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English speaking lawyers in Malaga (Andalucia / Costa del Sol) specialized in urban & rustic property law

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HOMEOWNERS ACTING IN GOOD FAITH, MORE PROTECTION IN THE ADMINISTRATIVE FIELD

andalucia, solicitor, lawyerLast 24 June, the Senate approved an amendment that provides greater protection to third-party homeowners acting in good faith in administrative proceedings. This amendment was approved with the favourable votes of the main political groups and introduces a third paragraph in article 108 of Law 29/1998, of 13 July, which regulates contentious-administrative proceedings in Spain.

This new third paragraph provides that: “The Judge or Court, in the cases where, in addition to declaring the construction of a property to violate regulations, it issues a reasoned order to demolish the works and restore the physical reality altered, shall require, as a condition prior to demolition and unless a situation of imminent danger prevents it, the provision of sufficient guarantees to respond to payment of compensation due to third parties acting in good faith.”

In other words, with this paragraph, it is guaranteed that the judge ordering the demolition of a building in administrative proceedings must ensure, prior to the demolition, that third parties acting in good faith that will be damaged by the demolition of their homes will receive compensation. This means that, what this new subsection regulates is that a home may not be demolished if the homeowner cannot be compensated in advance, as it is understood that the homeowner has no reason to suffer these damages when the party responsible for the unlawful act committed by building the home was someone else.

The approval of this new subsection equates the handling of the enforcement of judgments on buildings, which entail their demolition, in administrative and criminal proceedings since, as we explained in our article from March, the criminal code has also been amended in this sense.

The amendment in the administrative field, which gives greater protection to third parties acting in good faith, is even more logical, from a legal standpoint, than the one in the criminal field and, needless to say, represents the correction of a regulatory mistake that resulted in great injustice.

It should be noted that, in contentious-administrative proceedings, courts examine building licences granted by the City and which have been unlawfully granted due to being contrary to the plan of the municipality.

Before this amendment, when a judgment nullifying a licence of this type was handed down, usually, one of the consequences of this nullification was the obligation to demolish the works completed under the licence declared null, without compensating homeowners acting in good faith at the time of demolition in these proceedings. The only option for these homeowners was to start different judicial proceedings either against the City or against the seller of the property, which could take years to be solved and provided no certainty of recovering the investment made. We can thus prevent cases as regrettable as that of Mr and Mrs Prior.

We can affirm that, in judicial proceedings related to buildings, both in the administrative and criminal fields, thanks to these legislative amendments, homeowners who purchase or will purchase a property in good faith, not being responsible for any unlawful act, will enjoy greater protection of their assets and property rights.

Part of what we denounced and explained in an article published in 2013 has been addressed by these changes, even though there is still some way to go and more legislative changes are expected.

This legislative amendment, as the one introduced in the criminal code in March, has been made possible thanks to the work of several associations of people affected from many different areas in Spain, including: AUAN, AMA and SOHA. The continued and persistent work of these associations, their representatives and the lawyers involved have made it possible for all homeowners in Spain who are third parties acting in good faith to enjoy greater legal certainty.

 

Author: Gustavo Calero Monereo, C&D Solicitors, (Lawyers)

Torrox-Costa (Malaga/Costa del Sol/Andalucia)

INHERITANCE TAX IN SPAIN: WE ARE ALREADY EUROPEAN!

Inheritance tax in Spain

Inheritance tax in Spain

In our post of last March on Inheritance and Donation Tax, we discussed about the fact that European non-resident citizens in Spain were experiencing discrimination against resident citizens, because, under the same circumstances, they had to pay more taxes than resident taxpayers.

This unequal treatment happened when the deceased or beneficiaries were non-resident in Spain and they paid taxes in conformance with a State regulation which was more detrimental than the regional one, which was only applied to resident citizens.

This discrimination was confirmed by the European Court of Justice ruling dated 03rd of September 2014, which resolved this issue and established that Spain was infringing the free movement of capital within the EU, because of this separate treatment between resident and non-resident citizens.

