A Tax Guide Uk to Spain

It is a brief and basic insight in what to expect, it is by no means exact as every personal circumstances are not the same and as of yet no update to Brexit in place so we are still following the 2018 guidelines and i will update once the information comes through.

Where are you tax resident?

Understanding where you are tax resident is important since normally the country of residence would tax you on your worldwide income and gains.

In Spain, you are considered to be a tax resident if you spend more than 183 days in Spain during the Spanish tax year (the calendar year) or if your main professional activity or most of your assets are based in Spain (i.e. if your centre of economic interest is in Spain). You can also be considered to be resident in Spain if your spouse and/or dependent minor children live in Spain (unless you can prove otherwise). In Spain there is no split year treatment, so you are either resident or non-resident for the whole tax year.

(There are more In Depth test to determine this)

Many people move abroad and continue to wrongly pay tax in the UK, when they should be paying tax in their new country of residence. This is quite common in Spain, particularly where some people just never declare themselves to the Spanish tax authorities at all, assuming that they should continue paying tax in the UK, particularly if they only have UK-source income such as UK pensions and savings income. It can be all very confusing unless you receive specialist advice.

If you are seen as a Spanish resident, you will be liable for tax on your worldwide income and gains in Spain. Non-residents of Spain will be liable for Spanish income tax only on Spanish sourced income and capital gains.

There is a Tax Treaty that means the same income or gain is not taxed twice, however its best to get advice to ensure you are paying Tax in the correct country, if you do pay in one country you can reclaim back in another, and make sure you are not paying the higher tax this is why I always seek advise and to do a Tax return "just in case"

What about Capital Gains?

This is a major question a lot of British have, if you are a resident of Spain the gain on the sale of your main home may be exempt from capital gains tax provided you have lived in the property for at least three years and you are over 65 years old, or if you are under 65 and you reinvest the whole proceeds in a new main home. Certain conditions must be fulfilled to benefit from the main home relief for capital gains purposes in Spain.

Under the UK/Spain Double Tax Treaty, gains arising on disposal of UK properties are subject to Spanish capital gains tax at rates of up to 23%. This would apply even if the property was your main home before you moved to Spain, unless you are eligible for the main home relief for capital gains tax purposes. You would also be liable to UK capital gains tax. From 6 April 2015, UK capital gains tax applies on the sale of UK residential property even if the owner is non-UK resident.

You must declare the income from the sale on your annual resident tax declaration. However, it is important to remember that this declaration covers the previous year. Therefore, if you sold your house in May 2019 you would declare it in June 2020 and not in that year’s declaration.

Furthermore, the Autumn 2018 budget introduced changes to capital gains tax in the UK. Currently, you don’t have to pay capital gains tax on your main home. However, now you need to pay capital gains tax on second homes and buy to let properties. In the UK, you pay a higher rate of capital gains tax on property than other assets. Basic-rate taxpayers pay 18%, while higher band taxpayers pay 28%. However, all taxpayers have an annual CGT allowance, which means they can earn a certain amount tax-free. In 2019-20, capital gains of up to £12,000 are tax-free. 

The Gov.Uk as a widget that you can use on their website and it allows you to fill it in and give you the answer on how much capital gains you will owe, be honest when doing this as it will help later on if needed and don't forget if you have a spouse who shares half of the proceeds it makes it half the bill too! ( Ask for advice if need be!)

For Residents selling Spanish Property`s

The amount of capital gains tax you pay is incremental. Remember, you are considered a tax resident in Spain if you reside in the country for more than 183 days per year. 

Therefore, as a resident, the Spanish capital gains tax you owe will be: 

• 19% for the first €6,000 profit

• From €6,000 to €50,000, the tax percentage is 21%

• From €50,000 upwards, it’s 23%

For NonResidents and selling your home in Spain

Unusually, capital gains tax in Spain is simpler for non-residents than residents. For non-residents, the Spanish capital gains tax is a flat rate of 19% on profits made on the sale of a home. However, calculating capital gains tax is a little more complex than merely working out 19% of the sale price. Instead, you need to calculate the following:

1. The true purchase price:

   • This will be calculated from the purchase price (as written on the Title Deed) with plus some costs incurred during the purchase, including VAT, Land Registry fees, Notary fees, Transmission tax and legal fees.

The final sale figure

• This will be calculated from the current selling price, less the costs incurred during the sale. For instance, this would include your legal fees. Some costs of major structural alterations made to the property can also be deducted. However, you will need to be able to produce the official receipts for the materials and work involved. If you have made alterations to your property and you have not included these in your Title Deed, this needs to be rectified at the point of sale.

Finally, we can calculate:

• Final sale figure – true purchase price = net profit

I would suggest at this point do not even think about "Black Money" it is illegal and you do not have any rights should anything go wrong and you lose your money.