# Dmret



## dmret (Mar 12, 2013)

Good morning,
We are in the process of selling our home in the UK and the firm intention is then settle,long term renting in the Alicante area.We are both retired with good pensions.What I am confused about, and seems I'm not the only one, is that if we place the profit on the sale our home, built up over 45 years, in a UK based isa, will it be liable for Spanish tax. The figure invested will be in excess of 50, 000.euros (each). All our lives we have paid our dues and have no intention of evading any fiscal responsibilities. Our intended move is not a 'whim'. We are visiting next month, for a month, and fully intend to make other relevant enquiries, but, it would be handy to have a ' heads up' on this one any advise would be welcome.
Many thanks in advance.


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## Calas felices (Nov 29, 2007)

You cannot place more than £5760 into a cash ISA and £5760 into stocks and shares in any one year To subscribe to an ISA you have to be a resident or be ordinarily resident in the UK for tax purposes – if you are in the UK for 183 days or more in a tax year, you are a UK tax resident. Once you leave the UK and are tax resident in another country, you cannot add to your ISA. However Spain will require you to declare all your worldwide assets for tax purposes.


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## dmret (Mar 12, 2013)

Many thanks, what I should have said was some form of UK based investment that paid UK tax. Would this still be liable for spanish tax? We would be registering as residents as our relocation would be long term. Again thanks.


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## zenkarma (Feb 15, 2013)

dmret said:


> Would this still be liable for spanish tax? We would be registering as residents as our relocation would be long term. Again thanks.


I don't have a lot of time to answer this at the moment, but I'll post a couple of things you need to think about,

Once you become a fiscal resident of Spain (after having resided there for 183 days) you will be liable for Spanish tax on your worldwide income, regardless of source. HMRC and the Spanish Hacienda have a tax treaty in place which means you won't pay the same tax twice. If your tax liability to the HMRC comes to say £5,000 and your liability to the Spanish Hacienda £11,000 you pay £5,000 to HMRC and 11-5 = £6,000 to the Spanish Hacienda. Spanish taxes are frequently higher due to their low allowances.

You will also have to declare all your assets to the Spanish Hacienda over €50,000 in value in 3 categories - savings accounts, investment accounts, stocks and shares and property assets.

Be particularly careful you do not get caught up in Spanish Capital Gains Tax from the sale of your UK property by becoming resident in Spain in the same financial year you sell the UK property.

This site has some very useful guides to Spanish taxation, I strongly advise you have a good read through all of them until you understand fully what you're getting yourself into -

Advoco : Free Advice Centre


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## dmret (Mar 12, 2013)

Thanks for taking the time.A lot more thinking to be done.


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## zenkarma (Feb 15, 2013)

dmret said:


> A lot more thinking to be done.


Sadly so.

You have to plan, time and think this through very carefully to minimise any tax implications there might be.


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## dmret (Mar 12, 2013)

I wasn't aware of was the importance of selling in one tax year and becoming resident in that year.


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## extranjero (Nov 16, 2012)

dmret said:


> I wasn't aware of was the importance of selling in one tax year and becoming resident in that year.


Nor, I bet, was the vast majority of ex pats who moved to Spain years ago, and those who are in the process of doing so now! It does seem odd that you sell your house while living in the UK, move here before July 2nd of the same year and are expected to pay CGT on the profit when you make your tax return the following year. Thousands must have sold and become tax resident in the same year, but are blissfully unaware. Will the Hacienda chase all these people up?It's not something I have ever seen a warning about from all the experts who write about moving to Spain. I did see a post on one of these forums stating that the CGT would not be payable in Spain, but all others stated it was. I think Cambio asked about it? The issue of CGT implications is a very big one and should be prominently displayed .


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## rewdan (Feb 23, 2010)

I wonder if there is a way to get the message out there. I am sure there are plenty of brits who are about to retire to Spain, sell the family pile that they bought 20 years ago and has naturally increased in value.
If the rules were widely known then I am sure many people would delay their move which in real terms would cost Spain a fortune on a daily ongoing basis as all that cash stayed in the Uk.
It would make a huge difference if Spain gave an amnesty to CGT on your PPR but I guess that wont happen. Anyone clever enough to take up the challenge of getting the word out there!


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## dmret (Mar 12, 2013)

extranjero said:


> Nor, I bet, was the vast majority of ex pats who moved to Spain years ago, and those who are in the process of doing so now! It does seem odd that you sell your house while living in the UK, move here before July 2nd of the same year and are expected to pay CGT on the profit when you make your tax return the following year. Thousands must have sold and become tax resident in the same year, but are blissfully unaware. Will the Hacienda chase all these people up?It's not something I have ever seen a warning about from all the experts who write about moving to Spain. I did see a post on one of these forums stating that the CGT would not be payable in Spain, but all others stated it was. I think Cambio asked about it? The issue of CGT implications is a very big one and should be prominently displayed .


I'm with you. It came as a bit of a shock. I thought a warning would have been writ large, if there is such advice it passed me by, but it is well noted now, thanks.


