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I’m probably going to need a good tax advisor for this but I know there are experts on this forum so here goes!
My wife and I own a house in the UK which has been declared to the Spanish Authorities on form 720 in April 2013.
We have owned the house for over 30 years in which time the value has increased by £450K and for the last 5 years we have had tenants.
We are residents of Spain have our certificates of Residencias since 2010.
We pay all of our taxes in UK on our pensions and income from the house.
Our Spanish fiscal advisor has given us an undertaking in writing that we do not need to submit a tax return in Spain as we have no income or savings derived or in Spain.
We have a house in Spain, both properties are mortgage free.
My wife is over retirement age and I will be 65 in a couple of years.
The questions are:
If we decide to sell the house in the UK will it be subject to CGT in Spain? (The Tax Office in the UK state there will be a small CGT liability in the UK).
If so, would we be better de-registering in Spain and returning to the UK for a year or so before we sell it?
If anything happens to one of us, would the other have Spanish liability in Spain for Inheritance Tax on the house in the UK?
Thanks in advance. -
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We spend more than 183 days in Spain but I have a Govt. pension which has to be taxed in the UK My wife has her State pension and half of the house earnings from letting taxed in the UK as is my half.
We have been to the Hacienda for 3 years running,2 gestors and an abogado and they all agree we don’t have to submit tax returns.
Having read the forums it seems we should submit a tax return but if the Hacienda has logged our visits for 3 years and states we don’t have to do a return, what can we do? -
Sorry, cannot say much on your specific circumstances for reasons that I do not have the knowledge and the working practises of the Hacienda. As always in Spain what is the law & what can be the practise are completely
at the opposite end.The rule is if you spend more than 183 days in a Country you become a tax resident in that country. This is norm in most Western economies. Rents are taxed in the Country where the property is situated. If any tax is payable/paid the tax payer gets a credit towards his/her tax bill in the Country of where they have taken up tax residency.
I am surprised as to why the people you have consulted have advised to the contrary and would like to know why ? Talking to Hacienda does not prove anything. As in most Countries the offices can give you a simple answer to a simple question.
I have been told by business people in Spain that the Gestors are more knowledgeable than the staff working at the hacienda.
Do let us know how did you resolve the situation, as with new declaration of overseas assets of Spanish residents can catch a lot of the expats in similar circumstances.
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I,and an assesor have telephoned the Hacienda twice this year and they confirm we are in the ‘fiscal system’ so it’s not as if we are hiding.
I’ve seen a company advertise putting your Spanish property in a UK ltd. company. Perhaps, we could then make our children sole directors and then give up our Spanish residency.
We don’t mind paying for the legal advice (and have paid) but from our experiences so far, we feel we can’t get definitive answers. -
I am not suggesting that you are hiding in fact in my experience globally 95% are honest & upfront & it is the limbo state like yourself that make people look at alternative way. The so called tax advisor’s are not always up to date or may have expertise in one aspect of the law & not the other.
You should have asked your Gestor to get your position confirmed in writing.
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The facts appear to be that you have a property in the UK and a property in Spain.You are Spanish Residente because you spend 183 days a year there. You have been making declarations to Hacienda as fiscally resident for 3 years. You have declared to Hacienda your UK home on 720. When you sell it you will be expected to declare the amount you received and as the house is on their records they might fine you more than what you got if you don’t.Youshould have to pay Spanish CGT. Your Spanish Tax Advisor says you do not need to make a Spanish return -this seems unbelievable to me. You either have to file and pay No Residente tax (very small) or in your case declare your WORLDWIDE income and they should charge you Spanish Tax on all your UK income but deduct what you have paid to the HMRC including on your UK (other than Government service) pensions . So really you in theory may owe back tax to Hacienda. I would have thought to be safe with the UK home sale is you should this year file as NO RESIDENTE for the last taxyear 2012 IF you spent less than 183 days there. -if you think you could have been logged in by the Advance Passenger information from an airline then don’t take any risk . Make sure you keep under 183 days this year up to 31/12 -then file NO RESIDENTE for the current year next year ideally in April after you have sent in your HMRC return. Now you may need to check whether there are any time lags before you can then safely sell the UK house while you still have the Spanish home and maintain your NO RESIDENTE status of under 183 days until you get it in black and white print from a lawyer who you can sue but better from HACIENDA. If you put to them a specific request -I want to sell this now -I was resident from 2010-2013 . I have been No Residente since 2013 and currently No Residente. You might have to wait in No Residente status at least one year of filed returns.Then finally be careful not to re-enter Spain and be deemed as taking up Permanent residence fiscally until the following Spanish tax year.has started. Caution: this is from researches and academic elucidation of my own ( these issues interesting for evaluating personal options would appreciate knowing your result -like others on here !) BUT rely on your own or Professional advice ONLY.
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@catherine wrote:
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The questions are:
If we decide to sell the house in the UK will it be subject to CGT in Spain? (The Tax Office in the UK state there will be a small CGT liability in the UK).
If so, would we be better de-registering in Spain and returning to the UK for a year or so before we sell it?
If anything happens to one of us, would the other have Spanish liability in Spain for Inheritance Tax on the house in the UK?
Thanks in advance.Yes you almost certainly would be liable for Spanish CGT on your UK property (they would class it as a non-primary residence).
Yes I think the best bet is to become a tax resident in the UK before you sell it – and make sure you stay a tax resident in the UK for the rest of that fiscal year.
I think the house would be subject to UK inheritance tax only.(I’m not an expert on these matters, but I have tried to research them)
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My very limited understanding is that if one is a fiscal resident, one needs to file taxes in Spain. There are many deductions, and the amount due – if any – is the calculated Spanish taxes less the amount of taxes paid in the other country.
