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Capital gains tax

Posted: Thu Mar 16, 2023 11:37am
15 replies538 views4 members subscribed
Akelly1962

Posts: 313

31 helpful points

Location: Playa Flamenca

Joined: 8 Mar 2021

We are selling our home in Dublin to move over later in the year. I was told if we don't spend more than 183 days in spain this year we won't be liable for CGT on the sale of our irish home to the spanish authorities.  I have just been told that as non residents we still have to pay 19% CGT.   Is this true.  I'm gutted. Its a lot of money. We were planning on getting residency early next year to avoid it. Anyone else in this situation. Thanks 

killjoy

Posted: Thu Mar 16, 2023 12:24pm

killjoy

Super helpful member

Posts: 3232

1849 helpful points

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Joined: 4 Nov 2017

Posted: Thu Mar 16, 2023 12:24pm

As long as you are not a registered resident and do not have a NIE you are not "known" to the revenue office, which doesn't know about your fiancial assets whrever they may be and doesn't need to. Do not wake up sleeping dogs. Don't tell anyone about your personal situation and your plans.

Akelly1962

Posted: Thu Mar 16, 2023 12:33pm

Akelly1962

Original Poster

Posts: 313

31 helpful points

Location: Playa Flamenca

Joined: 8 Mar 2021

Posted: Thu Mar 16, 2023 12:33pm

killjoy wrote on Thu Mar 16, 2023 12:24pm:

As long as you are not a registered resident and do not have a NIE you are not "known" to the revenue office, which doesn't know about your fiancial assets whrever they may be and doesn't need to. Do not wake up sleeping dogs. Don't tell anyone about your personal situation and your plans.

Hi we have a house in Spain so have a NIE. We pay non resident tax since last year. There's bilateral agreement between Ireland and Spain with regards to taxation. Its all online so they can see we sold if they want to. 

Kimmy11

Posted: Thu Mar 16, 2023 1:28pm

Kimmy11

Legendary helpful member

Posts: 6869

12554 helpful points

Joined: 8 Aug 2017

Posted: Thu Mar 16, 2023 1:28pm

Hi Akelly,

Did a tax professional tell you that?  Assuming that you meet the definition of an Irish tax resident, as set out in Article 4 of the DTA between Ireland and Spain, I think they're wrong.  If you remain tax resident in Ireland for the tax year in which you sell your Irish property (from what you've said, I think Clause a. describes your circumstances?), any CGT liability should be to Ireland, not to Spain.  But I'm not an expert in Irish taxation, so it would be helpful if you could share with us who told you that you would have a CGT liability to Spain and why?

"Article 4 - Resident 

1. For the purposes of this Convention, the term "resident of a Contracting State" means, subject to the provisions of paragraphs 2 and 3 of this Article, any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that State in respect only of income from sources in that State. The terms "resident of Spain"and "resident of Ireland" shall be construed accordingly. 

2. Where by reason of the provisions of paragraph 1 of this Article an individual is a resident of both Contracting States, then his status shall be determined as follows: 

a. he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests); 

b. if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode; 

c. if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

d. if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement. 

3. Where by reason of the provisions of paragraph 1 of this Article a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the State in which its place of effective management is situated."

Kind regards,

Kim

Akelly1962

Posted: Thu Mar 16, 2023 1:40pm

Akelly1962

Original Poster

Posts: 313

31 helpful points

Location: Playa Flamenca

Joined: 8 Mar 2021

Posted: Thu Mar 16, 2023 1:40pm

Kimmy11 wrote on Thu Mar 16, 2023 1:28pm:

Hi Akelly,

Did a tax professional tell you that?  Assuming that you meet the definition of an Irish tax resident, as set out in Article 4 of the DTA between Ireland and Spain, I think they're wrong.  If you remain tax resident in Ireland for the tax year in which you sell your Irish prop...

...erty (from what you've said, I think Clause a. describes your circumstances?), any CGT liability should be to Ireland, not to Spain.  But I'm not an expert in Irish taxation, so it would be helpful if you could share with us who told you that you would have a CGT liability to Spain and why?

"Article 4 - Resident 

1. For the purposes of this Convention, the term "resident of a Contracting State" means, subject to the provisions of paragraphs 2 and 3 of this Article, any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that State in respect only of income from sources in that State. The terms "resident of Spain"and "resident of Ireland" shall be construed accordingly. 

2. Where by reason of the provisions of paragraph 1 of this Article an individual is a resident of both Contracting States, then his status shall be determined as follows: 

a. he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests); 

b. if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode; 

c. if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

d. if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement. 

3. Where by reason of the provisions of paragraph 1 of this Article a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the State in which its place of effective management is situated."

Kind regards,

Kim

Hi Kim

When we move to spain our only residence will be in spain. A solicitor in Spain told me we weren't liable if we don't spend 183 days there and another said we were liable fir CGT when doing tax returns as Mon resident.  Very confusing 

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Kimmy11

Posted: Thu Mar 16, 2023 2:27pm

Kimmy11

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Posts: 6869

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Joined: 8 Aug 2017

Posted: Thu Mar 16, 2023 2:27pm

Akelly1962 wrote on Thu Mar 16, 2023 1:40pm:

Hi Kim

When we move to spain our only residence will be in spain. A solicitor in Spain told me we weren't liable if we don't spend 183 days there and another said we were liable fir CGT when doing tax returns as Mon resident.  Very confusing 

Hi,

I think the second laywer's view may come from the fact that, once you sell your Irish property (your primary residence), your only property will be in Spain.  However, that doesn't make you tax resident in Spain until you move here and your Spanish property becomes your habitual residence.  Even without owning a property in Ireland, if your habitual abode is there (say, a rental property, living with family, etc.) and you can prove that it continues to be your centre of vital interest (e.g. you work there or, if retired, you can show regular living expenses in Ireland for at least 183 days), then I don't see how you can be classed as tax resident in Spain.  We moved permanently to Spain in 2016, when the UK was still in the EU, but because we lived in Spain less than 183 days of 2016, our first year of Spanish tax residency was 2017, for which our tax returns had to be submitted between March and June of 2018.