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## extranjero (Nov 16, 2012)

rewdan said:


> I wonder if there is a way to get the message out there. I am sure there are plenty of brits who are about to retire to Spain, sell the family pile that they bought 20 years ago and has naturally increased in value.
> If the rules were widely known then I am sure many people would delay their move which in real terms would cost Spain a fortune on a daily ongoing basis as all that cash stayed in the Uk.
> It would make a huge difference if Spain gave an amnesty to CGT on your PPR but I guess that wont happen. Anyone clever enough to take up the challenge of getting the word out there!


What will happen to all those who moved here years ago, and didn't realise this.... will they be hunted down?


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## rewdan (Feb 23, 2010)

It is very possible but who knows. I think there are exceptions such as to those over 65, when the property was purchased and those who reinvested the dosh into a new property, but I fall into neither category so I haven't been researching those points.
Personally, if I was in that boat and had a large potential liability I may consider moving back to blighty for a while. Not easy if your life is in Spain now. The sad thing is the people in that boat would have had no idea of the implications when they made the move in good faith.
Some taxes are wrong.


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## rewdan (Feb 23, 2010)

Oh, and I have just posted on that 'plot for 600euro' media thingy to ask if they would bring it up in the same program, only time will tell on that one but who knows. Maybe they should also run a program on the current liabilities for expats in Spain that were unaware of the rules when they moved!


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## extranjero (Nov 16, 2012)

rewdan said:


> It is very possible but who knows. I think there are exceptions such as to those over 65, when the property was purchased and those who reinvested the dosh into a new property, but I fall into neither category so I haven't been researching those points.
> Personally, if I was in that boat and had a large potential liability I may consider moving back to blighty for a while. Not easy if your life is in Spain now. The sad thing is the people in that boat would have had no idea of the implications when they made the move in good faith.
> Some taxes are wrong.


I have seen on other legal forums that cgt would NOT be payable in Spain in the situation we have discussed.I, like you, feel sorry for people, who would have had no idea about having to pay cgt on their UK house,in Spain;I cannot understand why it was not featured in all those books-You and the law in Spain,Living and working in Spain etc


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## rewdan (Feb 23, 2010)

I think everyone just missed it, including the Hacienda. I feel lucky that I picked up on it before getting in too deep but that is thanks to forums like this and the internet in general. That info wasn't knocking about ten years ago to Joe public. But you would think that someone writing a book called you and the law in Spain may have at least touched on it.
I wouldn't want to be someone that sold in the uk in 2007 at the height after 15 or 20 years of paying a mortgage, moved to Spain, rented a nice place only to get a 27% bill on there nest egg (plus fines and interest etc).
Disaster


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## thrax (Nov 13, 2008)

I might be wrong, but I thought there was no CGT liability on a house sale in UK if it is your main home??


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## rewdan (Feb 23, 2010)

Yep, you are wrong i am afraid. There is a capital gain liability in the Uk but there is a 100% exemption if it is your PPR (home). Unfortunately Spain does not give an equal exemption so therefore you have to pay the balance of CGT due in Spain that you haven't payed in the Uk. ie 27% of the gain in whole as you paid nada in the uk.
What a swiz !


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## CapnBilly (Jun 7, 2011)

rewdan said:


> Yep, you are wrong i am afraid. There is a capital gain liability in the Uk but there is a 100% exemption if it is your PPR (home). Unfortunately Spain does not give an equal exemption so therefore you have to pay the balance of CGT due in Spain that you haven't payed in the Uk. ie 27% of the gain in whole as you paid nada in the uk.
> What a swiz !


For what it's worth, you do get an indexing allowance


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## zenkarma (Feb 15, 2013)

thrax said:


> I might be wrong, but I thought there was no CGT liability on a house sale in UK if it is your main home??


There is CGT liability on selling a house in the UK as there is for other capital gains but as Rewdan rightly points out if the UK property is and has been your principal residence and there are stipulations that need to be met for it to be categorised as this, you're exempted from CGT liability on the capital gains.

However, Spain doesn't work like that or exempt you in that way. As far as the Hacienda is concerned it's a capital gain and will tax you on it if you're unlucky enough to have realised those capital gains in the same financial year as you become a Spanish fiscal resident.

I rather suspect the reasons people have gotten away with this in the past are twofold. Firstly, because Brits moving to Spain after having sold their principal UK residence were unaware of their likely Spanish CGT liability and the Spanish Hacienda would never have known anything about it. And secondly because the Hacienda has been notoriously lax in chasing people for these kinds of taxes in the past.

That's all changing now however. The Hacienda are getting tough and with this new asset reporting law they'll know straight away if someone has sold a UK property recently and will now chase them for their CGT liability on it.

I'd be interested to see the links for where people are saying you're not liable for Spanish CGT on selling your UK home.


