jimena latest

I saw this article in a Spanish paper a couple of days ago

Capital Gains Tax for non-residents reduced from 35% to 18%
Legislation to reduce Capital Gains Tax for non-residents from 35% to 18% (and increase it for residents from 15% to 18%) was approved by the Spanish Senate in October. The new regulations also reduce the withholding provision that non-residents pay when selling property in Spain from 5% to 3%. The new regulations come into force at the beginning of January 2007. Non-resident vendors should try to delay completion until January 2007 to benefit from these lower taxes.

 can anybody advise me on the following:

1. How will this affect us in the future when we want to sell our property in 5 to 7 years time if we complete before January 2007?
2. Does this mean if we complete before Jan 2007 we will be subject to 35% capital Gains Tax when we eventually sell

Derjac

Hello Derjac

The news is fantastic but I think it must mean when you complete the sale and not when you complete the purchase.  Therefore we all should benefit from this reduction.  Unless I have got it wrong but the vendor would be selling so this is good news for us all, unless of-course you are just about to complete on a sale, or unless I have got it completely wrong - in which case please let me know!!

Mrs H

Just in case there is any confusion over the withholding tax charged to non residents at time of sale of property. The authorities assume that as a non resident you will not pay any CGT liability. Thus they withhold the 5% (current) at time of sale. This is a provision against the overall CGT liability. One is technically still subject to the 35% (current) but that depends on whether one goes through the procedure of the declaration. If one can prove no gain it is possible to claim the retention back but there is a time limit and you need to kick your lawyers rear end to sort it as quickly as possible. If one does not pay the full amount of tax, the authorities can pursue you for the amount outstanding should you decide to reinvest in Spain in another property. I have been told (by a RELIABLE lawyer) that they have started recording passport details on a computer system where they believe there is still a CGT liability outstanding and people entering the country on holiday might be stopped if their passport is checked. Quite whether that is a Chinese whisper or not I do not know but Big Brother is all around these days so I guess anything is possible.

Rgds Smiley

How does the dual taxation system work between Spain and say the UK?

If a client is in the UK 40% tax bracket and pays 35% Spanish CGT (or the proposed 18%) or 5% Spanish retention (proposed 3%) are they then all paid up tax wise, or if the money is taken back to the UK are they subject to the balance of their 40% UK tax bracket?

Also, which official body is responsible for overseeing whether profits made are re-invested into further property, thus avoiding CGT?

It would be really helpfull if replies to this were 'official' and not hearsay, or 'chinese whispers'

The only way that CGT in Spain can be "avoided" is if the proceeds of property sale 1 are reinvested into a property which is your principal place of residence in Spain. Hence you will be a resident of Spain which it sounds as if you are not. Regarding tax on repatriation of the profits and whether you are liable for the uplift to your UK liability you should talk to a UK accountant.

Rgds