Renting out your only property and incurring CGT even if you're over 65
People should be warned!
If you rent out your only property in Spain (or England) during the summer months - or at any time even for one week - declare rental income and pay tax, when you sell you will be charged Capital Gains Tax as the tax office consider you've changed your property's designation/classification from Primary/Habitual Residence.
Our fiscal advisor's mother has just got a bill for almost 30,000e. She rented out during the summer months to supplement her pension. Paid the taxes as above. Sold in 2014 (the Hacienda can only go back three years so are currently trawling through the sold/rental tax records for that year). She received The Letter at her new address in England stating that she owed CGT. Her daughter took it to court and lost.
We know people who have rented their properties here for many, many years and not declared or paid a euro in tax. They've made a fortune when they sell they will be under the radar and therefore there will be no CGT to pay. A lot of older people having owned their properties for many years and made a decent profit, but rented out at some stage, and want to go back to UK have no idea of this CGT loophole Spain are exploiting.
This has just happened to us. We bought in 2000 and sold in 2018. We reinvested a lot of the profit we made in another house. Had we not and just returned to England (as we'd planned), bought another little property there, we would have got The Letter in 2022/23 demanding we pay CGT, back interest and the fine. Horrendous! So the bottom line is - do you declare rental income and pay CGT when you sell? Or do you not declare and face fines of up to 90,000e for non-disclosure? Seems to us now that it doesn't pay to be honest as you'll probably never be caught if you don't declare. All the lawyers/tax experts we've contacted for clarification/confirmation aren't aware but all have advised us to pay up which we have to do tomorrow.
We are upset and angry and now plan to sell and return to England.