tax on buying a house
 

Having a discussion with a neighbour and wonder if someone can settle this query.

If someone buys a house for €100,000 they would have to pay tax - say €7,000 at 7% (can´t remember either if that´s the correct rate, but it will do for the same of argument to use for this)
If the person then sells the house and buys another for €200,000 the tax would be €14,000.
Could the first amount of tax,ie the €7,000 on the first house, be rolled over against the €12,000 of tax on the second house, and therefore only the balance of €7,000 would need to be paid.

Re: tax on buying a house
 

I'm afraid it's not that simple. The answer to this question depends, apart from other considerations, on whether the subject is a resident or non-resident as different rules apply.

Put simply, a non-resident has no allowances and the full amount of tax would be payable on each purchase as well as Capital Gains Tax on the property that was being sold.

Re: tax on buying a house
 

And for a resident?

Re: tax on buying a house
 

The tax on the transfer (7%) would be the same but there would be no CGT so long as the house sold had been owned for 3 Years and it was your primary residence (because you rolled over the whole proceeds into the new house.)

Fred

Re: tax on buying a house
 

Hi, so by transfer do you mean the difference in the two prices of 100,000 and therefore tax of €7,000, or do you mean a further tax of €14,000 as tax on the purchase price of the second house?

Re: tax on buying a house
 

The tax is based on the declared cost of the new house. What you paid for the last one is not relevant apart from CGT - if applicable.

Fred

Re: tax on buying a house
 

If, as a resident, you reinvest the whole of the proceeds of the sale of your principal residence (having, as Fred James says, owned it for at least three years) in the purchase of another principal residence within two years there is no CGT to pay.

If you downgrade and the escritura value of the new purchase is less then the escritura value of the sale you pay CGT on the difference.

You must be sure that there is no overlap of ownership of the properties in question, ie you must sign the escritura of the sale of the old property prior to signing the escritura for the purchase of the new one.

If you are over 65 there is no CGT to pay.

To be classed as a resident for this purpose doesn't just mean being the holder of a residence permit. Each person named in the escritura will also need to obtain a certificate of fiscal domicile from the local tax office where you will have been paying your annual resident taxes.

None of this affects the fact that you will have to pay 7% transfer tax on the purchase of the new property regardless of your residency status.

Re: tax on buying a house
 

Thanks for all replies - it seems both my neighbour and myself were a little confused! So it seems all bets are off.