On the 1st of January 2015, in order to comply with the aforementioned judgment, the amendment of the State Inheritance Tax regulation has entered into force in Spain. A special scheme has been introduced in regards of the Inheritance Tax, so that non-resident citizens in Spain who are European residents may apply the regional regulation as residents already do, equating their situation.

This new regulation establishes that in the event that the deceased is a European non-resident in Spain, the European non-resident beneficiaries may apply the regional regulation where the most valuable assets are located in Spain. If the beneficiaries are resident in Spain, the regional regulations where they reside shall be applicable.

If the deceased has been a resident in a Spanish region and the beneficiaries are non-resident in Spain, the non-resident beneficiaries shall pay inheritance tax in conformance with the regional regulations where the deceased resided.

At this point, it is worth mentioning that the collection of the Inheritance and Donation Tax in Spain is assigned to regional governments, so that they are free to set forth their own regulations.

The effect of this assignment is that the amount to be paid for this tax by Spanish residents may significantly vary depending on the region where they live. In fact, a fiscal “war” has arisen between regional governments as regards of this tax, because some people have decided to establish their residence in regions with a more favourable tax scheme in order to pay fewer taxes for inheritance and donations, particularly those with more valuable estates.

The most recent and famous case in Andalusia was that of the late Duchess of Alba, who was sentimentally related to Andalusia but not fiscally, because her residence for tax purposes was in Madrid. The main benefit of this fact is that her beneficiaries have had a tax saving of more than 90 million Euros in the Inheritance Tax.

Since non-resident citizens will also enjoy the same Inheritance Tax regulation than resident citizens and considering that the regulation to be applied is that of the region where the most valuable assets are located, this unequal treatment between regions will also affect them.

However, imagine that you are a non-resident in Spain, do not have any property, but you have some money in a bank entity in Spain. In this case, which regulation shall be applicable for your beneficiaries? It seems that the applicable regulation shall be that of the region where the bank registered office is located. Thus, it is not the same a bank entity with registered office in Madrid, Barcelona or Seville, for instance. It has been said “it seems” above, because a definitive answer has not been obtained when contacting the Tax Administration Office in respect of this issue.

In short, these are good news for European foreign citizens and their beneficiaries, and welcome to the regional regulatory “chaos” in respect of Inheritance and Donation Tax.

 

Author: Gustavo Calero Monereo, C&D Solicitors, Málaga.

SUCCESSFUL DUTCH REAL ESTATE FAIR FOR C&D

Seminar at Dutch Second Home Fair

Seminar at Dutch Second Home Fair

As we already informed you in our previous news letter, C&D has been present at the Dutch Second Home fair in Utrecht last month. Being the only Spanish law firm on the fair, our daily seminars about the Spanish purchase process turned out to be the best attended during these three days, which proves that Spain is still a very attractive country for the Dutch to invest in. Also more than half of all exhibitors (mainly real estate agencies and developers) were focussed on Spain, which according to the organisation already has been the case for many years now.

In our stand we were able to speak to a lot of people with serious plans on buying a property in Spain, in most cases on the Costa del Sol or even particularly the Axarquia. The main issue in our conversations was to explain the important role of the lawyer during the purchase of a property in Spain. This situation is different from the Netherlands as in this country the lawyer´s work is completely done by the notary. We also got a lot of questions regarding wills and tax issues, for example on the subject of renting out a new bought property.

Author: Gustavo Calero Monereo, C&D Solicitors (Lawyers) Torrox-Málaga

Stand of C&D Solicitors on Dutch Second Home Fair in Utrecht

Stand of C&D Solicitors on Dutch Second Home Fair in Utrecht

Our daily seminar we held in both Dutch and English and we explained the different phases of the buying process with the various legal documents there are to sign (reservation contract, private purchase contract and the title deeds). Besides of this we gave some background information on the official investigation of the lawyer, by which the future owner can make sure he´ll buy his property with all possible guarantees and free of any risks. (The extended Dutch text of our seminar you can find on the home).

