Question
Feeling very stressed and welcome any advice! We are coming to live in Spain (on a Non-Lucrative Visa) to live for a year or 2 to check were happy there before we sell our house in Australia.
After getting tax advice we have been told that if we stay in Spain and then sell the Australian house we would have to pay Spanish tax on ALL income from selling our house in Australia. It’s not a capital gain as we’ve lived in this house for years but they are treating it as one? This seems so unfair to me – is there anyway around this? Any ideas so welcome
Answers
These are the answers of some Facebook group members:
“If you sold the house while you were an Australian tax resident, you shouldn’t pay taxes in Spain. However, there are good deductions if you sold your home to buy another one in Spain, there are some requirements to apply that. I’m a gestor administrativo in Spain and doing taxes for more than 22 years, so yes, it could be possible not to pay taxes in Australia and in Spain when selling your home property in Australia to buy a home in Spain. You could be tax resident in both countries at the same time, in some cases, because tax year periods are different in each country. Spain uses natural year, Australia starts it the 1st of July”
“We sold two houses in Aus whilst Spanish residents. We didn’t owe any capital gains on them in Aus. Send the reasoning through to our accountant in Spain and all good. As you lived in the house except for a few years your capital gains won’t be much. If you do owe capital gains then you pay it in Aus. In fact they withhold tax from non residents. The Spanish government will not ask for you to pay any if you paid it in Aus due to the double taxation treaty in place. I hope that makes sense!”
“The best thing to do would be to speak with a Spanish based lawyer, I can recommend the one I used with a similar issue. It may be as simple as making a declaration with modelo 720 to hacienda. This is a form for declaring assets outside of spain worth over 50,000 euro so when you do use this money they don’t start asking questions and then requesting payment or issuing a fine.”
“There are some tricky ones you have to be aware of when coming from Australia to Spain if you become a Spanish tax resident.
1 – Nobody knows for sure how withdrawals from Australian super will be treated in Spain. Normally tax free in Oz depending on amounts and age, in Spain some would maintain that they are the same as Spanish pensions and taxable (yes, I know the tax has already been paid in Oz)
2 – Difference in the first financial years, can be a challenge (or opportunity I guess). Spain uses calendar years (ends on 31/12), therefore fiscal periods overlap..
3 – Each region, except Andalusia I think, has a wealth tax on world-wide assets, with varying limits.
4 – Australian CGT on Main residence for foreign residents changed in 2020. Unless, exempted, a foreign resident is subject to CGT in Oz, even if it was your Main residence for 20 years.
Spanish tax takes into account the proceeds from the Main residence to be applied to the purchase of another. You would need a Spanish tax expert to tell you if an Australian home could be considered Main residence for Spanish tax purposes. I don’t know. Many UK migrants have faced this issue and the tax agents around the popular UK haunts, e.g. Alicante, Costa del Sol etc would surely have an opinion.
Obviously, you need sound advice, but it will be difficult to find. I have a someone in Canberra who has helped. He’s reasonable but some of the big companies want $$$$$s and they still don’t really know.
I’m not sure why, if you are not certain you will remain permanently in Spain, you want to sell your home so soon (maybe trying to time the market perhaps). I mean, the Australian rental market at the moment is very good for landlords. Perhaps you could go back in a couple of years for 183+ days, enjoy some time with friends and family, reestablish Aus residency and sell then?”
“Yes, you’d be up for full capital gains. It’s ridiculous but the house has to be sold and settled before you leave Aus. It’s scary because the way the application windows work, you need to have sold up before you find out whether your visa application is successful. The alternative is to wait for visa approval then sell – but 90 days to sell/settle a house and get to Spain (in case you haven’t got that far, the 90-day clock starts the day your visa is approved) would be equally scary. That said, ask a pro because surely one day someone will realise how stupid that is. But it was certainly still the case for us as we went through the process at the end of last year.”
“You should not have to pay taxes on your capital gains in Spain if you pay them in Australia as the capital gains paid there are the same . I work overseas but live in Spain and whatever taxes I pay overseas is added in my tax declaration and is part of tax paid . I never have to pay any tax in Spain because what I pay where I work is the same amount I have to pay in Spain. You need to speak to a good tax accountant that deals with overseas taxes. Whatever taxes you pay in another country gets added to taxes paid in the country your doing your declaration. I work in Mali and I do my taxes in Spain I pay 26% on my gross earnings in Mali and my gross and tax is put on my declaration which is worked out to what the tax system is in Spain so much earned so much tax to pay. If I pay more tax than I have to pay Spain will not refund me the extra I have paid that is the only problem.
I work in Mali and there is no tax treaty . I take in my last pay slip as it records all pays and taxes and is also our group certificate and they do my taxes from that . The boys that live in Australia do the same thing and they do there tax there . They do have pay some tax in Australia but I pay nothing in Spain .I don’t pay anything in Spain because there is a 60100 Euro exemption if you spend the full year working out of Spain . When you don’t work the full year you have to divide the 60100 Euros by 365 and whatever that equates you multiply buy the days you have worked away and that is removed from your gross”
