Darlees.com

Article by Mark Stucklin

When a non-resident sells property in Spain, they buyer is obliged to retain 3% of the price and pay it to the tax authorities to cover the vendor’s tax liabilities. If the vendor is due a refund after the tax has been paid, it can take years to get money back.

If the Spanish tax authorities consider a vendor non-resident in Spain for tax purposes, the buyer has to withhold 3% of the sale price to cover the vendor’s tax liabilities resulting from the sale. The taxman wants the money in case the vendor does a runner without paying his taxes, something that almost all non-resident vendors have done in the past.

Various terms in English and Spanish are used to identify this procedure. In Spanish it is known as the ‘retenci?n (sobre la venta de inmuebles) a cuenta del impuesto de la renta de los no-residentes’, whilst in English it is referred to as the capital gains tax retention on property sales. Some people also talk about a withholding tax (no strictly true) or money withheld, deducted, or kept back on a property sale in Spain.

The tax in question is the vendor’s capital gains tax, which has to be declared in his or her annual income tax returns (known in Spain as La Renta), and is taxed at 18%. Non-residents used to be taxed on capital gains at 25% but this was reduced to 18% as of 01/01/08.

This retention does not cover the vendor’s ‘plusvalia’ tax liability, which is paid to the town hall and is a separate matter.

After the sale, the buyer has one month from the date of sale to pay the 3% retention to the local tax office using the form (modelo) 211. A copy of the submitted form should then be given to the vendor or his lawyer, so a refund can be claimed.

If the vendor believes he is owed a refund (that the tax liability is less than the 3% retention), he has 3 months to present form 212 requesting a refund. This step is done at the local tax office (delegación de hacienda).

If a refund is due, how long does it take? It depends upon the tax office; some are quicker than others. In theory it shouldn’t take more than a few months, though some people report it taking up to 16 months. For feedback from other people see this Spanish tax retention forum discussion.

Be warned that if there are any minor errors in the documentation the tax authorities will jump on them as a reason to delay any refund. So make sure all the information in your 212 reclaim form is correct.

In an increasing number of cases, perhaps a majority of cases, the vendor’s tax liability is greater than the retention. What then? Depending upon the size of the liability, the Spanish taxman may try and come after you for it back home.

So, for example, if a British person living in London sells a holiday home in Spain for 200,000 Euros, the vendor will retain 6,000 Euros and pay it to the tax office. Say the vendor originally bought the home for 100,000 Euros, meaning a capital gain of 100,000 Euros, and a capital gains tax of something in the region of 18,000 Euros (there will be some relief for inflation). In this case the vendor will not be entitled to a refund, and may be pursued for 12,000 Euros back home by the Spanish taxman.

But if you don’t hear from them within 4 years you know you’re safe, as that is the legal deadline for the tax authorities to take action.

Note: This issue only applies to vendors who are considered non-resident by the Spanish tax authorities, i.e. fiscal non-residents. To be considered a fiscal resident you have to get a certificate from the tax office (hacienda) certifying that you are a fiscal resident. You will get this if you have been doing tax returns (declaración de la renta) for several years. Do not make the mistake of thinking you are fiscally resident just because you have an NIE number, or once had a residency card (tarjeta de la residencia). A notary will only accept a certificate from the tax office.

For more information and forum discussions see the Spanish capital gains tax retention at Spanish Property Insight

Question by Suresh: How can I avoid short term capital gains taxes?
I purchased a property 2 years back and now I am planning to sell the old property and buy a new property in same area.Can I get tax exemption on capital gains which is a short term because I am selling the property within 2 years.
Please advise If I can get tax exemption on capital gains
Can someone tell me as per Indian tax rules can I get tax exemption on capital gains.

Best answer:

Answer by ranger_co_1_75
In the U.S., any real estate held more than 12 months is long term capital gains. Real Estate held less than 12 months is short term capital gains.

If you have held the property for more than 12 months, it can be treated as long term capital gains. If the property qualifies as investment property, you can roll the proceeds into the new qualified investment property and defer the taxes, as long as the new property cost more than the old property.

Add your own answer in the comments!

