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Where Taxpayers and Advisers Meet

Spain can backdate CGT? on sale of UK PPR before moving to Spain (same year)

DavidGreen
Posts: 17
Joined: Wed Aug 06, 2008 3:47 pm

Spain can backdate CGT? on sale of UK PPR before moving to Spain (same year)

Postby DavidGreen » Sun May 19, 2019 3:16 pm

Hello
Any guidance or links to spain based tax companies who have first hand experience of my circumstances - would be really appreciated

I am a uk national. I sold my uk property / PPR in early April - i had lived there for several years - uk being my only centre of family & work
The sale was declared in the annual uk tax return - no CGT assessed due to PPR

The same year I moved permanently to Spain late May - the month i purchased Spain PPR / property. Spain tax year starts 1st January - so there is an overlap
I am concerned the overlap may give rise to Spain claiming CGT on the UK property based on the 183 day residency test

I have read the DTA.
Although my circumstances support that i was a uk tax resident until May.
However the double taxation offset provision within the treaty would be of no use to me financially - if there was a spain tax demand.
The `non-discrimination` clause is the only positive aspect - as spain nationals living in a PPR property for 3 years -
are not subject to cgt on the sale if the proceeds are re-invested in a PPR within 2 years

I have visited 3 tax companies in Barcelona but have had very contrasting advice.

many thanks in anticipation

maths
Posts: 7537
Joined: Wed Aug 06, 2008 3:25 pm

Re: Spain can backdate CGT? on sale of UK PPR before moving to Spain (same year)

Postby maths » Sun May 19, 2019 5:25 pm

You say early April. Was the sale on or before 5 April or on or after 6 April?

Assume the former. For the UK tax year 18/19 you were resident. Under Spanish domestic law you were resident for calendar year 2019.
This dual resident for period 1 January 2019 to 5 April 2019. Under dual residence resolution for this period it would seem you would be UK resident in which case no Spanish CGT.

Assume the latter. For the UK tax year 19/20 it would seem you were not UK resident. Under Spanish domestic law you were resident for calendar year 2019.However, there is no dual residence for the period 6 April 2019 to 31 December 2019, only Spanish residence. Hence there could be a Spanish CGT charge.

Possibly under Spanish law there may be some form of relief.

DavidGreen
Posts: 17
Joined: Wed Aug 06, 2008 3:47 pm

Re: Spain can backdate CGT? on sale of UK PPR before moving to Spain (same year)

Postby DavidGreen » Sun May 19, 2019 8:17 pm

thank you Maths for your input, your time is really appreciated

Yes it is the former. Date of UK sale was 3rd April so as you indicate -
`dual resident for period 1 January 2019 to 5 April 2019
Under dual residence resolution for this period it would seem you would be UK resident in which case no Spanish CGT.`

In Spain the contrasting advice i had received from tax advisors & accountants ranges from
- agreement with your assessment: in that the first Spain tax return while dating from January 1st, would not include UK income up to May when i arrived in Spain

That would be ideal, & seem just to me. However

- by contrast other Spain advisors have quoted the 183 day rule, the requirement to declare worldwide income from 1st January for the Spain tax return.
Another referenced the DTA, would require written confirmation from HMRC to confirm dates of my UK tax residence, and then would consult a UK equivalent service to determine which territory has precedence.

This contrast of interpretation & understanding only makes me nervous as to how the Spain tax agency assesses the situation

I would like to locate an accountant or tax lawyer in Spain that not only has dealt with similar circumstances
but would give me confidence that they can defend such a tax claim should it arise.

thank you Maths

darthblingbling
Posts: 240
Joined: Wed Aug 02, 2017 9:09 pm

Re: Spain can backdate CGT? on sale of UK PPR before moving to Spain (same year)

Postby darthblingbling » Mon May 20, 2019 8:15 am

You only began to have a permanent home in Spain in May 2019, assuming you had a permanent home in the UK up until that point it should be relatively clear at least for 2018-19 tax year (UK treat resident and Spanish treaty non resident up until 5 April 2019). For 2019-20 it will depend whether you remained UK tax resident under the SRT. But the CGT chargeable point seemed to occur in 2018-19 anyway, Spain may have different rules for determining the date however.

If you didn't have a permanent home in either state between the date you sold the UK property and when you began to reside in Spain, then it seems that assuming you are a national of only the UK, there is nothing tying you to Spain until you began to reside there. So assuming you remained UK tax resident under the SRT up until the point you began to reside in Spain, you would remain treaty UK resident up until that date.

As I understand, Spain has no concept of split tax years in their tax legislation (if you're resident or non resident, it applies to the full tax year)

maths
Posts: 7537
Joined: Wed Aug 06, 2008 3:25 pm

Re: Spain can backdate CGT? on sale of UK PPR before moving to Spain (same year)

Postby maths » Mon May 20, 2019 10:17 am

If you didn't have a permanent home in either state between the date you sold the UK property and when you began to reside in Spain, then it seems that assuming you are a national of only the UK, there is nothing tying you to Spain until you began to reside there. So assuming you remained UK tax resident under the SRT up until the point you began to reside in Spain, you would remain treaty UK resident up until that date.

Not sure I agree with the above.

In examining whether dual residence arises it is necessary to breakdown the analysis for the period 1.1.19 to 5.4.19 and 6.4.19 to 31.12.19.

Re 6.4.19 to 31.12.19 IF you were UK resident for this period (ie would need to be UK resident for the whole tax year 19/20) and also Spanish resident only then the dual residence require to be resolved.

darthblingbling
Posts: 240
Joined: Wed Aug 02, 2017 9:09 pm

Re: Spain can backdate CGT? on sale of UK PPR before moving to Spain (same year)

Postby darthblingbling » Mon May 20, 2019 11:00 am

Yeah, I said he needs to determine whether he's UK resident for 2019-20.

DavidGreen
Posts: 17
Joined: Wed Aug 06, 2008 3:47 pm

Re: Spain can backdate CGT? on sale of UK PPR before moving to Spain (same year)

Postby DavidGreen » Mon May 20, 2019 12:14 pm

thanks for the responses

to clarify my position
- from the May date i could only assume that i would be considered as Spain tax resident - ie spain only home / economic / family / no travel outside spain
- the only issue for me & this topic is whether Spain could have a CGT claim against my UK home (PPR) sold on 3rd April ?

It seems to be a grey area due caused by the overlap of tax years in uk/spain
many thanks

maths
Posts: 7537
Joined: Wed Aug 06, 2008 3:25 pm

Re: Spain can backdate CGT? on sale of UK PPR before moving to Spain (same year)

Postby maths » Mon May 20, 2019 12:40 pm

I answered it above



Assume the former. For the UK tax year 18/19 you were resident. Under Spanish domestic law you were resident for calendar year 2019.
This dual resident for period 1 January 2019 to 5 April 2019. Under dual residence resolution for this period it would seem you would be UK resident in which case no Spanish CGT.

DavidGreen
Posts: 17
Joined: Wed Aug 06, 2008 3:47 pm

Re: Spain can backdate CGT? on sale of UK PPR before moving to Spain (same year)

Postby DavidGreen » Mon May 20, 2019 3:05 pm

thank you maths for your input & time
it is much appreciated


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