# CGT - Capital Gains Tax Transfer.



## Jaq1967 (Aug 12, 2010)

Hi,

I have a question I would like answered.

In December 2006, my wife sold her apartment in Portugal for 80000 euro. She had originally purchased the property for 50000 euro - so ignoring solicitors and paperwork made 30000 euro.

We planned to reinvest this 30000 euro in a project in Portugal. In Jan 2007 we purchased a farm and planned to renovate the building on this property. It cost us 110000 euro. We got a mortgage for 110000 euro (100%). We planned to use this 30000 euro from the sale of the apartment to renovate the house on this land.

We were told, as we were investing this money in property, we would be exempt of CGT.

Later in 2007, our plans had changed and we bought a bigger house in the UK. We used this money towards the deposit. For arguments sake the house was worth £300000 and we paid a deposit of £100000 (inc. the 30000 euro above).

We have not got around to renovating our farm and it is on the back-burner - so to speak.

Recently, some 3 odd years on, we received a tax bill for CGT on the sale of the apartment. Apparently we had 3 year limit to reinvest this money. In their typical fashion they work in a '...it is for us to know this, not for us to tell you - until it is too late' attitude, as they never warn you until the date expired so the lovely people can stick a fine on top of it for their troubles - and to add to our misery.

Having invested this money in a property in the UK surely we would be exempt as it is in the EU? Would I need to update my tax return to reflect this as I believe we have not done this nor aware we had to do this?

Any advice on this would be welcome. 

I cannot say buying a place in Portugal has been a nice experience. The system is dreadful. The lawyers are terrible and everybody is out to get their pound of flesh. Information is minimal and most have given advice (good or bad) and when problems occure take no responsibility for their action. 

The bank? Don't start me on the bank... We are with Caixa Geral de Deposito (CGD). Avoid. They are the worse ever!

Thanks for your help.

Jaq


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## omostra06 (Sep 11, 2007)

I would suggest speaking with a Tax accountant who can advise you on this.


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## Jaq1967 (Aug 12, 2010)

Well... I guess I will, but they cost money. Forums are a great source of information - sometimes, and FREE! Shared experience, and all that. Just wonder if anybody has had any experience on this matter.

I understand Portugal was lagging behind European legistlation regarding to use of profits used on the sale of property then used on properties other than those in Portugal and in the EU instead. If anybody can point me in the right direction it would be great.

Frankly my experience of Portugal has been a poor one. I wouldn't recommend anybody to come here under it's present setup, laws, legistlation and banks. Even my father-in-law, who is Portuguese, and living in the Algarve has had enough. The country is beautiful. It is a shame it is so disorganised and not a surprise it is in the situation it is finding itself in.


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## loonytoon (Feb 11, 2009)

Jaq1967 said:


> Well... I guess I will, but they cost money. Forums are a great source of information - sometimes, and FREE! Shared experience, and all that. Just wonder if anybody has had any experience on this matter.
> 
> I understand Portugal was lagging behind European legistlation regarding to use of profits used on the sale of property then used on properties other than those in Portugal and in the EU instead. If anybody can point me in the right direction it would be great.
> 
> Frankly my experience of Portugal has been a poor one. I wouldn't recommend anybody to come here under it's present setup, laws, legistlation and banks. Even my father-in-law, who is Portuguese, and living in the Algarve has had enough. The country is beautiful. It is a shame it is so disorganised and not a surprise it is in the situation it is finding itself in.


Derek is right - you could end up paying a lot of money unless you get good solid advice. as far as i am aware your CG exemption is only available on either a business investment (presuming that business meets the individual country's definitions) OR your sole, main residence in the EU (not a second home) - not both so you may well be free of CGT in the UK (where you do not appear to have a liability) but not in PT (where it appears that you do as you haven't invested the 'profit') - spend the money on the accountant or pay the tax

jeff


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## Jaq1967 (Aug 12, 2010)

loonytoon said:


> Derek is right - you could end up paying a lot of money unless you get good solid advice. as far as i am aware your CG exemption is only available on either a business investment (presuming that business meets the individual country's definitions) OR your sole, main residence in the EU (not a second home) - not both so you may well be free of CGT in the UK (where you do not appear to have a liability) but not in PT (where it appears that you do as you haven't invested the 'profit') - spend the money on the accountant or pay the tax
> 
> jeff


In reply... If you buy a house in Portugal for €50000 and sell for €80000. You make €30000. Agreed? (...ignore taxes for 1 minute). You then buy a house in Portugal for €250000 and arrange for a mortgage for €200000 thus using the €30000 as part of the deposit. You would not pay CGT would you?

Ignore this property we have bought for a minute as this is 100% mortgaged. This €30000 made on the sale of apartment (...which was your main residence) is re-invested into an alternative property, which is now your new main residence. If this property was in Portugal I cannot see reinvesting this €30000 a problem nor should you pay CGT on it. If you decided to do the same, but reinvested this money in the property in the UK this should also not be a problem and you should not be subject to CGT as both Portugal and the UK are BOTH in the EU.

Spinning this entirely on it's head. Those of you who sold up in the UK (recently - as I believe Portugal had to fall in line with EU regulations, as they had ignored this transfer of funds until recently) to buy property in Portugal, did you pay CGT in the UK on any profit you made BEFORE reinvesting this money into your retirement home? Sure, if you don't reinvest all of it you would have to pay CGT on the balance not used. But what of those who used all the money made on the sale of their property in the UK into the purchase of their now main residence in Portugal? Did you pay CGT???


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