Personally, I wouldn't ask a Spanish lawyer ("abogado") these questions - you'd be better speaking to a tax specialist ("asesor fiscal").  In any event, as you've said you plan to ensure that you won't make yourself tax resident in Spain in the same tax year that you sell your Irish property, you won't be making a tax declaration in Spain for that year anyway.  If I were you, I'd enquire with the Irish tax office on what basis you need to declare any profit on the sale of your primary residence and that the timing of your planned move to Spain won't affect your tax residency - if they're anything like the UK's Inland Revenue, they won't offer any advice about Spanish tax, but they should confirm that any CGT liability would be to Ireland, not Spain.

Kind regards,

Kim 

Herefordjack

Posted: Thu Mar 16, 2023 2:28pm

Herefordjack

Super helpful member

Posts: 875

1090 helpful points

Location: Pego

Joined: 18 Dec 2017

Posted: Thu Mar 16, 2023 2:28pm

Akelly1962 wrote on Thu Mar 16, 2023 1:40pm:

Hi Kim

When we move to spain our only residence will be in spain. A solicitor in Spain told me we weren't liable if we don't spend 183 days there and another said we were liable fir CGT when doing tax returns as Mon resident.  Very confusing 

Your advisor is correct. The Spanish tax year is the calendar year. If you arrive in the second half of the year, you will not be classed as tax resident until 2024. Any income and capital gains made in 2023 will be the business of the Irish tax authorities only.

Please note residency and tax residency are different things. You can only be in the country for 90 days before formalising your presence. There is much advice on this on CBF.

You will need a NIE to do anything legal/official, such as buying property.

And finally, please ignore 'advice' from idiots who advise you to keep your financial affairs 'hidden'. Make sure you make an income tax declaration for 2024, which is submitted between April and June 2025.

Akelly1962

Posted: Thu Mar 16, 2023 2:34pm

Akelly1962

Original Poster

Posts: 313

31 helpful points

Location: Playa Flamenca

Joined: 8 Mar 2021

Posted: Thu Mar 16, 2023 2:34pm

Kimmy11 wrote on Thu Mar 16, 2023 2:27pm:

Hi,

I think the second laywer's view may come from the fact that, once you sell your Irish property (your primary residence), your only property will be in Spain.  However, that doesn't make you tax resident in Spain until you move here and your Spanish property becomes your habitual residence.&...

...nbsp; Even without owning a property in Ireland, if your habitual abode is there (say, a rental property, living with family, etc.) and you can prove that it continues to be your centre of vital interest (e.g. you work there or, if retired, you can show regular living expenses in Ireland for at least 183 days), then I don't see how you can be classed as tax resident in Spain.  We moved permanently to Spain in 2016, when the UK was still in the EU, but because we lived in Spain less than 183 days of 2016, our first year of Spanish tax residency was 2017, for which our tax returns had to be submitted between March and June of 2018.

Personally, I wouldn't ask a Spanish lawyer ("abogado") these questions - you'd be better speaking to a tax specialist ("asesor fiscal").  In any event, as you've said you plan to ensure that you won't make yourself tax resident in Spain in the same tax year that you sell your Irish property, you won't be making a tax declaration in Spain for that year anyway.  If I were you, I'd enquire with the Irish tax office on what basis you need to declare any profit on the sale of your primary residence and that the timing of your planned move to Spain won't affect your tax residency - if they're anything like the UK's Inland Revenue, they won't offer any advice about Spanish tax, but they should confirm that any CGT liability would be to Ireland, not Spain.

Kind regards,

Kim 

Thank you Kim.  I did enquire with Irish revenue but they hadn't a clue,

Akelly1962

Posted: Thu Mar 16, 2023 2:36pm

Akelly1962

Original Poster

Posts: 313

31 helpful points

Location: Playa Flamenca

Joined: 8 Mar 2021

Posted: Thu Mar 16, 2023 2:36pm

Herefordjack wrote on Thu Mar 16, 2023 2:28pm:

Your advisor is correct. The Spanish tax year is the calendar year. If you arrive in the second half of the year, you will not be classed as tax resident until 2024. Any income and capital gains made in 2023 will be the business of the Irish tax authorities only.

Please note residency and tax residency are different things. You can only be in the country for 90 days before formalising your presence. There is much advice on this on CBF....

...

You will need a NIE to do anything legal/official, such as buying property.

And finally, please ignore 'advice' from idiots who advise you to keep your financial affairs 'hidden'. Make sure you make an income tax declaration for 2024, which is submitted between April and June 2025.

Hi if I leave before 90 days and return but still not spend a total of 183 days then we should be OK.  Not liable for CGT in Ireland this year as principle residence,  Thanks for your help.

Kimmy11

Posted: Thu Mar 16, 2023 2:48pm

Kimmy11

Legendary helpful member

Posts: 6869

12554 helpful points

Joined: 8 Aug 2017

Posted: Thu Mar 16, 2023 2:48pm

Akelly1962 wrote on Thu Mar 16, 2023 2:34pm:

Thank you Kim.  I did enquire with Irish revenue but they hadn't a clue,

Hi again,

I'm not surprised - the level of detail on their website is, to be polite, lacking!

Kind regards,

Kim

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