Capital Gains Tax

Questions relating to buying or owning a property. Moving to Menorca Sub-forum: moving to, or living and working on Menorca
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rcorcoranuk
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Capital Gains Tax

Post by rcorcoranuk » May 25th, 2018, 1:46 pm

Hello!

I wonder if someone in the know can help. As I understand it CGT on the sale of your property is 19% on any profit - i.e. what you sold it for, minus what you paid for it and anything you can offset against it (money you've spent on the property since)

However the solicitor's email quotation says they take 3% of the amount you sell the property for at the notary's office as a safeguard for CGT and then it is adjusted - you apply for a refund, or in our case, we will owe them more.

My question is (if indeed the above is all correct), do you submit a form after the sale has gone through and pay them what you owe at a later date (like an annual tax return or something) or is this calculated before the sale goes through so you pay all of the CGT on completion?

We're looking potentially to upgrade to a slightly bigger property but I'm trying to work out all of the associated costs first and what would need paying when!

Thanks

Grandy
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Re: Capital Gains Tax

Post by Grandy » December 1st, 2018, 4:31 pm

Hi,
Probably a bit late to answer that question. Good advice here...
https://www.spanishpropertyinsight.com/ ... residents/

Has anyone here considered the effect of Brexit on taxation if still fiscally resident in the UK whilst owning property in Spain?
I believe double taxation treaties are outside EU agreements and not affected so anyone affected by the loss of 19% to 24% income tax, should be able to arrange to pay UK income tax instead at 20% and allowances in the UK. I don't know what this does to non residents income tax though.

However I believe Capital Gains does not have this and will lose the benefit of allowances after Brexit and any transition.
I'm buying a property if all goes well, soon to make an offer. Thinking of spending further capital!

What does anyone think of this possible scenario?....
You bought a property 15 years ago for €100,000, Since then, you spent €80,000 adding a pool and extensions. The property is to be sold for €327,000
My understanding is that for the calculation a correction is applied to the purchase price meaning that today's value, it was bought for say €127,000.
The gain is thus €200,000.
Had you been able to get the originally expected (before Brexit) relief on the €80k investment, you would have paid €22800 CGT but without the relief, you now pay €38000 which is €15200 more!

Any thoughts?

A good summary here...
https://www.icaew.com/technical/tax/tax ... iday-homes

Keefyd
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Re: Capital Gains Tax

Post by Keefyd » December 6th, 2018, 5:44 pm

This is a very helpful post, thank you.
I was aware that non E.U. countries pay 24% tax, but hadn’t considered paying the tax in the UK instead at only 20% and being able to continue to deduct expenses.
As I’ve been paying the tax in Spain and declaring this to the HMRC, if I opt to pay in UK from April 2019, will the Spanish tax authorities chase me for tax payments to them and is it the same double taxation process, only in reverse?
The imputed tax, that we pay as non residents, for periods not rented, will remain as a percentage of the cadestral value of the property I assume?
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Keefyd
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Re: Capital Gains Tax

Post by Keefyd » December 11th, 2018, 1:03 pm

Having investigated this further, since my last post, it seems that declaring the income in the UK, does not result in any savings on the amount of income tax liable.
Due to the double taxation agreement, between the UK and Spain, you only need to pay income tax, derived from holiday rental income, in one country. However, you have to declare the income and tax paid to BOTH countries and if either countries tax rate is higher than the rate paid, you will be liable to pay the difference to the relevant country.

So, for example, if you declare the income and pay the income tax at 20% in the UK, you still have to declare the income in Spain and the amount of tax paid in the UK and pay the difference in income tax rate (pre Brexit 19%, post Brexit 24%) to Spain, amounting to 5% post Brexit.

This year, I had to pay the difference between the current Spanish rate of 19% and the UK rate of 20%.

It’s also important to note that currently, you can deduct any expenses related to your rental, in both the UK and Spain, however post Brexit, you will not be able to deduct these expenses in Spain.

Quote from https://www.spanishpropertyinsight.com/ ... ncome-tax/. Also mentions that it is illegal to pay the income tax from income derived from holiday rental located in Spain, in the UK.

Following the double taxation treaty between Spain and the United Kingdom (updated in 2014), non-resident landlords need to file and pay tax on their rental income in the country where the real estate asset is located. So, for example, if a British national owns property in Catalonia (Spain) and rents it out as a holiday home during the summer season, they must declare and pay tax on their rental income into the Spanish Tax Office. If this British landlord is declaring and paying his Spanish derived rental income only in the UK, where he is tax domiciled, he would in fact be breaching Spanish tax laws. Thousands of British make this glaring mistake and are going to get into trouble with the Spanish Hacienda. UK tax domiciled owners need to declare and pay tax on their rental income in both countries. Following the double taxation treaty, the HRMC gives tax breaks on any rental income tax paid in Spain, so you don’t have to pay tax twice.
Lover of everything Menorcan. :jozza:

18jsm
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Re: Capital Gains Tax

Post by 18jsm » Today, 1:11 am

Could I just highlight from keefyd's post

"UK tax domiciled owners need to declare and pay tax on their rental income in both countries. Following the double taxation treaty, the HRMC gives tax breaks on any rental income tax paid in Spain, so you don’t have to pay tax twice"
John

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