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Residents' income tax - how to declare a property sale at a loss?

Posted: Thu May 2, 2019 7:34pm
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Ancient Printer

Ancient Printer

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I wonder who has an answer to this one? I bought a house in 2005 for €210,000. I hope to sell it shortly for €135,000. Who says property is a good investment??!! But that's not really my question. 

We already know that the buyer will probably be called upon to pay a complementario or better known as "bargain hunters' tax" but that's his problem.

Now I go to do my 2019 residents' tax return in June 2020 and I declare a loss of €75,000. If I am investigated I can prove the figures but I don't think that is of any interest to our fiscal friends here, is it? - and I'm done for fraud!?

So I think again and over declare, say €190,000 hoping that the loss of a mere €20,000 will be overlooked.

Which would you do? Be truthful and get done for evasion OR tell a lie to avoid investigation.

Look forward to the tax brains on the forum replies!

Rdudden

Posted: Thu May 2, 2019 8:50pm

Rdudden

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Posted: Thu May 2, 2019 8:50pm

sell the villa and go home they cannot do anything

Ancient Printer

Posted: Thu May 2, 2019 9:56pm

Ancient Printer

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Posted: Thu May 2, 2019 9:56pm

Rdudden wrote on Thu May 2, 2019 8:50pm:

sell the villa and go home they cannot do anything

My home is in Spain - I have nothing in England so where would home be?

jimtaylor

Posted: Fri May 3, 2019 5:05am

jimtaylor

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Posted: Fri May 3, 2019 5:05am

I don't know the answer - I can only give an opinion.

If it's your home, then you can't do anything about it.

If it's a second property, then capital losses can only be offset against capital gains - they can't be offset against tax on ordinary income.

Ancient Printer

Posted: Fri May 3, 2019 8:55am

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Posted: Fri May 3, 2019 8:55am

jimtaylor wrote on Fri May 3, 2019 5:05am:

I don't know the answer - I can only give an opinion.

If it's your home, then you can't do anything about it.

If it's a second property, then capital losses can only be offset against capital gains - they can't be offset against tax on ordinary income.

Capital gains? What's that? Never seen one in decades! The question isn't about getting tax relief but rather how to avoid investigation as the loss realised is unbelievable - unless you live in Spain. No this is a second home and buyers nowadays must be rich pickings for the Bargain Hunters Tax! I am wondering if you can be "done" for over-declaring because to do so affords me no tax advantage.

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jimtaylor

Posted: Fri May 3, 2019 9:55am

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Posted: Fri May 3, 2019 9:55am

I'd argue that a capital loss on property doesn't form part of an income tax Renta 2018 return and therefore doesn't need entering.

Ancient Printer

Posted: Fri May 3, 2019 10:57am

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Posted: Fri May 3, 2019 10:57am

jimtaylor wrote on Fri May 3, 2019 9:55am:

I'd argue that a capital loss on property doesn't form part of an income tax Renta 2018 return and therefore doesn't need entering.

Actually I have had to declare many capital losses in particular on English investments liquidated at a time of pound weakness - thus loses in € terms. They don't help with income tax due or otherwise but can be offset against gains if ever they occur in the future. One definitely has to declare sales and doing so prevents the sold property coming up on the "borrador" next year. 

jimtaylor

Posted: Fri May 3, 2019 2:44pm

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Posted: Fri May 3, 2019 2:44pm

I'm aware that you need to declare 'ordinary' investment losses, and that these can be offset against gains over a five year period.

I'm interested in what you say about a second property continuing to appear on the borrador, as I'd have expected the change of ownership to prevent that appearing, or to only show imputed tax for the period of the year in which it was in your possession.

Sorry I'm not helping - in fact, you're educating me.

Ancient Printer

Posted: Fri May 3, 2019 3:26pm

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Posted: Fri May 3, 2019 3:26pm

Hi Jim

Thanks for your comments. Yes you may be right that the change of ownership prevents it appearing in the borrador. I have never put it to the test as I duly declared the last one I sold (at a realistic price before the full effect of the collapse). I do it on line nowadays and the arithmetic is done for me. In the days before computers it was absolute toil as it all had to be calculated by hand and then typed neatly on forms (in triplicate or was it more?) Thus there appear to be three choices - the two I mentioned or the third of simply not declaring at all in return for not being able to hold the loss for future years. Perhaps that would draw less attention to the issue?

jimtaylor

Posted: Fri May 3, 2019 3:52pm

jimtaylor

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Posted: Fri May 3, 2019 3:52pm

I fully agree that before you could do it online, or use the PADRE program, it must have been a real pain. From a personal point of view I just wish they wouldn't keep changing the system, as that means a new learning curve every year. If you're likely to make any capital gains in the next five years then it's certainly worth declaring the loss, and they must recognise that people do make significant losses on property if that was bought at the peak, so it would seem sensible that declaring such a loss shouldn't prompt a query.

I've had a quick look at the manual, but just ended up cross-eyed, and haven't got time to try and make sense of it as I've got to go out in a few minutes. If you haven't looked at the manual, its here:

https://www.agenciatributaria.es/static_files/AEAT/DIT/Contenidos_Publicos/CAT/AYUWEB/Biblioteca_Virtual/Manuales_practicos/Renta/ManualRentaPatrimonio2018_V4_es_es.pdf

Good luck!

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