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Thread: Capital gains exemption when selling Spanish property

  1. #1
    Christine
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    Default Capital gains exemption when selling Spanish property

    I know as non-residents owning a property in spain we have to pay 18% tax on the profit made on the original purchase price. But if we want to buy another property in spain do we still have to pay this tax and then all other taxes when we purchase a new property? Our aim is to sell our two bedroom apt and buy a smaller 1 bed or even a studio so that we can be mortgage free.

    Please advise as to the legalities,thank you

  2. #2
    Junior Member
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    Unfortunately, you will not get an exemption in capital gains tax when you sell your property due to the fact that you are not resident in Spain.

    Residents can get CGT exemption on the sale of their property if:

    1. The property they are selling is their main residence, in which they have lived as residents for at least 3 years.
    2. They reinvest in another property which will be their main residence (this is not applicable for residents of 65 years, who are exempt regardless of whether they reinvest or not).

  3. #3
    Junior Member
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    According to what I have read Capital Gains Tax applies to everybody regardless whether you are registered as a resident in Spain or not. The type of assets involved can be an issue too. Hope this helps.
    When you're arguing with a fool, make sure he isn't doing the same thing.
    l2 adena

  4. #4
    Administrator
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    Hi mickiedaniels and welcome to the belegal.com forums.

    You are right, 18% capital gains tax on the profit is payable by everyone when selling their Spanish property. Whowever, what Christine is enquiring about is if she would be eligible for an exemption if she reinvests on another property after selling the one she currently owns. Only those that meet the conditions stated on the second post will be able to benefit from an exemption.

  5. #5
    Senior Member
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    Quote Originally Posted by Inigo View Post
    Unfortunately, you will not get an exemption in capital gains tax when you sell your property due to the fact that you are not resident in Spain.

    Residents can get CGT exemption on the sale of their property if:

    1. The property they are selling is their main residence, in which they have lived as residents for at least 3 years.
    2. They reinvest in another property which will be their main residence (this is not applicable for residents of 65 years, who are exempt regardless of whether they reinvest or not).
    Dear Madam,

    Just to add a third point to the two points quoted you only have two years as from the time of the sale to take advantage of this rollover benefit.

  6. #6
    Unregistered
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    Default capital gains

    Is it true that CG is not taken into consideration if the property has been owned for 10 years or more?

  7. #7
    Senior Member
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    Quote Originally Posted by Unregistered View Post
    Is it true that CG is not taken into consideration if the property has been owned for 10 years or more?
    Dear Sir or Madam,

    This is not not exactly the case but I see where you are coming from.

    Please read our article on the matter which explains it in detail:

    Taxes when Selling Spanish Property - 2nd May 2002

    Quoting our article:

    Capital Gains Tax (non-residents)

    A non-resident seller is liable for payment of a 18% Capital Gains Tax (EDIT: as from the 1st of January 2007, it used to be 35%) on the profit of the sale of their property unless it was bought before January 1st 1.987. However, there are exemptions available for those who have owned their property since 1.994 and before. Also, the vendor can offset against the gain made on the sale other costs.

    A vendor will be able to mitigate his tax exposure by three different ways:

    Reductions on when the property was purchased

    Those who bought a property after the 31st of December of 1.994 will not be entitled to any reductions.

    Those who bought in 1.987 of after will enjoy of a reduction of 11.11% on the net gain for every year they have owned the property before the 31st of December 1996 after taking the first two years. This means that a seller starts benefiting from this reduction, his first 11.11%, if he bought in 1.994, 22.22% if he bought in 1.993 and so on.

    Those who bought before the 31st of December 1.986 will be pay not tax, as the cuttoff point is 1.996.



    Reductions on the inflationary movements

    This reduction is obtained by applying a percentage to the l purchase price, raising the original price to the level of the value of the peseta today. This inflationary correction factor is applied to the entire purchase price, as well as to all costs surrounding the purchase. Likewise, improvements and extensions on the property will have to be updated inflation-wise.



    Reductions on the inherent costs of the purchase, works done on the property and others.


    Costs of the purchase: these would include VAT or Transfer Tax, Plusvalía Tax (where paid by the buyer), Land registry and Notary fees, lawyer´s and real estate agent´s fees, where applicable.

    Extensions and improvements done on the property: These should not be confused with maintenance and conservation costs, as these are not deductible. In practice, there is no clear cut distinction between one and the other.


    Examples of not deductible costs are repair or maintenance works, such as painting, repairs on heating systems, lifts, plumbing and so on.

    Examples of deductible costs are the installation of iron bars, doors, double glazing windows and similar improvements on the property.

    We've put together this Capital Gains Tax calculator so you can determine how much Cgt you will attract when you sell your spanish property.
    Yours faithfully,

  8. #8
    Unregistered
    Guest

    Cool Cap Gains on Old Sale

    I bought a villa in Marbella in 2001, and sold it in 2006. I was resident.

    I paid no CGT I am sure.

    I went to live in HKong, and I never heard any more.

    Now, I want to buy a condo in Marbella. My lawyer says that I will not be penalised if I never heard anything more, even though I kept a contact address.

    However, I am worried because I think that the penalty plus fines will be 30,000e for old CGT.

    If I buy again, will I be noted by the system?

    Edward

  9. #9
    Senior Member
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    Dear Sir,

    The statutory timelimit fro the Spanish Tax office to request past taxes is 4 years.

    After the 4 years are up they cannot pursue you as the debt has prescribed.

    In your case I would say you are still in the danger zone.

    CGT is paid one year after the sale on the following tax period. If you left the country you obvioulsy did not file and paid it.

    I take it you were a fiscal resident in Spain at the time and the buyer did not practice a 5% retention on account of your CDGT liability in 2006 on selling the property?

    Yours sincerely,
    Raymundo Larraín Nesbitt

  10. #10
    Unregistered
    Guest

    Default

    Quote Originally Posted by Lawbird Lawyer View Post
    Dear Madam,

    Just to add a third point to the two points quoted you only have two years as from the time of the sale to take advantage of this rollover benefit.
    Hello I am following these posts .
    After being a resident for 16 years in Mallorca and owning my house for 9 years I sold it in May 2007. After 3 months I returned to the UK . I want to go back to Mallorca and will buy my fathers apartment using the profits of the sale on my old house . I don't think I paid cgt before I left .
    The 2 year limit is up now so should I make a declaration in Mallorca on arrival ? .Can I make a private sale agreement for my fathers property backdated and claim the rollover took place before the 2 years without the notary and escritura changing ? .
    Otherwise at which year would I be safe from paying the cgt ?

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