My question is: Do ‘legal trusts’ exist in Spain? Are legal trusts from other countries recognized in Spain?
If so, is seems that this situation could have been avoided as the trust had the capital gain, and not the individual. I know this doesn’t help the situation, but it may help others.
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Reviewing my two previous posts Catherine says that they have ‘Certificates of Residence’ Now this is something different from being Fiscally Resident. Also it may be that the Spanish property has been in their ownership less than 5 years and so they cannot be ‘deemed’ Spanish Fiscally resident. So what determines the matter is whether they actually spend more than 182 days a year in Spain. If they had filed annually No Residente tax returns and paid the small annual tax to Hacienda this would be in their records and would have protected their UK property from the legislation that requires a 720 declaration.Filling in a No Residente declaration annually would have been ‘negligent’ but may well have gone unchallenged.The fact they have filed a 720 makes it more difficult as this might be construed as admission and they might be tempted to try and prove you were there from logged immigration records -perhaps not so thorough but its a lot of money ! So I moderate my previous posts to say it is possible you can sell CGT free the UK home without being taxed by Hacienda. It is clear to me you are UK tax resident -there is no problem there -it is established fact. But you should really be Spanish Fiscally resident too but it has not been raised by Hacienda and it is not an issue provided you now keep within the 182 days until and including the year you sell.in UK. In the meantime you you must complete a NO RESIDENTE tax form for the current year and for future years and including the year you sell in UK. If asked to pay arrears for previous 3 years just pay with the small fines. . After you sell you can take up Fiscal residence once the next new Spanish Fiscal year has started. Once you have done the No Residente return you could ask your fiscal advisor in Spain to get the 720 declaration withdrawn then because you made an error confusing the ‘Residencia Certification’ with fiscal resident and these two thingsare entirely different but frequently confused !!!! (Once again rely upon professional advice -but I think we are close to the truth of the matter)
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This will answer your questions from the HMRC perspective..
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Thanks again.
We have owned a holiday home in Spain and had an NIE number since 1989.
In 2003 we built our present home, sold our other one and paid the taxes.
We have tenants in our house in the UK and their contract is until July 2014.This is part of an email from our Spanish tax advisor:
“thanks for your email.
When you came to see me, we said that you are not obliged to do a tax
form.
I am a little bit confused now about that. We did your overseas assets
form 720 but you don´t have to do another tax form.
The deadline for tax returns for residents is the 30th of June, but as I
have said, there is no form to do for you.”
If we decide to sell in another 3 years when I’m a pensioner( my wife is now) would I be correct in assuming that we could sell the Spanish property without paying CGT and return to UK and sell that property (after renouncing our residencies here in Spain and spending the necessary time out of Spain) without incurring CGT in Spain on the UK property for the time we were resident here. -
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I reckon there are professionals who know more about this than me Catherine but I am contributing without wishing to appear ‘imposing’ ! This is very complex -your tax advisor says you don’t need to do a tax return because you have no Spanish income. But if you are fiscally resident you have to declare your Worldwide Income and that includes your UK house rents less the tax paid to HMRC under the double tax agreement. Now I met once a Spanish man who told me he did not have to declare his income if it was under 22000 euros per annum. Now my reading of Wincham’s guide and other web information tells me that Spanish personal allowance for a single person is only 6060 euros per annum so I am interested to know if there is some other rule for resident people -indeed that they might be using -if so do please let me know on here ! Now it is true that if you are over 65 and have lived in your Spanish property for at least 3 years as a main residence and have been paying Spanish Taxes you can sell the property CGT free. Check this because you apparently don’t pay Spanish income taxes. If you start paying there may be back tax for examle on UK rent from house Maybe Advisor does not know -but you have to be living on something !..If you do wait and sell your Spanish home in 3years time under the pensioner rule you could find the HMRC may want UK CGT on the profit above purchase price above the £11000(approx) annual exemption- but you can then sell your UK home UK CGT free and having left Spain Spanish CGT free. But where do you want to finally live -UK or Spain ? If on the other hand you file a No Residente tax return in Spain keeping to less than 183 days in Spain (days entering and leaving both counted) you could sell up in UK Spanish CGT free but in current year you might have already exceeded 182 so you then have to begin this from year beginning. 1.1.2014 and file No Resident in 2015 After you sell you could could go back to Spain in the next tax year -not before -caution and sell that free of Spanish CGT under the pensioner rule having severed all financial links with UKand limiting visits as they allow to be free of HMRC So much to work on -but do please tell me if you find anything about this 22000K per annum income rule for Spanish tax returns as I am researching ways of living in Spain for myself.
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Sorry Katy i was writing my long script while you posted but she says that her advisor asked hacienda who say she is in their system and they filed a 720. But how is it they don’t do her a tax return -as you say what an advisor -but the advisor might be more canny than we think trying to leave as any doors open for her as he can .but I worry she could get fined for not filing one -in a way think best she files NO Residente ASAP But you say they will treat her as non resident and she might sell it and pay only 3% ? But I read from ‘delora ‘ not many Lawyers will do it Katy -is that legal or is it not when the tax should be more -does it matter if you never set foot in Spain again -but maybe they will want to..
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If you are a resident in Spain and sell the Notary will want proof of fiscal residence. That is why you should file a tax return even if the amount due is NIL. I am not sure where the 22,000 comes from. Tax allowances in Spain are now less than the UK. If you are officially a resident then you are allowed about 1 year to declare CG…unless the profit from your old house is invested in another. Yes a resident pensioner does not pay CGT.
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