For tax purposes you are considered a Spanish Fiscal Resident if you stay in Spain more than 183 days within a one year period.
You are liable to pay tax on your worldwide incomes of all nature including your pensions.
In order to avoid paying income tax in two countries, Spain has a Double Taxation Treaty with the UK (as with many other countries). This means that you can apply for a UK tax exemption. By informing your country’s tax authorities (the Inland Revenue) about your tax residence in Spain, you do not have to pay taxes in both countries and declare your income in Spain.
The period assessed by the Tax Authority is from January to December, and taxes are always paid a year after.
The capital gain or loss on property sale is calculated by the difference between your selling price and your purchasing cost, as stated on your purchase deed.
Only EU Non-Residents will benefit from an exemption on capital gains tax, when selling their main home in Spain and re-investing in a new home in Spain, as they will also be exempt from paying capital gains tax on the amount re-invested.
There are three interesting tax allowances to be mentioned:
- People selling their main home and re-investing in a new home, which will be their main residence, are exempt from paying capital gains tax on the amount re-invested.
- People older than 65 years old are totally exempt from capital gains tax when selling their main home, regardless of whether they reinvest or not. They must have owned and resided in that property for at least three years.
- 50% tax exemption on capital gains tax on properties purchased between 12th May 2012 and 31st December 2012. You will only be taxed 50% on your capital gain.
The tax form called 720, introduced by The Spanish Tax Office concerning fraud and money laundering, and it must be completed by all tax residents in Spain. All below mentioned assets held as of the 31st of December with a value of more than €50,000 must be submitted on this form before 31st March.
- Accounts in foreign banks: Balance on 31st December and average balance in the last quarter.
- Properties and property rights owned in any other country.
- Shares, rights, life insurances and incomes deposited, handled, or obtained abroad.
Tax evaders will incur a penalty of €5,000 for every asset not declared after the deadline, with a minimum penalty of €10,000.
In addition, non-declared assets might be considered by the Tax Office, as capital gains. This means that tax evaders would have to include it on the Income Tax Return, being taxed as a capital gains, plus an additional penalty up to 150% over the total taxable amount.
This will be only applied to residents with total assets valued above €700,000 excluding your residential occupied house with a maximum value of €300,000.
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