The global capitalist structure has pushed commercialism so much so that there is a belief in society, that to be happy in life people must pursue material objects, a certain appearance, money, status; aspirations of no real substance. We now live in a world so commercialised that we are advertised products and services relentlessly, exhaustively. And so, in the pursuit we unwittingly maintain, strengthen the inherent greed produced by free markets the world over, whereby this cycle continues, generation to generation.

The Threat of Modern Capitalism to Society

As Ben Okri has stated, “Individualism has been raised almost to a religion, appearance made more important than substance. Success justifies greed, and greed justifies indifference to fellow human beings” (Okri, 2008). Our leaders strive to protect the interests of their citizens. They work to lower unemployment levels, improve education systems, methods to genuinely look after the people they govern. But for what end? The fierce competitiveness of our job markets push people to advance, where often to get ahead, individuals will abandon their sense of morals, of good. In the modern capitalist age we are told relentlessly to compete, that people break the rules to gain an advantage, sabotaging others if necessary. This occurs, while masquerading as fair competition.

In defence of capitalism, yes it promotes survival of the fittest, but it has now come to inadvertently push unethical practice, where behaviour bereft of values of good, of decency is seen to be necessary. It has come to be the norm in society now, through the omnipresent stream of commercialism and advertising.

Now, throughout human history there have and will always be, individuals who will cross any moral boundaries where necessary to meet their own ends, which leads us to one positive that we can take from the current society, from the effects of capitalism. True integrity, true moral character is accentuated by our system. There are people who still adhere to the principles of decency, virtue and of fair treatment of fellow human beings, which Ben Okri has not taken into account. Although his warning to the world is very real, the “heart of society”, as he puts it, is not as ruptured as profoundly as he claims.

However for the majority, the masses, there can be hope. Correct guidance and sincere leadership are now more important than ever before as the pitfalls of capitalism have become starkly transparent.

We Need Leaders of Values

As the devastating repercussions for the world from the disastrous decisions made in America are now becoming ever clearer, chiefly the financial crisis, a neglect of the dangers of climate change and human rights infringement on a colossal scale, it is also clear that we need strong leadership more than ever, to lead us through this dark time in the history of humanity. In Barack Obama not just America, but the world awaits with baited breath, in hope that he can undo many of the wrongs in our world. With leaders of principles, we aspire to be like them. A leader like Obama campiagned vigorously with the electorate, people across the country who share his vision for a better future, which led to record donations to his campiagn. His campaign was primarily funded by donations of less than 0 from over 3 million people, not large sums such as the £50,000 George Osborne sought to solicit from Oleg Deripaska, Russia’s richest man.

But how can we repair the damage within our civilisations when our leaders themselves undermine the values and principles that we should aspire to. If politicians and religious leaders lie or cheat in their own interests, what kind of example does that set to the peoples that they lead? Moreover many crimes committed by public figures have gone unpunished. This can be seen throughout history. Richard Nixon was pardoned by President Ford for the Watergate scandal. More recently the “cash for honours” scandal in Britain, where nobody in the upper echelons of the Labour leadership was called to account. Instead those who aspire to lead our civilisations need to engage the masses, campaign for donors in order to realise their vision for a nation, for the world. Society needs a relationship of trust between those who govern and the governed. It is inextricable, otherwise, we are faced with a broken society, where, as is now the case, the human race is slowly losing its very humanity.

Ben Okri (Thursday, October 30, 2008), writing for The London Times, Page 30

Capital gains tax (CGT) is payable on the sale not only of stocks and shares, but also far from household goods and personal effects up to a value of £ 6,000 and private vehicles. Subject to certain exceptions, you do not have to pay CGT on any gain you make when you sell your house. Also, on the other hand, it can done on the road against profits elsewhere.

http://www.capitalinvest.equitylinesite.com/2009/11/14/reducing-tax-on-investments-minimising-capital-gains-tax/

Capital gains with capital losses are in the same tax year and accounting for thisthere is an annual exemption, currently £ 7,500. As a result, few people pay CGT.

If the result of transactions, which is one year before the annual exemption, a loss, it can be done to us in the following years.

