No taxes on the sale of habitual dwelling for residents

Legal tip 359. No taxes on the sale of habitual dwelling for residents
06 October 2010 @ 10:53

I have not seen a taxable profit on capital gains tax for a long time - except when the tax office imposes fictious values!

This is really an example of residence being one of choice because regardless of your tax status as to whether or not you file returns or whatever, if you live in Spain full time then tax law says you are resident. It does not say you are considered resident only if you apply for residence and pay/file tax returns.

I know many people who have no other home outside of Spain so their house in Spain is clearly there sole/principal private residence and they are here 365 days a year - of course they don't bother with the hassle of filing tax returns and continue to maintain non-resident tax status unless there is some benefit to be had .........

But nowadays the notary requires a certificate of fiscal residence from Hacienda for foreigners to prove they are resident and therefore avoid the 3% retention. If you never file a tax return, I don't thik you will get this, and the notary will retain the 3% regardless of your pleadings.

I may be wrong on this, and am happy to be corrected if so.

 You are absolutely correct Roberto, it doesn't matter if you have a Residencia card or certificate, if you cannot provide your last Renta or proof of fiscal Residency they will still retain the 3%, primary residence or not.

faro- surely you know that-you must file tax returns, its not a choice, but the law. also, when you sell your house you must produce a tax certificate, or 3 % will be retained.  you may have residencia, but you  must  pay your income tax in spain in order to be FISCALLY resident, waving your residence card at the notary won't do! hopefully the hacienda will catch up with these non tax payers-they've got away with it too long.

Just out of curiosity, do you have to file a Renta return if you have no income?  This could happen if you were living off capital for example.  But also, UK civil service pensioners are paid and taxed in the UK and do not have to include their pension as income in a Renta return.  So you could quite legitimately be ineligible for a tax certificate while being tax and legally resident in Spain.  To retain the 3% or to deny capital gains tax relief would then be in breach of the EU requirement not to discriminate between residents and non-residents.

Not 100% sure on this - there are certain circumstances under which you would not be obliged to complete a tax return (e.g. no income), but in order to be eligible for any tax relief, and I suppose that would include the 3% retention on property sales, you have to file a return. So I guess if you plan (in advance) to sell your property, then best to file a return, even if it's zero.

Out of interest I notice Maria saying it's only for people 65+ years old? 

I thought as long as you were submitting a tax return and it was your primary residence and you were buying another primary residence in Spain then no matter how old you are you dont have to pay the 3% but it is withheld until you buy another property?

Am I right?

It used to be the case that, if you rebuy in Spain within two years (between escritura dates) you can reclaim capital gains tax if paid.  You can reclaim in full if the new primary residence has a higher escritura price - or Hacienda imputed price - than the old one.  If it is less, you are liable for tax on the difference.  I don't know if that has changed in the last couple of years.

You don't have to file if you have no income & live off of capital that does not produce a return above 1600€'s as a family.. If you have income above 8k you have to file , & if you have income from investments that generates more than 1600€'s interest, as a family, you have to file. I.e. if you receive 1500€ interest & your wife the same , you both have to file as the combined total is over 1600€'s.

As other posters have pointed out you're better filing a zero return if you are contemplating selling. If you are submitting tax returns & sell & it's your primary residence, there is no retention . If you don't buy again in spain within 2 years then you are liable to declare & pay cgt on your next declaration. It used to be the case if you bought ANYWHERE within 2 years ( I:E: the UK ) it was exempt from cgt but they've stopped that by altering the law to spain only !

 "It used to be the case if you bought ANYWHERE within 2 years ( I:E: the UK ) it was exempt from cgt but they've stopped that by altering the law to spain only !"

Now there's something that is worth writing to your MEP about.  Blatant discrimination in favour of Spanish over other EU nationalities.

Technically, it is not discrimination against non-Spanish, since the same would apply to a Spaniard if he sold his house in Spain and bought another in, say, Portugal, wouldn't it? I agree it sounds like a bit of dodgy legislation that may not stand up to EU scrutiny, but perhaps we shouldn't be too quick to condemn Spain as anti-foreigners. More like anti-EU meddling, which probably most EU members are against too.

It is not just the CGT tax a seller should worry about bad as it is.

It is the Plus Valia tax ( local authorities estimate of the increase in land value since you bought)

This has increased dramatically over the last year or two

I believe this  can add up to 4 to 5 thousand euro costs onto the the sales cost of an average property

and no way of avoiding it.

they screw you on the way in and screw you on the way out .