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My sister is off to view in Spain and will buy with Spanish mortgage that will be redeemed on sale of UK property which will sell relatively easily.They intend to reside there permanently fully when the UK property is sold How do they avoid paying Spanish CGT on their UK Capital Gain. They will not be in Spain 182 days this year but unclear if they would be safe by filing No residente for this fiscal year early next year. Should they leave Spain at Xmas and come back January 1 or 2nd or would that be deemed temporary absence and fiscal residence started when they first bought the property. Or should they not occupy the property until the next Spanish Tax year . Any links to answers to this question most appreciated. I have read some UK buyers have been caught out unaware of this issue.
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You said..
“They intend to reside there permanently fully when the UK property is sold”
So up to this point they will not be tax resident in Spain, in which case there is no need to submit any tax return in Spain prior to this point, except non-resident tax associated with their holiday home . So the Spanish tax authorities will never know about the existence and sale of this property.
However, reading between the lines, I take it that your sister is permanently moving to Spain, the day she buys her Spanish home and at some point in the future the UK home will be sold. Just make sure the UK house is sold before becoming tax resident in Spain, as otherwise it will have to be declared and then the associated rules followed. However it is my understanding that when selling your primary residence in Spain no CGT is payable if you buy another primary home within 2 years. I am not sure of the implications when there is an overlap of ownership.
My advice is keep it simple. Only become tax resident in Spain once the UK home is sold.
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Yes jp1. Thank-you It is important you do not become tax resident before the property is sold. The imporant thing I have come across is Hacienda can deem you to be fiscally resident from the date you have taken up residence even if in that fiscal year you are there less than 183 days. When you are a permanent resident any short absences do not break this status. Do you need to make only very short visits to the new property and not regularly reside there until the beginning of next fiscal year. You are suggesting jp1 that you can regularly reside there and that filing No Residente for it as a holiday home for the current year next January as less than 183 days and then to file as resident in 2017 in following years return.. If you have sold in Uk how can Hacienda know unless you gave your UK sddress when buying in Spain or that Hacienda might ask HMRC when you file a Spanish tax return. I would like someone to say that its Ok to sell your UK home take your capital gain – Your property sold and vacated money in bank you go to Spain and take up residence in new Spanish home and then you have no worries about being taxed by the Spanish on your capital gain as it is in the same tax year -if they found out. Or that there are recent precedents of such !
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How would the tax authorities know that you are resident? You have to declare yourself resident. During a transition period, in moving from your home country to Spain the dates of fiscal residency will be when you declare them, there is no other way for a tax authority to know otherwise.
I own a holiday home in Spain. If I decided to move to Spain tomorrow it would be impossible for the UK or Spanish Tax authority to know the exact date I cease to become fiscally resident in the UK and take up fiscal residency in Spain, especially if moving between the two countries regularly unless I have specific interests in one or other country such as work, children in school etc needing the necessity to register these details.
If your sister is buying a house in Spain and then becoming fiscally resident when she starts to live there and then selling her UK house at a later date then she needs to abide by the fiscal rules of Spain at the point of selling.
You mentioned in your earlier post that your sister won’t permanently live in Spain until the UK house is sold. If this is the case then she doesn’t have a problem. However, I suspect that this not the case.
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Thank-you much for that jp1. I will have to try to find where I saw the information that Hacienda can decide when you become fiscally resident – ie if you move in to your Spanish property in September and remain there even if you are in Spain this year less than 183 days they can deem you fiscally resident from the day you move in.That makes you fiscally resident for the whole tax year and supposed to make a tax return for it. Does it make any difference whether you sell your UK home before or after you move into your spanish home whether you are supposed to do a 720 declaration of anoverseas capital gain in the current Spanish tax year on an asset worth more than 40000 euros or have I read something wrong please ?
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Further to my last post I have now read on this site athread that mmakes it clear than unless you have spent a lot of time in Spain if you move in in the second half of year you will not be deemed tax resident. The information item is How you become Tax resident in Spain and it makes the position abundantly clear. Have to say I should have seen it before ! You can find this information in GUIDES
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