Looking back we can say that this fair exceeded our expectations and has been really successful for us. Not only in the perspective of attracting new clients but also as a learning experience of presenting our company on the Dutch market. Despite of the good weather this Second Home edition in Utrecht attracted around 5.000 visitors.

Author: Francisco Delgado Montilla, C&D Solicitors (lawyers)
Torrox-Costa (Málaga/Costa del Sol/Andalucia)

HOW TO AVOID TAX PENALTY FOR NON-RESIDENTS OWNING A SPANISH PROPERTY

Avoid penalty non-residents owning Spanish property

Recently, some of our clients have received notifications at our law firm from the Spanish Tax Office demanding the submission of a copy of their Spanish Income Tax return for fiscal Residents or their Income Tax Return for Non Residents with properties in Spain, which are compulsory to be filed in these cases and considering that Spanish Tax Authorities know they own or have owned a property in Spain.  Warning that failure to do it will be fined or will give them a penalty. This issue was formerly considered in a previous article published on our website.

These notifications are referred further back in time, that is, Tax Authorities request the submission of the aforementioned returns, whether they are fiscal residents or non-residents in Spain, for these years in which they have been owners of these properties. For example, we are recently dealing with a case in September in which Spanish Tax Authorities are demanding the last and enforceable Income Tax returns for Non Residents—Spanish IRNR— for the years ending 2008, 2009, 2010 and 2011.

By means of these notifications, a tax management procedure is initiated aimed at controlling the submission of tax returns, self-assessments and data communications which are compulsory by law. By means of this procedure, Tax Authorities try to carry out the regularisation steps corresponding to these cases where taxpayers have failed to meet their tax liabilities, because they have not submitted their Income Tax returns for fiscal Residents (Spanish IRPF) or Income Tax returns for Non fiscal Residents (Spanish IRNR). You can get access to further information in English from Tax Authorities about these and others tax obligations for non residents at the Agencia Tributaria website.

It is also worth mentioning that the reception of these notifications, when they are duly served, suspends the limitation period in which Tax Authorities are entitled to recover what is claimed and for the periods referred in the notifications. In addition, they also suspends the limitation period to impose tax penalties resulting from the regularisation procedures applied to cases which are not subject to law. The aforementioned notification and subsequent settlement are accompanied by a tax penalty.

On a recent visit to the tax office in Velez-Malaga, the official in charge of these matters confirmed us that it has been sent more than a thousand of such requirements during this month and last August, only for some locations in the region of the Axarquia.

Against this background, if you find yourself in this situation—you are a Non Resident in Spain owning a property in Spain, whether you have received this type of notification from the Spanish Tax Authorities or not, you may receive it in the near future. Thus, C&D Solicitors recommend you to normalise your situation as soon as possible by submitting every Income Tax returns for Non Residents for the last 4 years in which you have owned a property in Spain. This may prevent you at lease from paying the financial penalty which accompanies the aforementioned notifications.

 

Author: Francisco Delgado Montilla, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

 

NEW TAX LIABILITY FOR RESIDENT TAXPAYERS

The Spanish Government passed on the 15th of November 2012 a Royal Decree providing the liabilities to inform about assets and rights located abroad. This information is available at http://www.boe.es/boe/dias/2012/11/24/pdfs/BOE-A-2012-14452.pdf.

This liability only affects resident taxpayers; non-residents are not liable for submitting this tax return.

Any account in financial institutions and any kind of real property or real property rights of ownership shall be declared, as well as any securities, interests, insurances and incomes, which are deposited, managed or obtained abroad.

Taxpayers shall inform about these assets and rights which they own abroad as at 31st of December 2012.

This tax return shall include any kind of assets and rights provided that the individual value for each of them exceeds EUR 50,000. This includes the following:

-          All accounts in financial institutions—account balances as at 31st of December and average balances for the last quarter.

