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4. Change of permanent dwelling
If you sell one property in order to buy another, you have some special advantages if you are a resident, or become one. Because then you have the right to deduct the costs of buying the new permanent dwelling from the gains of selling the old one. You may have a complete exemption from paying capital gains taxes on two conditions:
- if the total declared sales price of the old permanent dwelling is reinvested in the purchase (or purchase and renovation) of new permanent dwelling, and
- that the reinvestment be done within a period of a maximum 2 years.
You will have a part exemption from capital gains taxes if the purchasing price of the new permanent dwelling is less than the declared sales price of the previous one, according to this formula:
amount reinvested x capital gains
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total declared sales price
Example on a part exemption: Using the calculations explained in previous chapters, you have got net taxable capital gains of 18000 Euros on a net total declared sales price of your previous permanent dwelling, let us say 72000 Euros. The declared purchasing price for the new permanent dwelling is 54000 Euros. The calculation is: 54000 Euros x 18000 Euros = 972 Million Euros. Then you divide the 972 million by 72000 = an exemption of 13500 Euros. You pay capital gains tax only on 4500 Euros (18000 Euros minus 13500 Euros).
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