The annual exemption can not be transferred, but gains are applied for a year before a loss brought forward which, if not used, can be transmitted.

The following investments are exempt from CGT:

gilt edged stock
Corporate bondLoans and equity
Friendly Society Savings Plans
ISAs and PEPs
Company share option schemes
Investment companies and venture capital trusts
Commercial forestry

As for taxes on income, investments, capital gains are exempt, have good investments in their own right. A gain is taxed at better than no profit at all.

Indexation and taper relief

For purchases prior to April 1998, the costs can be indexed, that set by the cumulativeInflation (RPI) between purchase and April 1998.

However, the index can not exceed the break, ie it can not be used in order to be taken to create a loss.

If you shares before the 6th April 1998, it is a good idea to compute the indexed cost of acquisition as it will not change. This can be done by the CW indexation allowances for April 1998 in Inland Revenue leaflet CGT1, which can be obtained from your local tax office.

From April 1998 the indexation was replaced by taperRelief, which is based on the length of the property. It only applies to shares held for at least three full years, although an additional year to the total for the stock on 17 March 1998 is added to the property.

The share of the profits at the expense reduced to 95% on the third full year and a further 5% for each subsequent year, at a minimum of 60% complete after ten years.

For example, if you bought shares would, in August 1996 and sold it in June 2001, the taxable profits are calculated,follows:

The initial cost would be until 5 April 1998 in accordance with the CW indexation allowance increased for the period to give the indexed purchase price.
The excess of the selling value of the indexed cost is the taxable gain before taper relief.
Although the stock here only for two full years, since April 1998 instead, as the shares on 17 March 1998 for another year added style, allowing a total of three years, then taper relief reduces the chargeable gain by 95%

http://www.capitalinvest.equitylinesite.com/2009/11/14/reducing-tax-on-investments-minimising-capital-gains-tax/

Question by Henry G: How are capital gains taxed on my stock investments?
Let’s say I bought and sold a number of stocks in the year 2010 (no other years). And say that overall I made about $ 20,000 in realized gains, but also sustained about $ 20,000 in realized losses. Do I have to pay capital gains taxes on the $ 20,000 in realized gains even though I also suffered $ 20,000 in realized losses? Or are my gains offset by my losses and is there a limit on this offset amount?

Best answer:

Answer by money-saving-rv-repair.com
This isn’t my area of expertise but… if the gains and losses occurred in the same year they can be offset and you don’t pay taxes on the capital gains.

If this happened on separate years things now change.

Say a $ 10,000 loss occurred first and there were no gains that year to offset the loss. You can carry over the loss into the following years to offset future years gains, however, there is a $ 3,000 per year limit. If you made capital gains the next year of $ 20,000 you will be taxed on $ 17,000. The remaining $ 7,000 of losses remains and can be applied to offset future gains.

Add your own answer in the comments!

Question by Rich Jones: What are capital assets? How are the gains and losses from the disposition of capital assets taxed?
Why are capital assets treated differently from ordinary assets? Is this treatment beneficial or not? Explain the netting process for capital gains. On what form are these transactions reported in the tax return? Are there any carry forward or carry back provisions?

Best answer:

Answer by Schnoogle Bunny
“Capital assets” are a woman’s breasts.

Ordinary assets are her hindquarters

Add your own answer in the comments!

Professional landlords all over the world cringe when they see that time of the year approaching when calculations related to taxation have to be made. The process of calculating capital gains and the taxes to be paid for these is one of the most complex calculations. There are a number of complex factors, and it is so easy to make a mistake. A mistake in things so important is certainly not what you want. It could spell disaster for you with the feds.

However, it is time for professional landlords all over the world to rejoice. The advent of modern technology has bought various specialist software that can help the professional landlord in these duties. The Capital Gains Tax Calculator has arrived, and it is one of the best software tools that can help the professional landlord in calculating gains from capital investments and taxes to be paid.

These calculators have no difficulty in doing the complex calculations involved in the process. In addition to this, they provide detailed break ups of the calculations. They also provide the landlord a good amount of crucial information related to managing the taxes.

