legal advice | C&D Solicitors

RELEVANT RULING FOR HOMEBUYERS OF NON-COMPLETED PROPERTIES WITHOUT BANK GUARANTEES

Written by Gustavo Calero Monereo on 2 September, 2013. Posted in banks, building permit, developer, english speaking solicitor, Headline, judgment, legal advice, malaga, nerja, property law, solicitors Nerja.

Ruling for non-completed Spanish properties without bank guarantees

In the last few years, it has become quite common the significant number of homebuyers who have purchased off-plan properties and paid large sums of money on account for their future homes, however, the developer has never completed nor handed them over. Consequently, the advanced money has been lost in many cases, because the developer may have gone bankrupt and lost all assets to refund these amounts to them.

Spanish Government passed in 1968 the Law 57/1968 dated 27th of July on the receipt of sums paid in advance prior to the construction and sale of homes. This was aimed at stopping several cases of homebuyers who lost their money paid for properties which never were built.

Spanish Law 57/1968 is still in force and solicitors, who are specialised in this issue, know the regulations for homebuyers’ protection in respect of sums paid in advance to developers for off-plan or under construction properties prior to their completion. However, the most relevant point at this moment is the judgment argumentation set out for the court proceedings where 46 homebuyers without bank guarantees securing advanced payments, made a legal claim jointly and severally to the bank and the developer demanding the total amounts paid, because the construction works were never completed. The judgment was pronounced by a court of first instance of Albacete on the 08/06/2012 and was confirmed by the Provincial Court on the 11th of February of this year.

The aforementioned judgment ordered the bank to refund all amounts of money paid by the homebuyers, considering that it was jointly and severally liable together with the developer, pursuant to the interpretation of Articles 1 and 2 of the abovementioned Law of 1968, Article 4 of the Spanish Ministerial Order of 1968 and the First Additional Provision of the Law 38/1999 on building regulations.

Although the bank was not a party on the sale agreement and did not either issue bank guarantees for homebuyers’ payments on account, the main line of argument of this judgment to consider the bank to be jointly and severally liable is that this bank knew about these payments in the developer’s account and was aware that these amounts were paid for the purchase of homes in a property development. As a result of that, the bank did not comply with the obligations provided by Law 57/1968 and committed a banking malpractice, pursuant to the interpretation of Article 1.2 of this Law, as the developer should have been required to open a special account where depositing its funds apart from any other amounts aimed at the construction of the properties. In addition, the bank should have not permitted these deposits in ordinary accounts, and particularly when this bank was the only financial entity financing the development and profited from this real estate business.

This judgment entails a court action to recover the money for those homebuyers without bank guarantee securing the amounts paid on account to developers, because, if appropriate, they could bring an action for joint and several liability against the bank where the developer’s loan was granted, where the payments were deposited and where the developer operated. Thus, homebuyers will have better chances to recover the sums paid, considering that there are already many judgments where developers has been condemned to pay, but court orders cannot be enforced because of their insolvency, while banks are always solvent.

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

Return On Investment Spanish holiday lettings

THE “SUMMER HOLIDAY RENTALS” ISSUE

Written by Francisco Delgado Montilla on 10 July, 2013. Posted in Andalucia, english speaking solicitor, Headline, Income, lawyer, legal advice, Property law, rentals, solicitors Nerja, torrox. No Comments on THE “SUMMER HOLIDAY RENTALS” ISSUE

Spain, summer, holiday, rentals, tax, law — New rules Spanish holiday rentals tax

On the 5th of June 2013, Spanish Law 4/2013 dated 4th of June was published in the Spanish Official Gazette B.O.E. This recent Law states the procedures to relax and promote the rental housing market. By means of this Law, the Spanish Government tries to regulate summer holiday rentals, which are not controlled by the Spanish Tax Administration Office.

These regulations aim at two basic objectives: on the one hand, to change people’s habit in respect of meeting their housing needs—up to now, people were inclined to purchase their usual home and obtain a mortgage. Now, it is a question to be more inclined to live in a rental home. And on the other hand, these regulations aim at combating underground economy of summer holiday rentals.

