When you are moving between countries, the tax implications of selling your property can be confusing. It’s generated some of the greatest number of questions on our forums. Here we try to answer some of the questions regarding CGT in Spain for you.
However, we would like to remind you that taxes in Spain can be complicated and you could be subject to fines or penalties if you miss a deadline or don’t do your taxes properly. Advisably, you should seek fiscal advice from an expert to avoid possible complications.
CGT in Spain: Q&A
The answer is, yes. You must pay capital gains tax or CGT in Spain on the difference between the sale price and the purchase price of your property. This is classed as income and is declared on your resident tax declaration along with the rest of your annual income before the end of June, if you have been residing in Spain for over 183 days.
Provided you become resident in a different year to when you sold your property then you will save on the capital gains tax or CGT in Spain. If you sell, for example, in 2020 and move to Spain in 2021 as a resident then there will be no capital gains tax to pay. However, if you move out in the same year, then there will be.
Unfortunately, no. The mortgage and debts are not deducted from the profit you made between buying and selling the property. However, when calculating CGT you can submit information about VAT, large home improvements and any legal fees you incurred and these can be taken into account. So too can the fees involved in selling your property, such as those of your estate agent.
It is possible to have extensions and new buildings taken into account when CGT is being calculated. However, you will need to be able to show the official receipts for the work you’ve had done and that you have the correct licences in place.
The extensions will also need to have been legally registered in the UK, although this is very hard to justify in Spain. What cannot be taken into consideration is any general work you have had done for wear and tear over the years.
You are exempt from paying CGT if you are over the age of 65, you are a pensioner and if you have been a tax resident living in the property sold for over three years.
Presuming that you are a resident, the good news is that this will mean that you do not have to pay this tax.
You can also be exempt from paying it if you have been a fiscal resident in Spain for three years or more and are buying another home to live in even if you are below the age of 65. However, you must have invested the full amount from the sale and then live in your new property for a minimum of another three years. Otherwise the CGT in Spain can still be charged to you.
Yes. You will still have to pay CGT in Spain and then make a tax declaration in the UK. The good news, however, is that under the double taxation treaty, the tax you have paid in Spain can be deducted from what you must pay in the UK. In other words, you will not have to pay twice.
Yes, non-residents must pay CGT. At the current rates this is 19% of the profit you have made on the sale although you can also deduct costs incurred in the purchase including VAT, Land Registry fees, notary fees, transfer tax and legal fees. Costs can also be deducted from the sale leaving you with a net profit.
After the sale of your property, 3% of the current sale price will be retained by the lawyer acting on behalf of the buyer and this will be paid to the tax office in the name of the seller on Tax Form 211. This is just in case the tax authority may find it difficult to contact you after the sale.
Once your capital gains tax liabilities are settled then you will either receive a refund or have to pay outstanding tax. In order to retrieve any money you must submit form 210H to the tax office within three months of the sale along with the last four years of non-resident income tax. Don’t expect your money back straight away. It can take up to a year to be returned.
Help with capital gains tax in Spain
Navigating the taxation system of a foreign country can be an intimidating task – especially if you don’t speak the language. Furthermore, as many people who live in Spain know, Spanish bureaucracy can be particularly challenging. However, if you want to sell your home, Ábaco Advisers is here to help. At Ábaco Advisers, our team of experienced fiscal and taxation experts can help you make sure you follow regulations. For more information, without obligation, fill out this form and we will offer you a free consultation. We can give you the advice you need in the language of your choice.