-          Real property, indicating the purchase date and acquisition value.

-          Real property rights of ownership, indicating the opening or cancellation date.

-          Securities, interests, insurances and incomes which are deposited, managed or obtained abroad as at 31st of December of each year.

The submission of this informative tax return in successive years is only compulsory when the established limit have increased more than EUR 20,000.

The requirements of this tax liability shall be met between the 1st of January and the 31st of March in the following year to which this information refers.

This tax liability refers to both individual residents and bodies corporate which are liable for corporate tax in Spain. Tax form 720 shall be electronically submitted to fulfill the requirements of this tax return.

The recent approval of this tax liability to inform about assets located abroad represents a new control method for liable taxpayers in order to uncover informal economy, tax evasion and money laundering.

Fines are significant and they do not refer to the legal o illegal way of obtaining those assets, but to the fact that they are declared or not. The failure to submit the informative tax return will be considered a very serious infringement and the corresponding sanctions will be applied. This implies the payment of a EUR 5,000 set fine for each point of information which is not declared and the minimum fine amounts to EUR 10,000. The fine for individual taxpayers amounts to EUR 100 for each point of information and the minimum fine amounts to EUR 1,500, where the informative tax return had been submitted after the deadline without previous notification from the Spanish Tax Authority.

It is worth stressing the heavy fines, including for declaration of imprecise information. The above mentioned Royal Decree does not allow misunderstandings. A single mistake may result in a heavy fine. The declaration of incomplete or imprecise information entails the same sanctions. The fact that these assets are correctly declared in the country of origin will never be considered a ground for excluding the liability to pay the fine.

It is also determined that the tax liability to inform shall not be time-barred in respect to the date of origin of the assets and the application of this rule.

If this is your case, please do not wait any longer and prepare all the necessary information for submission to the Spanish Tax Authority in the following days. If you have any doubt or enquiry regarding this issue, please do not hesitate to contact us.

 

 

Author: Francisco Delgado Montilla, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

 

TAX EXEMPTION WHEN BUYING A PROPERTY BEFORE 31/12/2012

Regarding the current financial situation, which is reflected in the drop of property sales in Spain every three months, the Spanish Government has passed a new tax exemption. This exemption tries to promote the sale of properties and may become very interesting for both individuals and bodies corporate considering buying a real estate property in Spain in the short term, whether they purchase commercial premises, homes, offices, garages, plots, storage rooms, etc.

On the 12th of May 2012, the Central Government passed the Spanish Royal Decree-Law 18/2012 of 11th of May on the restructuring and sale of the property assets of the financial sector. This regulation included in its First, Second and Third Final Provisions the tax exemption for bodies corporate and individuals, whether resident or non-resident in Spain. This reform law allows all those buying a property from the 12th of May 2012 till the 31st of December 2012 to pay taxes only on the 50% of the capital gains when selling the property subsequently, whether in 1, 5, 10…etc years, while the remaining 50% is free of charges.

This exemption may save an important amount of money, because if a property is currently sold in Spain, capital gains are taxed at 21% for non-residents (19% from 2014), at 27% for resident taxpayers in Spain (21% from 2014) and at 30% for bodies corporate.

Here we present an example: imagine you are thinking about buying a property in Spain considering the current market opportunities; the price for this property may be EUR 200,000; the following eventual scenarios may occur according to the date of purchase when selling this property, for example, in 2017 for a sale price of EUR 270,000:

1) Non-resident taxpayers: EUR 70,000 of capital gains at 19% makes a total payment of EUR 13,000; if the purchase is performed before the 31/12/2012, the total payment would be EUR 6,650.

2) Resident taxpayers: EUR 70,000 of capital gains at 21% makes a total payment of EUR 14,700. If the purchase is performed before the 31/12/2012, the total payment would be EUR 7,350.

