Taxes and selling a Spanish property

Hi all,

I have a question for the future regarding a sale of Spanish property. I plan to buy a smaller property in Spain this year to give myself a few years to see if the Spanish lifestyle suits me before committing to life there, but should I commit to living my life in Spain, am I right in thinking the taxes would not be as heavy if I were selling my first Spanish home to purchase a larger new home in Spain as opposed to selling up and leaving the country?

Many thanks.

Mac

If you sell a home and use the entire proceeds to purchase another property anywhere in the EU there is no CGT to pay on the first property.

You need to be aware that moving in Spain is a very expensive option. There is the transfer tax of 10% to start with plus all the associated costs of solicitors, notaries, utilities, estate agent fees (complete rip off) and so on. This is money that just flies out the window and you never get back. You will have paid it all out on the first, smaller, property but won't be able to add that to the selling price as the new owners have to pay it on top of what they buy it for

We were, a few years, thinking of moving to a larger property. Yes, we'd have got away with CGT as permanent residents but there was an extra minimum of 30,000 euro on top of the price because of these. The new property was 250,000 and 25,000 in tax would have had to be added. Plus the 5k estate agent fees without even taking into consideration the notary, solicitor and other things.

It would only have been an extra 70k for the property but over 100k when all those things were taken into account.

If you sell up and move back to UK you will have a minimum of 3% of the selling price retained to pay any taxes and will be liable to CGT.

Either rent in the area you want until you find the place you really want to buy or buy the one you want in the first place.

Thanks, Marcliff.

I’m going to hold onto my UK property (and rent it out) for a few years while I decide on if I want to live permanently in Spain, but that means buying a smaller property first as I would not have the free money to buy a bigger home. I have been told to set aside about €20,000 for all the associated costs on top of the price of the Spain property.

I am assuming my second Spanish move would also incur a further €20,000 on top of the new property price?

Obviously if I love Spain, selling my UK home would free up a lot of money and having spoken to a financial advisor, I know the CGT on selling the UK property after only a few years will not be substantial.

It’s great to know that if I sold my first Spainish home, I would not lose too much using that money to purchase a second Spanish home (should I actually want one and not be perfectly happy in my first Spanish home).

I’m doing my best to find the absolute best Spanish property I can afford right now for the money I have so as to not need to move a second time, but also to be aware the option is there (at a not huge price) should I wish to.

Over later this month to look at properties!

20,000 expenses would buy a property for less than 150,000 euro.
15,000 tax. 5,000 estate agent for a start (you may find a cheaper estate agent) but that's your 20k gone. Then there's the notary, the solicitor, the utilities and so on. That's goodbye money you won't get back.

If you then buy a bigger property obviously more expensive so your 20k won't cover the new place. Even one at just 50k more would have 20k tax alone on it. And that's just buying a pre owned house, if you decide on a new build there is another 1.5% stamp duty to pay as well.

It's an expensive proposition to move here in Spain.
And the bit about no CGT if you buy one for more than you sold the other one, that won't apply if you are a non resident as it is the main home exemption and you can't claim it as a main home if you aren't resident and you must have lived there for 3 years anyway. And if you do take out residency then you will be liable for CGT on your home in UK.

Yes, I see what you mean about burning the money away. I was looking at roughly that figure for my first Spanish property, so the €20,000 or so would be right, but the CGT I would pay on selling my UK home once I become resident in Spain would be higher? I was planning on becoming a resident as soon as I can (I am an EU passport holder - does that help me as regards staying without becoming a resident so soon?) I was told it by a UK financial adviser the UK CGT after only a few years would not be significant.

Are you talking about what I would have to pay the Spanish government? How much would that be?

Guess I need to talk to a Spanish financial advisor too!

You’ve been brilliantly helpful and patient, Marcliff! Thank you!

Also, wouldn’t the CGT on the Spanish property on come from the profit? I mean, if I bought a place for €150k and sold it in 2 years for €160k wouldn’t it be from the €10k?

Once you become a Spanish resident you are liable to CGT on worldwide assets so, yes, it could work out expensive.
Any CGT paid in UK will be offset against the CGT you will pay in Spain.

Definitely see a Spanish accountant to work out the amount you would be liable for. Only if you sell your UK property in the year prior to becoming a resident will you not pay CGT.

You become a tax resident in Spain once you have lived here for more than 6 months in any one year.
10% transfer tax is payable on every property you buy.

If it is your intention to live full time in Spain you must apply for residency within 3 months of arrival.
Even EU citizens are limited to 3 months at any one time in Spain although it generally isn't applied too strictly. Just be careful if you go on the padron as that is the date they will use to assess when you became resident.

As a resident, you can claim expenses against CGT such as taxes, solicitors fees and so on. As a non resident you can't and would automatically have a 3% retention fee.

You will hardly make any profit on your Spanish property, if any. It is the rapidly increasing prices in UK that would affect you.

Thanks. So, I need to find out exactly what percentage I would lose from my money if I sold my UK home after becoming resident in Spain because it was my intention to become a resident ASAP so I could actually feel what it is like to LIVE in Spain.

Either that or stay at my place in Spain for three months, leave for three months, and then return to Spain for three months until such time I decide I do wish to sell up in the UK and make things permanent?

Have I got that right?

With an Irish passport, you don't need to leave for 3 months. The 90 in 180 only affects non EU citizens. You could stay for 3 months then go away for a short time and then come back for 3 months. As long as you don't stay more than 6 months in any one year or you will be classed as a tax resident regardless of taking it out officially or not.

And has been pointed out several times, do not sell your UK property in the same year you become a tax resident. You become a tax resident in any one year (Jan to Dec) that you are here for more than 6 months and you will pay tax on your worldwide income for the entire year. So if you become resident in May, you will be tax resident for that entire year. If you become resident in October (the last 6 months0 you will not become tax resident until the following year.

marcliff wrote:With an Irish passport, you don't need to leave for 3 months. The 90 in 180 only affects non EU citizens. You could stay for 3 months then go away for a short time and then come back for 3 months. As long as you don't stay more than 6 months in any one year or you will be classed as a tax resident regardless of taking it out officially or not.

But essentially I would still have to be out of Spain for 6 months in the year?

marcliff wrote: And has been pointed out several times, do not sell your UK property in the same year you become a tax resident. You become a tax resident in any one year (Jan to Dec) that you are here for more than 6 months and you will pay tax on your worldwide income for the entire year. So if you become resident in May, you will be tax resident for that entire year. If you become resident in October (the last 6 months0 you will not become tax resident until the following year.

So, the solution to that is not to take up residency until I decide to sell my UK home?