WHEN SELLING A PROPERTY NOT TAKING GOOD LEGAL ADVICE COULD COST YOU A LOT OF MONEY:
Question:
We are selling our property for 230000 euro having purchased it for 110000 euro in 2003. We are residents in Spain since 2004. My husband is 64 and I am 57. What is our situation regarding capital gains tax?
A .
The first thing is to be able to prove to the notary the day of the sale that you are in fact a Spanish tax resident. It is very important to realize that having what everyone calls the “residencia” issued by the police does not in fact prove you are a tax resident of Spain, and that if this is the only document you take to the notary to prove tax residency , the notary will consider you a non resident and you will be subject to a 3% retention.
To prove you are a tax resident you need to request a certificate from the tax authorities, which can then be taken to the notary. If you suffer the nasty surprise of them saying that in fact you are a non resident, you will need to get this amended by proving to them that you are in fact a resident before they will issue you with the correct certificate for the notary.
Regarding the sale itself if possible wait until your husband is 65 for signing the sales deed. If you do this you will pay no capital gains tax in relation to his half of the sale. You would then just pay capital gains tax in relation to the half you are selling. In relation to your half , you can also claim exemption if you Intend to reinvest the proceeds of the sale in another property in Spain within two years.
If you do not intend to reinvest the calculation of your capital gains tax would be:
Half of sales price (minus expenses necessary for the sale) minus half of purchase price (including all expenses on the purchase and all updated by inflation).
When you have this final amount you can deduct half of any bills you have paid to make improvements to the property (they have to be supported by proper invoices). When you have the final amount we need to apply the tax rate which is 21% for the first 6000 euro profit, 24% for the profit from 6000 to 24000 euro and 27% on the net profit above this amount.
