Mitzyboy

If you were to have a portfolio of investments that was declared to the Spanish tax man for wealth tax purposes (they dont create an income, they just go up and down as the banking and financial experts feel appropriate or how the wind is blowing at any particular time), what happens if they are encashed? Sounds like a daft question I guess, but are they suddenly treated as income by the Spanish tax authorities and taxed accordingly? I know the tax free pension lump sum is taxed here, but is realisation of cash from investments?

Ellan_Vannin

I am not sure if there is a Spanish equivalent of Capital Gains Tax as in the UK but if there is I would think that you would be taxed on the capital gain.

Mitzyboy

I know you pay CGT on the Spanish home profit under certain circumstances, but as you say not sure about investments

ForHotspot

Now that the wealth tax in Spain is abolished, will investment still be taxed in Spain?

Mitzyboy

Gawd knows ... all I know is that if they were getting "X" amount from wealth tax and they have abolished it, then they will be looking to recover it from somewhere else.

big wheels

Don't forget that allthough wealth tax has been abolished from 1st Jan 2008.
You will still need to submit this year for 2007.

EsuriJohn

A capital gain is a capital gain on houses, pictures,currency,gold bars or shares

lmj50

Hi Jon (Mitzy)
You dont say what type of investments you have so i am assuming it will be an Investment Bond? (I have used UK tax example for ease of explanation.)
If it is then when a "chargeable event" occurs, i,e, an encashment then the gain is added to your income, but you can, mitigate this, by dividing the gain by the number of years you have held the bond. This "slice" is then added to your income. It the "slice" brings your total income into the "higher" rate then you pay 20% on the income, if it does not there is no more tax to pay as the fund has been taxed at the equivalent of basic rate tax.
This is NOT Capital gains tax! If your investment is a "collective" e.g. unit trust then different taxes apply.
I would need to know more about your specific circumstances to give an accurate reply.
Feel free to pm me if you want further details.
LMJ

ForHotspot

How about the investment is in stock (shares)? I supose you don't need to pay tax until you sell the shares & will be taxed on the gain, is this correct?

lmj50

Hi
You are liable for income tax on any dividends, and yes CGT when you come to sell. you have of course your individual CGT allowance. For 2008/2009 its £9600.
Please not these allowances I refer to, assume you are liable to Uk tax.
LMJ

Fred James

If you have declared these investments for wealth tax then they must be pretty large as the threshold for wealth tax is quite high.

CGT is an entirely different issue, and if you sell assets at a profit you will pay CGT. As from this tax year you will only pay 18% tax even if you sell them in the same tax year as you bought then - previously that would have been treated as income and taxed at income tax rates.

There are also indexation allowances based on RPI that apply to these investments when you come to sell them.

Mitzyboy

I'm liable for Spanish Tax, not UK tax. Stocks and shares at the moment are not doing particularly well, and therefore there is no gain to talk of since investment

Thanks Fred

big wheels

Sent you a pm re someone I can recommend who will professionally advise you on this matter