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bigduckontax, Accountant
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I bought a Villa in Spain 14 years ago what are my allowances

Customer Question

I bought a Villa in Spain 14 years ago what are my allowances for capital gains tax if I sell now. What is the rate for C.G.T?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.


Did you use the property used as a your main home, as a holiday home or was it let under the furnished holiday letting rules? Have you sold it yet?

Customer: replied 3 years ago.

Holiday home. not sold yet

Expert:  TonyTax replied 3 years ago.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 3 years ago.

Hi again.

As a UK resident and assuming that you are a UK national, you are taxable on all your income and gains regardless of where in the world they originate. Each part owner of the property will be taxable on their share of the gain and is entitled to an exemption from UK Capital Gains Tax for the first £11,000 of gains they make in any one tax year.

You calculate the gain by taking the disposal proceeds and deducting the sum of the purchase price, the costs of buying and selling the property (legal fees, survey fees, stamp duty if applicable, selling agent fees, local authority fees and disbursements). You use the exchange rates in force at the time of the purchase and sale so some of the gain or loss will be a currency gain or loss but it remains part of the overall gain or loss. You can use the average exchange rate for the tax year or purchase and sale or the actual rates, whichever is to your advantage. Take a look here for historical exchange rates.

There are two rates of CGT in the UK, 18% and 28%. The rate or combination of rates that you will pay will be dependent on the level of your income in the tax year you make any gains in excess of the annual CGT exemption of £11,000. Assuming that your sell the property in the current tax year, 2014/15, one of the following scenarios will apply:

1 If your income including your share of any gain is £41,865 or less, then all the taxable gain will be charged to CGT at 18%.

2 1f your income excluding your share of any gain is more than £41,865, then all the taxable gain will be charged to CGT at 28%.

3 If your income excluding your share of any gain is £41,865 or less but more than £41,865 when you add your share of the taxable gain, then part of the taxable gain will be charged to CGT at 18% and part at 28%.

You will have to pay CGT in Spain if you make a gain from the disposal of the property but any tax you pay there will be deductible from your UK CGT liability if you have one. I'm not an expert on the Spanish CGT system and I've found that much of the information available on the internet to be unreliable or contradictory compared to that on other site so you would be well advised to seek local expert advice on that. It seems that the Spanish government has tinkered with the CGT system so many times and been taken to the European Court for taxing non-spain residents at a higher rate than spain residents that the websites cannot keep up. I do know that the buyer's lawyer will retain 3% of the sale price as an advance payment of your Spanish CGT liability. If you don't have one, you will be able to reclaim the 3% retention from the Spanish tax authority.

I hope this helps. Let me know if you have any further questions.

Customer: replied 3 years ago.

This is the wrong info. I am a resident in the Irish republic. so what is my position.For C.G.T in Ireland there is an allowance based on length of time the property is owned does this apply in this case?

Expert:  TonyTax replied 3 years ago.

It's the right information for a UK resident. It would have helped to know your country of residence as this is a UK tax site so it's not unreasonable for the experts here to assume that the people who ask questions here are looking for UK tax advice.

I will opt out as I know little about the Eire tax system.

Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

You are liable to Irish CGT at a rate of 33% on the capital gain made on the sale of your Spanish Villa. The first 1270 Euros of gain is not taxable. You must file a return of the gain made by 31 October in the year following the tax year of the sale. This information is available from 'Citizens' Information,' an Irish Government web site.

Ireland and Spain have a Double Taxation Treaty so any tax deducted by the Spanish authorities would be allowed as a tax credit against Irish CGT.

I do hope I have helped you with your question.