Bill Blevins is co-founder of tax and wealth management specialists Blevins Franks. For further information visit www.blevinsfranks.com
Paying tax in Spain
Q. I moved to Spain to live in October 2008. I had previously bought a villa here where I spent a number of long breaks with my wife. When will I have to start paying Spanish taxes? I am told I will have to do it in the early part of 2009 but I dont know if I am liable or not?
Keith Beresford, Norfolk
A. You will become tax resident in Spain if you spend more than 183 days there in any Spanish tax year, which runs from 1st January to 31st December. The days do not have to be consecutive. You may also be considered tax resident if your centre of economic interests is in Spain, that is, the base for your economic or professional activities is in Spain; or if your centre of vital interests is in Spain, for example, if your spouse lives in Spain and you are not legally separated, and/or your dependent minor children live in Spain.
If you spent 183 days or more in Spain during 2008, taking into account any previous visits in the earlier part of the year, under the Spanish residency rules you are likely to be regarded as resident in Spain for the full calendar year. However, as you moved to Spain permanently in October you could find that you are regarded as non-Spanish resident during that year, providing that you did not spend 183 days there in 2008 and you do not meet any of the other residency criteria.
If you moved to Spain directly from the UK, then it is likely that, under the UK/Spain Tax Treaty rules, you will be regarded as UK resident up to the date you left the UK and resident in Spain thereafter.
Tax returns are submitted some time during May or June in the year following the tax year, so for the 2008 tax year declarations are made in 2009. The deadline is the 1st July. Any tax due must also be paid by this date.
Capital Gains Tax on Italy apartment
Q. I have an apartment in Italy that I want to sell. How much Capital Gains Tax will I have to pay?
Marcs Nolan, London
A. If you have owned the property for less than five years you will have to pay Capital Gains Tax. The gain is taxable as ordinary income at a rate of between 23 per cent and 43 per cent, depending on the amount of gain, or at a special fixed rate. Otherwise, the gain is exempt. Property is also exempt from Capital Gains Tax if it is your main home (prima casa), so long as the proceeds are reinvested in another main home within one year of sale. Note that an Italian property cannot be your main home if you are not living in Italy.
As an alternative to declaring a taxable gain on the tax return for the year and subjecting it to income tax rates, you can choose to pay a fixed-rate tax on the gain at the time of sale via the notary (notaio). The rate is currently 20 per cent.
This article was published in the April 2009 issue of A Place in the Sun magazine. To order a back issue call +44 (0) 20 3207 2920 or to subscribe click here.