What are the features of a good capital gains tax calculator? A good one comes with a huge number of features that will be of help to the professional landlord. Make sure that the calculator you buy is packed with features that will make your job easier. If the functions are not even worth the expense, do not go for the item. There are a good number of things you will have to check and verify.

If the capital gains tax calculator can be customized according to your needs and specifications, that is an extremely advantageous feature. This will make it customized to provide you with the best pieces of advice that will be applicable for your finances.

Make sure that the capital gains tax calculator you buy has a good number of features that can be upgraded as the years come. If the calculations can be customized, there is nothing like it. There is no dearth of quality. Make sure you check online regarding this. Compare prices and features at the same time. read online reviews.

It is also important to make sure that the software you buy is compatible with your system.

 

Guidetoriches.net is the best resource on the internet if you want to see your way to becoming rich. There are a number of blogs dealing with subjects as varied as the <a rel=”nofollow” onclick=”javascript:_gaq.push(['_trackPageview', '/outgoing/article_exit_link']);” href=”http://www.guidetoriches.net/capital-gains-tax-calculator.html”>capital gains tax calculator</a>, stock charts, <a rel=”nofollow” onclick=”javascript:_gaq.push(['_trackPageview', '/outgoing/article_exit_link']);” href=”http://www.guidetoriches.net/list-of-tax-deductions.html”>list of tax deductions</a>,  put and hold options and a whole lot of others. The author is a VC.

For most of us, our home represents our largest asset. Over time, the management of this asset can make a big difference in our overall financial outlook. One of the largest planning opportunities home ownership brings is the favorable tax treatment afforded the sale of a primary residence. The gain on the sale of a home is considered a gain on the sale of a capital asset. Any taxable profit you make is subject to a maximum long-term capital gain rate of 15% (down to 5% for taxpayers in the 10-15% federal income tax bracket) if you owned the house for more than 12 months. Gain on the sale of a home may be taxable only if they exceed 0,000 for single filers (0,000 for joint filers) if certain conditions discussed below are met. Determining Your Net Gain To determine your profit (gain), you subtract your basis from the sale price minus all costs and commissions. For instance, if you sell a house for 0,000, and must pay your broker 6% of the sale price — or ,000 — your sale price for determining capital gain tax is 5,000 (0,000 minus ,000). Say you bought that house 20 years ago for ,000.

You have since redone the kitchen and bathrooms, put in new windows, added a bedroom, and a new roof. Your basis in the house is ,000 plus the cost of all of the capital improvements you have made, providing you have documentation verifying the costs. Let’s assume the total cost of those improvements over the 20 years you owned the home is ,000. In such a case, your basis would be ,000. Your capital gain would be 5,000 minus ,000, or 0,000. If you are in the 28% federal tax bracket or higher, your capital gain tax on your home sale would be ,000 unless you use the principal residence exclusion. The Primary Residence Exclusion Here’s where the favorable tax treatment of capital gains from a residence come in.

A 0,000 exclusion for single filers (0,000 for joint filers) is now available to all taxpayers. You can claim the exclusion once every two years. To be eligible, you must have owned the residence and occupied it as a principal residence for at least two of the five years prior to the sale or exchange. If you fail to meet these requirements due to health reasons, a change in place of employment, or other unforeseen circumstances, you can exclude the fraction of the 0,000 (0,000 if married filing a joint return) equal to the fraction of two years that these requirements are met. For example, let’s say you were forced to move for employment reasons after only living in a home for 12 months.

Without the qualified exclusion, your full tax would have been ,000. Instead, you would pay just half, since you lived in the home 12 of the 24 months required, or 0.5 of the period. The tax of ,000 multiplied by 0.5 would yield a tax bill of just ,000. For many Americans at or nearing retirement age, their home represents a terrific opportunity to “cash out,” pad their retirement portfolio with tax-free gains, and help ensure their “golden years” truly live up to the name. Feel free to ask us for guidance in making this important decision. For more information please visit at http://www.filippiniusa.com

What You Should Know About Home Selling And Capital Gains

There is a way around capital gains taxes, and it’s through home sales exclusion. Homeowners everywhere know about the tax breaks the US government is serving up, especially the ones on tax deductions and mortgage interest. Home sellers stand to benefit big time. Majority of them will not owe the IRS (Internal Revenue Service) a cent.