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## Derek H (Dec 7, 2008)

Re. Financial year end in Spain. April 5, as per UK ?
Derek


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## xabiaxica (Jun 23, 2009)

Derek H said:


> Re. Financial year end in Spain. April 5, as per UK ?
> Derek


no, the financial year is Jan 1st to Dec 31st


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## snikpoh (Nov 19, 2007)

xabiachica said:


> no, the financial year is Jan 1st to Dec 31st


As a Spanish resident, the tax year is a calendar year with tax returns having to be done around June.

For non-residents, returns must be done by December 31st. QUESTION; do non-residents have a different tax year?


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## extranjero (Nov 16, 2012)

zenkarma said:


> There is CGT liability on selling a house in the UK as there is for other capital gains but as Rewdan rightly points out if the UK property is and has been your principal residence and there are stipulations that need to be met for it to be categorised as this, you're exempted from CGT liability on the capital gains.
> 
> However, Spain doesn't work like that or exempt you in that way. As far as the Hacienda is concerned it's a capital gain and will tax you on it if you're unlucky enough to have realised those capital gains in the same financial year as you become a Spanish fiscal resident.
> 
> ...


Taxation Web
Belegal
Yes the assets law will be used by the Hacienda for keeping track of assets, especially helpful in IHT, but not everyone complied with this new law;they obviously think it's worth the risk!
It does seem very mean to tax someone on their main residence.


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## CapnBilly (Jun 7, 2011)

extranjero said:


> Taxation Web
> Belegal
> Yes the assets law will be used by the Hacienda for keeping track of assets, especially helpful in IHT, but not everyone complied with this new law;they obviously think it's worth the risk!
> It does seem very mean to tax someone on their main residence.


In Spain, you only pay capital gains on the amount you don't reinvest from selling your main residence. You have 2 years to do this. The problem arises when you buy a property in Spain, before you sell in the UK, and then move so that the property in Spain becomes your main residence, which means you then have a second property in the UK, which is not your main residence. 

I may be wrong, but I think its the same in the UK, except that you get allowances for the time it was your main property in the UK, whereas, in Spain, the only allowances you get is indexation.


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## crookesey (May 22, 2008)

The more that I read posts like these, the more I wonder why folk move to Spain in the first place. On the subject of Spain taxing the profit made on a UK property, what would happen if you sold up and rented for say a couple of years, before moving to Spain?


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## CapnBilly (Jun 7, 2011)

crookesey said:


> The more that I read posts like these, the more I wonder why folk move to Spain in the first place. On the subject of Spain taxing the profit made on a UK property, what would happen if you sold up and rented for say a couple of years, before moving to Spain?


Nothing


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## extranjero (Nov 16, 2012)

CapnBilly said:


> In Spain, you only pay capital gains on the amount you don't reinvest from selling your main residence. You have 2 years to do this. The problem arises when you buy a property in Spain, before you sell in the UK, and then move so that the property in Spain becomes your main residence, which means you then have a second property in the UK, which is not your main residence.
> 
> I may be wrong, but I think its the same in the UK, except that you get allowances for the time it was your main property in the UK, whereas, in Spain, the only allowances you get is indexation.


Can you explain "indexation"
Also, I have heard that if the property was bought before1986, no CGT is payable?


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## CapnBilly (Jun 7, 2011)

extranjero said:


> Can you explain "indexation"
> Also, I have heard that if the property was bought before1986, no CGT is payable?


Its a multiplier, presumably to take into account inflation. Thats correct about 1986, as it was about 11% a year before 1996 (so 1996 means its zero). 

rates are listed here


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## zenkarma (Feb 15, 2013)

crookesey said:


> On the subject of Spain taxing the profit made on a UK property, what would happen if you sold up and rented for say a couple of years, before moving to Spain?


You would only pay CGT in Spain on your UK property if you become fiscal resident there in the same tax year you sell your UK property.

So with timing and as you rightly say, possibly renting for a period before you move out to Spain you avoid it.

It's just a game we have to play. They set the rules down to catch you, you work out ways around their rules and avoid it .


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## extranjero (Nov 16, 2012)

zenkarma said:


> You would only pay CGT in Spain on your UK property if you become fiscal resident there in the same tax year you sell your UK property.
> 
> So with timing and as you rightly say, possibly renting for a period before you move out to Spain you avoid it.
> 
> It's just a game we have to play. They set the rules down to catch you, you work out ways around their rules and avoid it .


The trouble is, I bet thousands moved to Spain years ago not realising the implications of the 183 day rule, and who can blame them?it does seem ridiculous to have to pay cgt on a property sold when they were living in UK at the time.
In UK you are liable for tax from the moment you touch UK soil.
In Spain you are liable for tax for the whole year if you spend183 days there 
Why can't countries in the EU sing from the same hymn sheet when it comes to tax residency- it would be so much easier!


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## crookesey (May 22, 2008)

It's a wonder that any of you guys have the time to work in Spain, what with having to spend most of it reading up on the Spanish revenue's covert operations manual.


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## gus-lopez (Jan 4, 2010)

crookesey said:


> It's a wonder that any of you guys have the time to work in Spain, what with having to spend most of it reading up on the Spanish revenue's covert operations manual.


You have to make time.


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