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Spanish Residence before 31 Dec 2020 and Capital Gains tax

Posted: Sat Jul 25, 2020 11:05am
5 replies239 views7 members subscribed
mark1962

Posts: 1

Location: Valle Del Sol

Joined: 11 Jul 2020

Hi

We are looking at purchasing a property before the end of 2020 and spending 4 to 5 months a year in Spain and I was thinking of applying for Residence so that I keep my EU rights (Medical, Prescriptions etc), if I understand it correctly if I apply for Residence then I would be subject to Capital Gains Tax when I sell our UK home, as my wife and I are under 65 (58 and 51), so the over 65 rule does not apply (plus the house is in both names)

I intend to retire at 62 and would be looking at relocating then and selling the UK home which would then attract CGT.

Have I interpreted this correctly re Residence and CGT ?

Any advice would be appreciated.

Thanks

paulsav

Posted: Sat Jul 25, 2020 12:29pm

paulsav

Helpful member

Posts: 275

209 helpful points

Location: Yecla

Joined: 4 Dec 2015

Posted: Sat Jul 25, 2020 12:29pm

Yes Mark, once you become a spanish resident you will be subject to CGT on selling your UK home to Spain if you have lived in Spain more than 183days in that selling year. Also if you choose to keep your Uk home on, it becomes a 2nd home as far as Uk Hmrc is concerned and if you revert back to Uk residency later you are subject to CGT on selling as it was no longer your primary residence. The over 65 rule only applies if you have lived in property previous 3 years as main residence and you,re some way off that age anyway. You also mention 4/5 months living in Spain, but on gaining residency if you leave Spain over 6months in a year you can lose your residency so its counterproductive. We are in similar situation with a Uk home, had for 40years so profit is major. We cant sell by Dec and cant afford to lose out to CGT as its exempt in Uk, so will stay non resident as we are 20 years older than yourselves. You need to sell before December, rent after if you need to stay in Uk, but apply for residency to keep your health and pension conditions intact after Brexit. You dont have to have completed residency by December, just you have started process and are "living" in Spain by then. Its perfectly ok then to be out of Spain upto 6months but no longer so you comply with residency rules. Bare in mind all travel after January will be monitored as free movement ends and as non resident you will have to comply with the 90days in 180days per year visits. Good luck with your decisions

Regards

Pauline.

Will60

Posted: Sat Jul 25, 2020 6:36pm

Will60

Helpful member

Posts: 93

77 helpful points

Joined: 10 Feb 2020

Posted: Sat Jul 25, 2020 6:36pm

paulsav wrote on Sat Jul 25, 2020 12:29pm:

Yes Mark, once you become a spanish resident you will be subject to CGT on selling your UK home to Spain if you have lived in Spain more than 183days in that selling year. Also if you choose to keep your Uk home on, it becomes a 2nd home as far as Uk Hmrc is concerned and if you revert back to Uk...

... residency later you are subject to CGT on selling as it was no longer your primary residence. The over 65 rule only applies if you have lived in property previous 3 years as main residence and you,re some way off that age anyway. You also mention 4/5 months living in Spain, but on gaining residency if you leave Spain over 6months in a year you can lose your residency so its counterproductive. We are in similar situation with a Uk home, had for 40years so profit is major. We cant sell by Dec and cant afford to lose out to CGT as its exempt in Uk, so will stay non resident as we are 20 years older than yourselves. You need to sell before December, rent after if you need to stay in Uk, but apply for residency to keep your health and pension conditions intact after Brexit. You dont have to have completed residency by December, just you have started process and are "living" in Spain by then. Its perfectly ok then to be out of Spain upto 6months but no longer so you comply with residency rules. Bare in mind all travel after January will be monitored as free movement ends and as non resident you will have to comply with the 90days in 180days per year visits. Good luck with your decisions

Regards

Pauline.

I wonder .... if you apply for and gain Residency in Spain, can you actually remain fiscally non-resident (under post-Brexit rules) ?

And if you are fiscally Resident in Spain, what about tax on earnings in the UK ? You would be taxed on these in Spain, as well as on any pension lump sum etc. (depending on whether or not you are a government employee). 

You seem to want to "lock-in" your pre-Brexit Residency benefits, although you won't actually reside here for another 4 years.

If you can find legal way to do this, there are many who will want to know.

crissywissy

Posted: Sun Jul 26, 2020 9:14am

crissywissy

Very helpful member

Posts: 1375

821 helpful points

Location: Mar Menor

Joined: 26 Sep 2015

Posted: Sun Jul 26, 2020 9:14am

You must live in Spain for the majority of the year to apply for residency. (now TIE) so if you intend to be here 4 or 5 months a year then you remain UK residents. Once you move here if you are below UK state pension age you have no access to UK NHS. Look at CAB Spain for more info

Dax

Posted: Sun Jul 26, 2020 2:26pm

Dax

Posts: 46

38 helpful points

Location: San Cayetano

Joined: 17 Feb 2019

Posted: Sun Jul 26, 2020 2:26pm

In order to apply for residencia, if you are not working or retired, you have to have private health insurance which is equal cover to what the spanish state offers. Spanish healthcare is based on contributions not residency. This could work out very expensive for something you're not going to use. I really don't see a way you could arrange residency now in order to 'lock in' future benefits. May be worth contacting a lawyer who deals with these things for proper advice.

jjewilson

Posted: Mon Aug 10, 2020 2:45pm

Posts: 1

Joined: 10 Aug 2020

Posted: Mon Aug 10, 2020 2:45pm

Registration is required if you stay for more than three months at a time. Tax residency is normally established if you stay for more than 183 days in Spain in the whole calendar year. They are not the same, but it is sometimes hard to establish what you entitled to if you are registered for local authority purposes but are not tax resident. As usual, you need to find an expert who you trust for accurate and up to date legal and financial advice for your exact situation.

General advice is given here:

https://www.aplaceinthesun.com/spain/advice/living-overseas/tax-residency

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