Some Info On Capital Gains And Selling Your House

Selling your main residence can earn you profits amounting to as much as 0,000. That’s as a single owner. You can make two times that amount if married. All these come with no capital gains taxes owed.

In the past (pre-May 7, 1997), people escaped having to pay taxes on profits made from home sales one way: using the same money to purchase other, pricier homes within a couple of years. Sellers age 55 and older had another option. They could opt for a one-time tax exemption offer in profits worth nearly 5,000.

The passing of the 1997 Taxpayer Relief Act eased the home sale tax load borne by the millions of homeowner taxpayers. Per-sale exclusion amounts seen today, replaced the once-in-a-lifetime or rollover alternatives.

Who Is Qualified? This is determined through the “USE” checklist or test. Exemptions restricted to every couple of years. People are only exempted from home sale capital gains taxes once per two-year period.

1. USE Test – You’re qualified for home sale capital gains tax exemption if you owned and inhabited a residential place for two of the last five years prior to selling, but there can be interruptions in the timeframe involved. You can reside in the house during year 1 and rent it out for the next three years, move back in for year 5 and still be eligible.

2. Failing the USE Test – If you flunked the USE test, there’s still hope. You can avail of prorated exclusions on capital gains, provided your home was sold because you switched jobs, had health reasons or other unexpected circumstances. Say you lived in a house for just one year because of employment changes. This entitles you to an exemption of 5,000 or half the original 0,000 exemption you would’ve gotten.

3. Nursing home exception – Although ordinarily you’re required to own and reside in the property for two of the most recent five years, this requirement can be driven down to just one of the five years for those who wind up living in nursing homes. Even better, the length of stay in nursing homes is credited to the USE test, treating the nursing home much like the original house.

If you’ve been toying with the idea of selling your house for months, but are a few months shy of the two-year requirement, hang in there just a bit more until you complete the entire 24 months. It will mean bigger capital gains for you.

This article is just general information on capital gains tax on real estate sale. You should always consult with a tax person or an attorney at law on any tax matters or questions you may have on capital gains taxes on real estate.

The New Year is here and yes it is time to look at your assets and see what you can do to exploit the favourable taxation of capital assets. There is little time to plan and to execute tax planning strategies before the 5th April so review your assets and act now.

 

Planning:

I always advocate planning; do not cheat! You will never be able to wipe out entire tax liabilities but with careful planning you should be able to save several small to medium amounts thus justifying the overall plan.

 

Is it a capital gain?

Obvious but some people jump in and do not realize that what they are planning does not give rise to a Capital Gain. Ensure that when you consider the taxation of the sale of an asset the correct charge is to Capital Gains Tax rather than Income Tax.

 

In your planning also consider Inheritance Tax.

 

I find that when taxpayers sell assets they are drawn immediately to considering capital gains tax.  The first option to tax is as trading profits rather than capital gains. The deciding factor is whether or not the intention at the time of purchase is to make a profit from the resale, with or without improving the asset, within a short time scale.

 

As the sale of land and property are the sale of capital assets, a high percentage of taxpayers are drawn to capital gains to tax the profit. HMR&C does not. They fully review the transaction to see if it is a transaction in the nature of trade.

 

If this fails, the next attempt is to tax it under a little known provision where land, or any property deriving its value from land, is acquired with the sole or main objective of realizing a gain from the disposal of the land, or land is held as trading stock, or land is developed with the sole or main object of realising a gain from the land when developed. The section states that it is enacted to prevent the avoidance of tax by persons concerned with land or the development of land.

 

You can see that a transaction resulting in a profit of a capital nature could result in the profit being taxed as income. This legislation covers all individuals whether resident in the U.K. or not, so long as the land is situated in the U.K.

 

 

 

 

Tax free amount:

Every individual has £10,100 tax free each year. Although tax rates are lower for Capital Gains than they are for Income Tax it is still a worthwhile saving especially as you can take advantage on an annual basis.

