Capital Gains Tax Case Study


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A man called us who was selling his house in the Malaga province with capital gains and he had a specific question about reinvestment of the gain. He sent it to us:

“I need some advice about my situation. I’m in the process of moving from Spain. I have been a Spanish resident for about 15 years, and working/tax paying since at least 2002. My (only) house in Spain where I have been empadronado/living until now, looks like it’s about to sell. I bought the property for about 20,000euros (c.2001), and built my own house. No mortgage. Some facturas (I guess about 20,000euros) in my name, but not many. Selling price around 285,000euros.

I understand that if I and my wife both leave Spain now we lose our tax residency. To avoid that, we will remain in Spain for over 183 days in 2015 (doesn’t have to be continuously).  I believe this way I maintain my Spanish tax residency, and can get tax relief on ALL the property capital gain – as selling my main home as a Spanish tax resident, providing I reinvest ALL the money in another property that is also my main home … anywhere in the world. To be my main home, again its where the family is resident. With a 2 year time limit to reinvest … and 1 more year before resale (unless I have to resell for major life reasons … divorce, death, job change etc).

All that was clear to me. Since then I have been told by others that I can only reinvest within the EU to get CGT relief (and must be spanish tax resident in 2015.I have looked at spanish govt we site on CGT tax relief and cant find anything about international or EU reinvestment!!  The best for me is the EU REINVESTMENT WITHOUT BEING tax resident in spain in 2015. Next best is world wide reinvestment being tax resident in 2015!  I want to see the spanish govt documents that that show these to be real options. My Spanish is good enough to understand …. so a spanish version is fine!”

We had blogged an article on this website about capital gains tax that had answered this and he had wanted to check it.

He asked us to send him something in Spanish that backed up what we had written, so we sent him the actual Boletin (Law) and some other information.

This is what he first replied:

“It took a bit of trawling … but I think this is the bit that your blog post referred to that other companies got wrong!  And both are well considered in the Industry!

from Page 6 of the BOE:

En tercer lugar, y también para favorecer la libre circulación de los ciudadanos dentro
de la Unión Europea, se permite al contribuyente no residente que quede excluida de
gravamen la ganancia patrimonial que obtenga con motivo de la transmisión de la que
haya sido su vivienda habitual en territorio español, siempre que el importe obtenido en la transmisión se reinvierta en la adquisición de una nueva vivienda habitual.

Or in English:
Third, and also to promote the free movement of citizens within the European Union, non-resident taxpayers are excluded from the capital gains tax arising from the transmission of their residence in Spanish territory , provided that the amount obtained for the transfer is reinvested in the acquisition of a new habitual housing.

Thanks for your help again Amanda!”

Then last night he wrote a thank you,:

“Thanks so much for your help today! I was getting more than a bit frustrated with hearing a different answer from everybody I asked and everything I read about my tricky Capital Gains Tax situation. Including some big hitters in the expat tax world.

You were so friendly, and went right out of your way to help me find the official information I needed to back up what it said on one of your blog posts.
You guys were right, and could prove it! I can’t tell you what a relief it is just to know what the rules are that apply to my situation.
I have some big decisions to make, and at least I now know what the implications really are. What I can’t believe though is that you didn’t even charge me! I would definitely use you wherever possible in future”

He made my day, as this little firm stood out again in the world of the big hitters on the internet!!


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