September 12, 2006
More Property Problems: Residency and Capital Gains Tax
I recently received this email regarding residence and capital gains tax on selling a property in Menorca.
Hola, buenos dias
I have just read your web page and was wondering if you would take the time to give me some advice on selling a property in Menorca.
Myself and my family were residents in Menorca up until 2 years ago, when my marriage broke down, and I returned to the UK with my four children.
My ex husband spends half his time here and half in Menorca. We are selling our matrimonial home in Menorca, and my ex husband is saying we have to pay 35% CGT (non-residents), but as it was the matrimonial home, and we are selling due to the marriage breakdown, i am of the opinion we only pay 15% (residents).
We still hold our residencias which will expire in 2007, and I understand a person can be resident in more than one country at any one time, but only domicilied in one country.
My spanish solicitor wont return my calls, and I have no-one who can help me.
Please please please help.
Many thanks
xxxxx
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Dear xxxxx
This is a complex grey area. Technically from what I have read you sound as if you gone over the time limit for remaining a resident in Spain, therefore you would be treated as a non resident and liable for the 35% tax rate when you sell provided that you can prove otherwise.
Capital Gains tax for residents and non resident will be brought in line soon (January 2007). The new official rate should be 18%. I am pretty sure, however, that the non resident rate will not immediately lower to 18%. It would be more likely that the rates would drop over a period of 3 to 5 years.
It's important that you speak to a lawyer before proceeding with the sale so that you know your full tax liabilities. If your lawyer is not answering your calls, get a new one quickly and pay for the advice. Being properly prepared will help you in your settlement with your estranged husband.
Yours sincerely,
Ben Johnson
Category: Our Time in Spain