 

The £10,100 not used by one person cannot be transferred to an other, married or not. If not used it is lost.

 

The strategy is to annually review your assets and see what you can realize to make a gain of less than £10,100 rather than wait for the natural disposal. The result is that the tax free amount can be compounded in value by reinvesting in a profitable investment.

 

Bed & breakfast to spouse & ISA:

A married couple can transfer assets between them without attracting liability, the asset passing to the other at a value that gives rise to neither gain nor loss. By spreading the ownership you immediately have a further tax free amount of £10,100.

 

You may want to bed and breakfast your investments at the end of the year in order to wipe out some of the accrued gain.

 

There is legislation that prevents this but there is nothing that stops you bed and breakfasting with your spouse/civil partner.

 

You sell and your spouse/civil partner buys thus keeping the holding in the family but having removed part of the taxable gain.

 

It appears from a guidance note issued by HMR&C that they find the sale of an asset standing at a loss and with the other spouse/civil partner repurchasing it to be unacceptable so take care and seek professional advice.

 

An alterative strategy is to sell the shares and buy them back through an ISA.

 

You can then have them in a tax-free vehicle for the rest of your ownership.

 

An ISA is in effect a tax haven. You can sell assets into the ISA and capital gains up

to £10,100 are tax-free.

 

Joint Tenants v Tenants in Common:

Usually spouses/civil partners hold property as joint tenants.  This means on death the property passes automatically to the surviving spouse/civil partner.

 

If the property is transferred to ownership as tenants in common, you are free to dispose of your share as you please either during your lifetime or by your will. 

 

This adds to the planning opportunities and should be discussed with your adviser.

 

If you own property solely I suggest you see a solicitor as you could transfer the ownership to tenants in common.

 

Only transfer 1% and retain 99%. If you do not elect for the income to be split in that proportion it will automatically be dealt with under the 50:50 rule so the income is shared but the capital remains 99% yours.

 

This could be done by declaring a trust in favour of your spouse. HMR&C will accept the transfer took place on the date the document is signed. HMR&C have confirmed that such a trust is effective.

 

Residence:

Co habitees have an advantage over married couples where two houses are owned as each of the co habitees is entitled to a principle residence free of tax if the other conditions are met, whereas a married couple is only entitled to the one exemption.

 

Losses:

In your annual review if you have made profits see if there are any assets that you could sell at a loss which can then be set against the chargeable gains thus reducing the tax payable.

 

If you have an asset that has become worthless you do not have to wait for the ultimate sale; you can claim the loss. For shares there is a published list which shows when HMR&C have accepted that a share has either become worthless or has negligible value.

 

If you have subscribed for shares in a trading company that is not listed on a recognized stock exchange and have lost your investment due to the shares becoming worthless, you can claim to have your capital loss set against your other income for that year or the previous year.

 

Losses c/f:

Where there is a capital loss brought forward and the chargeable gains do not exceed the annual exemption no deduction is made for the losses brought forward.  They are preserved and are available to be carried forward.

 

Timing:

The date of disposal of an asset is the time when the contract is made and not when the asset is conveyed or transferred.

 

This means the exchange of contracts and not completion. For a conditional contract it is the date on which the condition is satisfied.

 

A sale timed for February 2011 delayed until after 6th April, 2011 will delay the tax payable from 31st January, 2013 to 31st January, 2014

 

This is a simple tactic but the interest earned could be substantial.

 

Purchase of own shares:

If you want to retire from your company, one way is for the company to buy back your shares.

 

If this happens you should seek advice as the transaction can be treated as giving rise to either an income or a capital distribution.

 

It will depend on your circumstances which is best for you; especially with the high Income Tax rates and as after Entrepreneurs Relief Capital Gains are taxable at 10%. I know the rate at which I would prefer to pay.

 

Peter Clare

 

The Poacher turned Gamekeeper

 

This information has been honesty written with a view to helping you: I am, like most people, not perfect and I apologise for any in corrections. I cannot be held responsible for any consequences of you using the information unless I have been made aware of the full facts of the matter and have expressed an opinion thereon.