Capial gains tax on overseas property

brodev

Property in Portugal is being sold. CGT will be due in Portugal. As I am UK resident will CGT be payable also in UK and, if so, can the Portuguese CGT be used as an offset? Also as both the original purchase and sale are in Euros do exchange rate variations get taken into consideration?

silvercar

Yes, Yes and no.

You calculate the purchase and sale price in £. This could result in a paper loss or gain that you didn't actually see.

Keep_pedalling

I do believe you can relief where double taxation occurs.

https://www.gov.uk/tax-foreign-income/taxed-twice

brianposter

You need to read the UK-Portugal double tax treaty. These treaties are usually reasonably comprehensible.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/412602/uk-portugal-dta.pdf

brodev

Thanks for your replies. I shall make a capital gain in € but I shall make a greater capital gain in £ because of differences in exchange rate. Naturally I would prefer to use the smaller gain in € as my UK gain. Can I do this?

silvercar

brodev wrote: »

Thanks for your replies. I shall make a capital gain in € but I shall make a greater capital gain in £ because of differences in exchange rate. Naturally I would prefer to use the smaller gain in € as my UK gain. Can I do this?

NO.

Purchase price in Euro translated to pounds. (exchange rate at time of purchase.)

Sale price in Euro translated to pounds. (exchange rate at time of sale.)

Difference is the profit. That is the basis on which you calculate the gain.

Any CGT or equivalent tax paid in Portugal (assuming the double taxation treaty allows for it) will be allowed as a deduction for the UK CGT.

[Deleted User]

My understanding is that you can't.

When calculating the capital gain you convert the sale price, cost price and expenses from euros to pounds at each point.

You will have a euro gain which you declare in Portugal.
You will have a sterling gain in UK. You can claim double taxation relief by setting off the tax paid in Portugal (again converted to pounds) against the Capital Gains tax due in the UK. If the tax in Portugal is more than the tax in the UK the excess is lost.

Remember that other UK tax is irrelevant. Many make the mistake where, for example, £3000 is the equivalent of the Portuguese tax and believe that they can set this off against all UK tax paid. The CGT liability ON THIS ASSET SALE in the UK would have to exceed £3000 to claim all of it as DTR.

It has been a while since I have dealt with this area - I am sure that others will correct me if my thoughts are no longer the case.