Nevertheless, these regulations leave summer holiday rentals without legal protection, because they provide that “rentals intended for non-residential use” are not regulated by the Urban Rental Law (Spanish acronym LAU), but by the regulations of Regional Governments according to their own criteria.

Particularly, Andalusian legislation on this respect is very strict and tough if compared with other Spanish regions. For example, owners with less than three rental properties in the same building or residential complex are not included within Andalusian regulations. As a result of that conditioning, a high percentage of owners are prevented from renting their second homes. This is aimed at combating “encroachment” upon the tourist professional field and unfair competition for traditional tour operators.

Alternatively, the new Law imposes strict and controlling measures for this type of summer rentals—the Spanish Tax Administration Office obliges electric companies to submit annually a report including household consumption. This is intended to gather the necessary data to detect those housing rentals that are not declared.

The new Law literally provides the following: “… it is not included within the scope of this law: … the temporary assignment for use of the entire furnished and equipped home to be immediately occupied, marketed and promoted through tourist offer channels for economic purposes, when this property is subject to a specific regime as a result of its sectorial regulations.

Upon consideration of this statement, these regulations may be discussed and interpreted in respect of renting a home for holidays from a private landlord. We consider that this rental is possible, but it is necessary to tell the difference between two types of scenarios: on the one hand, the rental per days with a tourist purpose; and on the other hand, the seasonal rental.

In the former case, it implies a regular commercial use of the rental by a professional, offering other additional services apart from the accommodation. In fact, this kind of tourist apartment rentals was also excluded from Spanish Urban Rental Law (LAU) up to now. They were regulated by the legislation of the competent public bodies.

In the later scenario, we are not dealing with a tourist business activity, but a temporary assignment without additional obligation. Accordingly, this new Law does not seem to affect people under these conditions. In case it does, it may certainly imply a clear restriction of owners’ rights. They may be able to rent their homes per season, whether for a long term or a short term, including per days. In addition, these housing rentals are regulated under the protection of Spanish Urban Rental Law of 1994 (LAU).

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

PREFERRED SHARES: THE GREAT SCANDAL

Written by Gustavo Calero Monereo on 11 June, 2013. Posted in Andalucia, english speaking solicitor, fraud, Headline, interest, lawyer, legal advice, malaga, preferred shares, solicitors Nerja. No Comments on PREFERRED SHARES: THE GREAT SCANDAL

By the end of 2008, Spanish saving banks and banks already had clear reports stating that current high interest rates may drop and the property bubble was about to burst. In addition, they also knew that the lucrative business of saving banks in the construction sector by means of credits for developers and mortgages for individuals, was about to go to ruin.

Regarding that their core business in the housing sector was about to finish and that saving banks could not issue shares as banks could, they “invented” the sale of a product to obtain funds known as participaciones preferentes (preferred shares). This financial term may be defined as debt securities issuances for an undetermined period of time, in which saving banks pay returns depending on their profits. But they may not even pay anything at all—although this product offered up to 7% returns—, because the payment of these returns depended on the financial entity profits. Thus, as a result of the housing sector slump and saving banks loss, there was no profit. Furthermore, these preferred shares have no voting rights and are not guaranteed by the Deposit Guarantee Fund—which covers people’s savings up to 100,000 Euros—and has no maturity, that is, they are perpetual.

Most of the investors who purchased these preferred shares were retail clients of these financial entities. Most of them thought that this product was similar to fixed income deposits. In most cases, these clients did not have any knowledge about financial risks neither any intention to risk their savings—their money was invested in fixed term deposits and one day they received a telephone call from the bank convincing them of the “advantages” of purchasing preferred shares; however, most of the disadvantages were not explained to them, because the bank employees did not probably even know what they were offering. They just followed the financial entity instructions.

Result: 300,000 people affected by the purchase of these preferred shares which may amount to 30,000 million Euros, although this sum may be higher.

Financial entities are allowed to sell this type of products if they carry out the following: study of the investor’s profile and performance of the private investor test for suitability. In most cases, it is obvious that financial entities should have not sold the aforementioned preferred shares to most of their retail clients, because they did not match the suitable profile to purchase this type of products and had limited savings to be invested only in conservative products, such as fixed income deposits.

