice.
Iñigo:

So, in the case of an expatriate who is under 65, who has been living and working in Spain for several years and has had his principal residence in Spain and is then transferred by his multinational employer to another (EU) member country,where he will establish his new residencia habitual, and where he will reinvest the proceeds of the sale of his Spanish home, he will be liable for CGT on the profit on such sale. IE in such a case there is at present NO exemption.
Does the applicable law actually state that the new residencia habitual has to be located in Spain?
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Old Sep 17th 2008, 10:58 am
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Default Re: current taxes for selling a property in Spain

Article 38 of "Ley 35/2006, de 28 de noviembre, del Impuesto sobre la Renta de las Personas Físicas" establishes that you can only get an exemption in capital gains tax if you reinvest in what we have been referring to as a main residence or "residencia habitual".

The definition of "residencia habitual" can be obtained from Article 68.3, and although the text doesn't explicitly mention it, the whole law deals with taxation of Spanish residents, and it is understood that a property has to be located in Spain to be considered a resident's dwelling. From the moment you leave the country and establish your residence in a different country, you will no longer be considered a resident for tax purposes. The law which regulates the taxation of non residents is the "Impuesto de la Renta de NO Residentes", and does not allow for exemptions in capital gains tax.

I hope it helps.
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Old Sep 18th 2008, 6:18 pm
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Default Re: current taxes for selling a property in Spain

Originally Posted by Inigo
Article 38 of "Ley 35/2006, de 28 de noviembre, del Impuesto sobre la Renta de las Personas Físicas" establishes that you can only get an exemption in capital gains tax if you reinvest in what we have been referring to as a main residence or "residencia habitual".

The definition of "residencia habitual" can be obtained from Article 68.3, and although the text doesn't explicitly mention it, the whole law deals with taxation of Spanish residents, and it is understood that a property has to be located in Spain to be considered a resident's dwelling. From the moment you leave the country and establish your residence in a different country, you will no longer be considered a resident for tax purposes. The law which regulates the taxation of non residents is the "Impuesto de la Renta de NO Residentes", and does not allow for exemptions in capital gains tax.

I hope it helps.
Many thanks Iñigo. It seems unjust but, as already stated, let's hope pressure from Brussels can make the difference.
iant
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Old Sep 18th 2008, 8:15 pm
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Default Re: current taxes for selling a property in Spain

Originally Posted by iant
Many thanks Iñigo. It seems unjust but, as already stated, let's hope pressure from Brussels can make the difference.
iant
Don`t get too hopeful look at the land grab situation. The EU has been putting Spain under pressure for years on this injustice and it still goes on.
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