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How is residency tax calculated?

Posted: Tue Jun 29, 2021 3:47pm
13 replies315 views5 members subscribed
Burnie

Posts: 58

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Joined: 28 Aug 2018

We will be paying our final non-residence tax this year; we have now got residency and so will need to pay residence tax next year. We have sold our property in the UK and have read that we have to pay an extortionate amount in tax on the profit of our UK sale. Please can anyone explain how residency tax is calculated? (We have no income e.g. salary or pensions, and have planned to live off the equity of our house sale until pensions kick in further down the line.)

Will60

Posted: Tue Jun 29, 2021 4:03pm

Will60

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Posts: 317

315 helpful points

Joined: 10 Feb 2020

Posted: Tue Jun 29, 2021 4:03pm

If you gained Residency between 1.1.21 and now, you are tax-Resident in Spain from 1.1.21.

If you sold your UK home after you became tax-Resident in Spain, you pay Capital Gains Tax in Spain on your profit. There are no allowances or taper reliefs.

You need a tax-gestor or assessoria to advise you.

Even if you have zero "income" (for the next few years), you need to submit a tax return.

Assuming you became tax-Resident on 1.1.21, you will submit modelo 720 forms in Feb 2022 (declarations of world-wide assets).

You will submit tax returns in June 2022, and tax will be paid in 2 chunks (late June/early July) and November. It is likely that any CGT will become payable in June 2022.

Burnie

Posted: Tue Jun 29, 2021 5:18pm

Burnie

Original Poster

Posts: 58

11 helpful points

Joined: 28 Aug 2018

Posted: Tue Jun 29, 2021 5:18pm

Will60 wrote on Tue Jun 29, 2021 4:03pm:

If you gained Residency between 1.1.21 and now, you are tax-Resident in Spain from 1.1.21.

If you sold your UK home after you became tax-Resident in Spain, you pay Capital Gains Tax in Spain on your profit. There are no allowances or taper reliefs.

You need a tax-gestor or assessoria to advise you.

Even if you have zero "income" (for the next few years), you need to submit a tax return.

Assuming you became tax-Resident on 1.1.21, you will submit modelo 720 forms in Feb 2022 (declarations of world-wide assets).

You will submit tax returns in June 2022, and tax will be paid in 2 chunks (late June/early July) and November. It is likely that any CGT will become payable in June 2022.

Thank you, that’s helpful information. In answer to your question, we’ve paid non-residence tax for three years (this being the third year) as we own a house here. We collected our TIE’s this month, then a week later the sale completion of our UK house went through.

Will60

Posted: Tue Jun 29, 2021 5:54pm

Will60

Helpful member

Posts: 317

315 helpful points

Joined: 10 Feb 2020

Posted: Tue Jun 29, 2021 5:54pm

Burnie wrote on Tue Jun 29, 2021 5:18pm:

Thank you, that’s helpful information. In answer to your question, we’ve paid non-residence tax for three years (this being the third year) as we own a house here. We collected our TIE’s this month, then a week later the sale completion of our UK house went through.

That timing is unfortunate. If your Residency had been delayed until July, you wouldn't be tax-Resident until next year.

Then again, I'm guessing you gained Residency under the pre-Brexit rules ?

Burnie

Posted: Tue Jun 29, 2021 6:31pm

Burnie

Original Poster

Posts: 58

11 helpful points

Joined: 28 Aug 2018

Posted: Tue Jun 29, 2021 6:31pm

Will60 wrote on Tue Jun 29, 2021 5:54pm:

That timing is unfortunate. If your Residency had been delayed until July, you wouldn't be tax-Resident until next year.

Then again, I'm guessing you gained Residency under the pre-Brexit rules ?

Yes we gained residency pre Brexit but had to return to the UK to sell the house and complete our work contracts. As soon as we could, we came back to collect our TIE cards.

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Jeffcore

Posted: Wed Jun 30, 2021 4:09pm

Posts: 103

35 helpful points

Location: Los Alcázares

Joined: 10 Jan 2018

Posted: Wed Jun 30, 2021 4:09pm

As I understand it? You are only TAX resident if you spend mote than 183 days in Spain in the calendar tax year. It's not directly related to whether you have residency. Also there are allowances relating to changes in tax rules that may apply if you have owned your UK house for several years otherwise capital gains is based on the difference between buying and selling prices- very unfair. You need to speak to a tax expert.

eduardo3332

Posted: Wed Jun 30, 2021 8:42pm

eduardo3332

Super helpful member

Posts: 1570

1178 helpful points

Joined: 21 Jan 2016

Posted: Wed Jun 30, 2021 8:42pm

Jeffcore wrote on Wed Jun 30, 2021 4:09pm:

As I understand it? You are only TAX resident if you spend mote than 183 days in Spain in the calendar tax year. It's not directly related to whether you have residency. Also there are allowances relating to changes in tax rules that may apply if you have owned your UK house for several years oth...

...erwise capital gains is based on the difference between buying and selling prices- very unfair. You need to speak to a tax expert.

If you are a resident in Spain then you are a resident, it is irrelevant how long you have spent in or outside of the country so you must unfortunatly pay the taxes 

Jeffcore

Posted: Wed Jun 30, 2021 11:19pm

Posts: 103

35 helpful points

Location: Los Alcázares

Joined: 10 Jan 2018

Posted: Wed Jun 30, 2021 11:19pm

eduardo3332 wrote on Wed Jun 30, 2021 8:42pm:

If you are a resident in Spain then you are a resident, it is irrelevant how long you have spent in or outside of the country so you must unfortunatly pay the taxes 

Do a Google search for Spain tax residency rules.

PhilMadox

Posted: Wed Jun 30, 2021 11:42pm

Posts: 21

19 helpful points

Location: Mazarron

Joined: 30 Jun 2021

Posted: Wed Jun 30, 2021 11:42pm

Ouch. That sounds horrible. I hope you find a way through the jungle and still have your shirt.

Mary 21

Posted: Thu Jul 1, 2021 1:27am

Posts: 9

4 helpful points

Location: Calasparra

Joined: 10 Jun 2021

Posted: Thu Jul 1, 2021 1:27am

eduardo3332 wrote on Wed Jun 30, 2021 8:42pm:

If you are a resident in Spain then you are a resident, it is irrelevant how long you have spent in or outside of the country so you must unfortunatly pay the taxes 

Make sure you get taxed as a couple. We were asked to pay  sum..and we said we wish to be taxed as a couple and it saved us 50% other initial quote. Good luck 

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