Holders of the aforementioned preferred shares have the following options:

A) Secondary market offering, although they may be sold at a loss considering current circumstances.

B) Conversion into shares of the entity—this is the solution offered by saving banks. However, this exchange is also at a loss, as Bankia has already done two weeks ago—in this case, its clients have lost up to 70% of their investment when the preferred shares were converted.

C) Going to the arbitration offered by the Government—we sincerely have misgivings about its results and clients may also have to assume significant losses.

D) Going to court through civil proceedings to claim for the invalidity of the contract which served as a basis for purchasing preferred shares. This is the most recommended procedure for all people affected, as court orders which have been already known are pronounced in favour of these people. Although this action may imply a longer procedure to recover the invested money, the result is much more advantageous.

We finally recommend you to consult an expert before taking any decision if you are a person affected by this matter, so that all possible options are explored particularly.

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

MORTGAGES: THE WELL-KNOWN ECJ RULING ON THURSDAY 14TH OF MARCH

Written by Gustavo Calero Monereo on 13 May, 2013. Posted in euribor, lawyer, legal advice, mortgages, property law. No Comments on MORTGAGES: THE WELL-KNOWN ECJ RULING ON THURSDAY 14TH OF MARCH

HIPOTECA 2 — European vs Spanish legal protection for consumers with mortgages

About a month ago, the European Court of Justice (ECJ) ruling caused a great stir among Spanish media. This court judgment has been originated from a preliminary ruling handed down by the Mercantil Court nº 3 of Barcelona, as a result of the mortgage foreclosure procedure between an individual and La Caixa Bank. This preliminary ruling intends to clarify if Spanish legislation complies with the consumer protection requirements regulated by the European Directive 93/13/ECC. This Directive was approved to ensure consumers’ protection against their disadvantageous position with respect to a professional when contracting certain services.

In short, here below are the facts intended to be disclosed before the ECJ:

First: In regard of Spanish civil procedure in the matter of mortgage foreclosures, it was intended to be disclosed if Spanish regulations fail to comply with the aforementioned European Directive protecting consumers, because in Spain the “judgment debtor” cannot claim the existence of unfair terms set forth in this contract. In Spain, if judgment debtors want to claim the existence of unfair terms in this type of contracts, they should initiate different court proceedings which may not paralyse the mortgage foreclosure proceedings; for example, a situation may arise where a property is auctioned due to the unpaid mortgage and the judgment debtor may also obtain a favourable court decision declaring that the contract of that mortgage is null and void once that the property has been auctioned. This may arise because the mortgage foreclosure cannot be paralysed despite the contract may be considered to be null and void.

Second: regarding the substance of the matter, the concept of “unfair term” of the Directive is intended to be clarified in order to assess if the terms of the mortgage contract—subject matter of the main action and undersigned between an individual and a bank, are of unfair nature; these terms are the following: early termination of long-term contracts, fixing of default interests and the liquidity agreement. These are “cut and paste” terms (similar terms) appearing in any mortgage contract which anybody may have executed with a bank.

Regarding the first issue, the ECJ is clear and unambiguous declaring that the Spanish procedural regime reduces the effectiveness of the protection pursued by the Directive, because:

a) Possible unfair terms of the main contract cannot be challenged in the same mortgage foreclosure proceedings which may finish with the property put up for auction.

b) Mortgage foreclosure proceedings cannot be paralysed by the courts, although they know that the judgment debtor has filed court actions challenging possible unfair terms.

It is worth mentioning that by virtue of a repeated European case-law, the national court is obliged to consider of its own motion the unfairness of all contractual terms under this Directive.

Regarding the second issue, the ECJ answer is not very revealing, or at least automatically, in order to know whether a term is unfair or not, as the ECJ considers that the national court is the only competent body to interpret and apply the national Law. However, the court ruling states that to decide if a term causes an imbalance to the detriment of the consumer in relation to bank—national regulations must be taken into account if that agreement is not signed between the parties, the court shall assess if this term leaves the consumer in a less favourable situation than this provided by the national Law in force in case this term exists. For example, if the term fixing the default interest in the mortgage contract (normally around 20%) is an exception and there is no other similar legal interest in national Law (i.e. default interest applicable to commercial transactions is at 7.75%), then this term may be considered to be unfair; an open-and-shut case, judge for yourself.