3) Corporate: EUR 70,000 of capital gains at 30% makes a total payment of EUR 21,000. If the purchase is performed before the 31/12/2012, the total payment would be EUR 10,500.

Obviously, this tax saving is not definitive in order to decide whether to buy a property or not in Spain, as it is not possible to know whether prices may go down much more nor the gains resulting from the eventual property sale. However, this fact may be a helpful factor to take a decision for those considering buying a property, especially for those non-speculative potential buyers whose main purpose is to enjoy this property for many years; thus, the longer they own the property, the greater the capital gains may be when selling it. Look at the figures and draw your own conclusions.

 

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

 

MALAGA, AXARQUÍA AND URBAN PROBLEMS.

I recently read an article in Diario Sur talking about Alcaucín Town Hall. It is still bogged down with the properties built in non building lands.

Consequences arisen from the urban corruption existing in Alcaucin (Malaga) since 2009, has resulted in a lack of legal security for part of the owners and people who are interested in investing in a property around this area of Malaga, provoking, as main conclusion, an important loss on the buying and selling property market, and a horrible publicity abroad of our local institutions and our legal system as well, for a non response in view of the abuse competence of some Town Halls in urban matters and, in the permission of the Andalusian Government, who has looked the other way for many years while the many urban irregularities happened; of course cashing up thanks to taxes and prices for the usufruct and enjoyment of the properties and for asset transfers.

Some of the professionals that work in this area, we wonder why so many legal proceedings are opened where the owners turn out accused. Most of them are not responsible of this illegal urban activity, but they can be seriously affected.

From a legal point of view, most of these procedures would end into nothing because of the prescription of many of the charged urbanizing crimes and because of the possibility of regularization of buildings, as it has been stated by the doctrine. Passing of time in the resolution of these judiciary procedures only provokes an overextension of this chaotic situation.

I do agree in the fact that town halls should be meticulous in the fulfilment of urban rules and that the Andalusian Government must closely watch private as well as local building activities. However, I do not quite understand that there should be a series of judicial procedures opened against illegal urban licenses that have enjoyed a tacit acknowledgement for years due to lack of control; specially, when these acts have been carried out in such an evident way and for such a long period of time.

The intervention line that is being carried upon the misuses of non-urban ground, not only arrives late but it does not solve the problem, thus causing the situation to worsen by overextending the resolution to the problem within the eternal judiciary channels. In many of these procedures the solution will not only be the least adequate but it may not even be possible to re-establish the original status to the illegally urbanised ground, which would be the desired thing to be done in this last instance. All this without taking into account the patrimonial responsibility that this will mean to the city council already in great debt and what’s more, the nullity of the illegal local licenses as well as the prejudices that may arise among those property owners who were counting on the city council to achieve a building permission.

In such a time of chaotic urbanism and autonomic and local irresponsibility associated to periods of growth, it would have been logic to establish a strict action line to be followed from now on, being categorical to all the illegal behaviour and conduct, reaching a consensus on the different competent institutions with logic and coherence by the assumption of responsibility over these illegal acts from those truly responsible. There are always solutions and technical means to be applied if both parts are implied in it.

We finally hope that coherence finally imposes itself. However, if this long period of uncertainty were here to stay, the image of the real estate would be irreparably damaged and the efficacy of the public and professional institutions in question. It will be difficult to overcome this situation because of this feeling of judicial insecurity and chaos in the criteria due to the arbitrary decisions that weaken us all.

 

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

 

Contact

C&D Solicitors S.L.P.
Calle La Noria , Edif. Recreo II, 1-15
29793 Torróx-Costa (Málaga), Spain
(Entrance at backside of building)

T/F: +34 - 952 532 582
M: +34 - 677 875 078 (Gustavo Calero Monereo)
M: +34 - 659 218 470 (Francisco Delgado Montilla)

Open: Mon, Wed, Fri: 08:30 - 15:30
Tue, Thu: 09:30 - 14:30 & 16:30 - 19:30