One for all of you a little confused about the Capital Gains Tax, who is expected to pay it, what is the cost, and if it can be avoided.
How is Capital Gains Calculated?
It is based on the net profit made when selling an asset usually a property, which is calculated by deducting the original purchase price (including VAT, Land Registry fees, property transfer tax and legal and notary fees, estate agent fees, any settlement fees) from the final sale price (less costs incurred during the sale). WE do have allowances in addition to deduct approx €12,500 and it is per share of the house, so for 2, its 50% per person
For Spanish tax residents, the tax rate starts at 19% for the first €6,000 profit obtained and increases thereafter to 21% when the gain is between €6,000 and €50,000, 23% when the gain is between €50,000 and €200,000, and 26% for any gain over €200,000,
There are a few exceptions to avoid paying Capital Gains Tax.
For example, if you purchase another home as your sole, main residence using the proceeds from the sale of a property that you also used as your sole, main residence only then you are legally exempt from paying Capital Gains Tax. Also, if you are over 65 years old then you are not required to pay Capital Gains Tax, but you must have lived in the property as your sole, main residence for a minimum of three years prior to the sale of your property.
To avoid it all together if the above exceptions do not apply then the best option is to aim to arrive in Spain after the 3rd July in any Spanish Tax year, this being 1st January to 31st December.By coming in as a resident after this date this will ensure you are under the 183 days.
You do NOT need to count any days already spent in Spain beforehand as you are already a Fiscal resident in another country, only in exceptional circumstances and if you are avoiding tax of course will this be taken into consideration.
Before this date it will make one a Fiscal Resident and likely to be eligible for a Tax return for that year, payable the year after, this is under normal circumstances.
Don´t forget whether you are a resident or not in Spain and sell your home here you are liable for Capital gains either way, the above is only for those who wish to know the rules on Capital gains from a home country before becoming a Spanish Fiscal resident over the 183 days.
This is still worked out as above.
As always get in touch for further information and assistance.