Capital Gains Tax Explained

What Is It, When Do You Pay It & What Could Affect It?

A Slide'N Doors Property Guide

Introduction

Selling a property is an exciting milestone, but it's important to remember that the amount you sell your property for isn't always the amount you'll keep.

One of the most misunderstood aspects of selling property abroad is Capital Gains Tax (CGT).

Many people are told they will definitely have to pay it, while others assume they won't. The reality is that every country has its own tax laws, and your personal circumstances can make a significant difference.

This guide explains what Capital Gains Tax is, the factors that can affect it, common misconceptions, and shares one of Wayne's own experiences selling property in Costa Rica.

What Is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax that may be payable on the profit you make when selling a property.

The important word is profit.

It's not usually based on the amount you sell the property for, but on the increase in its value between the day you bought it and the day you sold it.

A Simple Example

• You buy a property for £200,000.
• During ownership you spend £25,000 on qualifying improvements, such as a new roof, extension, swimming pool or structural renovations.
• You also incur £10,000 in buying and selling costs, such as legal fees, surveys or estate agency fees (where these are allowable under local tax rules).
• You later sell the property for £300,000.

At first glance it looks like you've made a £100,000 profit.

However, in many countries, some genuine property-related expenses may be deducted when calculating your taxable gain, provided you have kept receipts, invoices and supporting evidence.

Examples may include:

• Structural renovations
• Extensions
• Swimming pools
• Permanent landscaping
• New roofs
• Replacement windows and doors
• Major electrical or plumbing upgrades
• Architect or engineering fees
• Legal fees
• Survey costs
• Estate agency fees
• Transfer taxes and registration costs (where permitted)

Routine maintenance, decorating and general repairs are often treated differently from capital improvements, and the rules vary between countries.

Always keep your invoices, receipts, guarantees and proof of payment. They could prove invaluable when it comes to calculating your Capital Gains Tax.

Wayne's Tip 💡

From the day you buy your property, create a folder—either paper or digital.

Keep every receipt, invoice, guarantee and photograph of improvements you make. Years later, these records could help reduce your taxable gain and make life much easier for your accountant or lawyer.

Does Every Country Charge Capital Gains Tax?

No.

Every country has its own tax laws.

Some countries charge Capital Gains Tax on most property sales.

Some offer exemptions for your main residence.

Some reduce the amount of tax payable if you've owned the property for a certain number of years.

Others calculate tax using completely different methods.

Tax laws also change, so what applies today may not apply in the future.

Don't Assume Non-Residents Don't Pay Tax

One of the biggest misconceptions is:

"I don't live in that country anymore, so I won't have to pay tax there."

Unfortunately, it isn't that simple.

In many countries, non-residents can still be liable for Capital Gains Tax when selling property.

Likewise, some countries offer exemptions or reduced tax depending on whether the property was your main residence, how long you've owned it or your tax residency.

You may also have reporting obligations in your home country, even if you've already paid tax where the property is located.

Some countries have Double Taxation Agreements (DTAs) which are designed to help prevent the same gain being taxed twice, but these agreements differ from country to country.

Never assume that living abroad means you don't have to pay tax. Always seek advice based on your own circumstances.

Wayne's Tip 💡

Your passport, where you live, where you pay tax and where your property is located can all affect your tax position.

Don't rely on assumptions—ask questions before you sell.

What Can Affect Capital Gains Tax?

The amount of tax you pay may depend on:

• The country where the property is located.
• Your country of tax residence.
• Your nationality.
• Whether it was your main home.
• Whether it was an investment or rental property.
• How long you've owned it.
• Improvements you've made.
• Buying and selling costs.
• Double Taxation Agreements.
• Current tax legislation.

Every situation is different.

Country Comparison

General guide for US and Canadian buyers and sellers.

Key

✅ Usually applies

⚠️ Special rules or exemptions may apply

❌ Generally no traditional Capital Gains Tax

Wayne's Experience – Costa Rica 🇨🇷

When I decided to sell my home in Costa Rica, almost everyone gave me the same answer:

"You'll have to pay Capital Gains Tax."

Estate agents assumed it.

Some admitted they weren't tax specialists and suggested speaking to a lawyer.

Even my own attorney initially worked on the basis that I would need to pay it.

Something didn't feel right.

Instead of simply accepting what I was being told, I started asking questions and researching the legislation that applied to my own circumstances.

After discussing everything properly, it became clear that my situation qualified differently, and I legally didn't have to pay the Capital Gains Tax I had originally been told I owed.

The biggest lesson wasn't that I saved money.

It was that even experienced professionals can make assumptions.

Always ask questions, understand why advice is being given and make sure it applies to your circumstances—not someone else's.

Wayne's Tip 💡

If everyone gives you the same answer, that's reassuring.

If everyone gives you the same answer without explaining why, keep asking questions.

A good lawyer or tax adviser should be happy to explain how the rules apply to your specific situation.

Common Mistakes

• Assuming you'll automatically pay Capital Gains Tax.
• Assuming you won't because you're no longer a resident.
• Throwing away receipts and invoices.
• Forgetting to keep proof of improvements.
• Relying on advice from social media or friends.
• Waiting until you've accepted an offer before seeking tax advice.
• Assuming someone else's situation applies to yours.

Before You Sell

Before putting your property on the market, ask yourself:

• Will Capital Gains Tax apply to me?
• Are there any exemptions available?
• What expenses can I legally deduct?
• Have I kept all my invoices and receipts?
• Will I need to declare the sale in my home country?
• Does a Double Taxation Agreement apply?

Getting the right advice before you sell could save you time, money and unnecessary stress.

Did You Know?

Two people selling almost identical properties in the same country can end up paying completely different amounts of Capital Gains Tax because of differences in residency, ownership history, exemptions and allowable expenses.

Trusted Partners

Slide'N Doors is building a network of trusted lawyers, accountants and property professionals around the world.

Where we've worked with experienced professionals ourselves, we'll recommend them throughout our Property Guides to help you make informed decisions with confidence.

Related Property Guides

• Can I Legally Buy Property Abroad?
• It Ain't Always Cash! – Ways to Finance Property Abroad
• Can I Legally Sell Property Abroad?
• What Does It Really Cost to Sell Property Abroad?
• Never Pay a Property Deposit Without Legal Protection

Disclaimer

This guide is intended for general information only and should not be relied upon as legal, financial or tax advice.

Capital Gains Tax laws vary between countries and change over time. Your tax liability will depend on your individual circumstances, including residency, ownership history, local legislation and any applicable tax treaties.

Always seek advice from a qualified lawyer, accountant or tax professional before buying or selling property.