Silverspyder

Hi all, I wonder if anyone can help us with this one?
my partner has owned a house in Casares for 17yrs but lives in the UK and rents it out full time,
Recently we have been thinking about moving to Casares and living there in the house full time, my partner has her NIE but hasn't yet applied for residency and wonders what the benefits and downfalls of doing this would be, she has a few properties in the UK that she rents out which provide her with income, she also pays all the bills at the property in Casares and has these in her name and also the Ibi tax in her name,
so in brief, if she wanted to sell this house in the future would she pay more or less tax, capital gains on the sale if she was a Spanish resident?
also we wanted to run part of the house as a B&B and airb&b and wondered what the implications of this would be?
any help advice or comments on this would be most helpful
Best Regards

1sexsmith

I m sure someone can explain the pros and cons of residencia although basically it isn't really a choice if you actually intend to live for more than 90 days in Spain. As far as Abnb goes there is a bit of a resistance to it in a growing number of areas in Spain such that some communities are bringing in laws to curb it. Be careful if you want to make it part of a business plan

Silverspyder

Re Residencia, we know about the 90 days rule on this so registering is fine if we are going to live there, but also what implications it would have on the sale of the property? If we stayed here and sold the property as a none Spanish resident or moved there, registered and at a later date decided to sell would we pay more tax on sale of our house?

1sexsmith

Not entirely sure but usually you would expect there to be slightly more advantages in being a resident when you sell than non resident. Having said that it depends on how much capital gains you might make. And you also have to factor in the fact that you will be declaring all your income in Spain not in UK.swings and roundabouts

Fred James

If the property is located in Spain, your tax residency is not relevant as CGT is paid in Spain on Spanish assets. The tax rates are the same for residents and non residents. The difference is that tax residents may be exempt if they roll over the proceeds into another home or are over 65. However that only applies to your habitual residence which you must have lived in, as a resident, for 3 years - so clearly that would not apply to you.

As for the UK rental income, that would remain taxed in the UK as it arises in the UK. However, it would also be taxed in Spain as part of your world wide income, but any UK tax can be offset against and tax paid on the rental income in Spain.

Loafing Along

As a Non-Resident selling your property in Spain you will automatically have a 3% retention on the sale price , aganist any potential CGT. Difficult and time-consuming to get it back

bobd22

Others as have already done so can advise you better than me on pros and cons re property and rental air b&b etc. However if you are planning on moving to Spain full time at some point then given whats going on re brexit and it's uncertainties being registered resident can only be a plus in my view. As so long as a deal of some sort is done then many things do fall into place so long as you can show you were legally resident before brexit date and more than likely before end of transition. I took the view better be safe than sorry and do it before next March just to be sure. Worth considering if you WANT to live full time in your house in the future post this current mess.

Fred James

bobd22

I wasn't aware of that Fred however although that is good news I personally would rather have in place the EU agreements if there is a deal agreed. That way a simple change of Spanish government isn't a factor. Certainly though a desireable move if it proves right

Silverspyder

Thanks all for your help and advice so far, it looks like going for residency before March is a good idea

bolton wanderer

Do be aware that if your partner sells any of her UK properties after she has gained Spanish residency, then she will will become liable for Spanish CGT on the sale.
If you're moving over permanently wouldn't it be better to sell one property (your/her main residence) before becoming Spanish tax resident. That would save you the Spanish CGT on at least one property. There might be time to transfer ownership of another of her properties to yourself, to become your main residence, before selling.

Don't forget that once Spanish tax resident you will each lose the £12,500 UK tax allowance (£25,000 total), personal savings & dividend tax allowances and access to UK tax free savings (ISA's). Also, look up Modelo 720 declaration requirement.
You will also need Health insurance for at least 12 months of residency, after which you can then pay the €120 per month into the system.

Could be worthwhile initially for just one of you to apply for tax residency? (you)... So that you could legally run the business in Spain and your partner could run her business in the UK

Good luck with your new venture.