Finally and regarding ongoing and future mortgage foreclosures in Spain, it is worth mentioning that two rulings have been already issued in the last three weeks declaring mortgage contracts to be null and void, because default interests were unfair.

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

BUILDING PERMIT INVALIDITY AND CONSEQUENCES FOR THIRD PARTIES IN GOOD FAITH

Written by Gustavo Calero Monereo on 5 March, 2013. Posted in assimilated out of ordination, building permit, english speaking solicitor, Featured, lawyer, legal advice, non developable land, out of ordination, Property law, property law, solicitor, solicitors Nerja, torrox, undeveloped land. No Comments on BUILDING PERMIT INVALIDITY AND CONSEQUENCES FOR THIRD PARTIES IN GOOD FAITH

Invalid Andalucian building permit/licence

One of the legal problems affecting some owners of properties on non-developable land has originated in the last ten years with the invalidity of building permits, which protected these constructions on non-developable land. This invalidity has been obtained in most of the cases by means of the corresponding contentious-administrative court proceedings.

First of all, the invalidity of a building permit would imply the demolition of what has been built under this permission on specially protected non-developable land; in case of common non-developable lands (without special protection), this invalidity may imply the demolition if more than four years has not elapsed between the end of the construction and the beginning of contentious-administrative proceedings or the invalidity procedure ex-officio by the Town Council. After March 2012 six years should have elapsed.

From a legal point of view, the main problem lies in the third party in good faith, included in Article 34 of Spanish Mortgage Law, who purchases a property to the former owner who had a building permit to build, and later on, he finds out that this permit has been challenged by contentious-administrative jurisdictional courts and found null and void by final judgment before the sale execution; or he finds out that there is a contentious-administrative proceedings going on when he bought the property and has not been finished yet. Therefore, sooner or later a judgment may be received stating that the permit is invalid.

The third party in good faith is not able to know about these facts because until the 1st of July 2011 it is not compulsory to register in the Land Registry the invalidity of the building permit ordered by final judgment or resolution ex-officio by the Town Council. This modification was incorporated by the Spanish Royal Decree-Law 8/2011 approval modifying some articles of Spanish Land Law. For this reason, this third party purchaser is not able to know about this situation, becausethe Land Registry has not recorded in most of the cases the decisions taken on building permits which may affect their property rights.

The abovementioned Royal Decree-Law approval has set the compulsory registration in the Land Registry of the legal condition of the property, so that the Public Administration bodies will be responsible if this notification is not served to the Land Registry when contentious-administrative proceedings are affecting the building permit granted to the property. Articles 51 and 53 of Spanish Land Law (Royal Decree-Law 2/2008 of 20th of June) set forth this compulsory registration, so that the third party in good faith may be able to know about the legal situation of the property by looking up the Land Registry and then decide about buying or not this property knowingly and intelligently.

However, regarding the abovementioned information, a problem arises when considering the facts previous to the 1st of July 2011—whether the proceedings are finished at this date or they are not resolved yet, because the abovementioned compulsory registration in the Land Registry was not in force as to this date as former regulations were applied.

In my opinion, the main problem of Spanish legislation in this field and its most frequent interpretation by Spanish case law, lies in the fact that the third party in good faith accessing the Land Registry is not protected by the Registry certification and the legal certainty that the Land Registry must provide, prevailing the planning legality support over the registry certification. We understand that is not abiding to law, because the third party in good faith, legal owner and unaware of the legal situation concerning the building permit, shall not be subject to the negligence of Public Administration. In the interest of legal certainty, the rights of the third party in good faith should prevail over the planning law enforcement.

Apart from the abovementioned situation of the third party in good faith, the core problem lies in the fact that the property right in Spain does not enjoy a special protection. It is also worth mentioning that Spain is subject to comply with the Rome Convention, which considers the property right to be a fundamental right with a special protection. Concerning its interpretation of property right, The European Court of Human Rights (ECHR) itself has demanded the following:

1) Those affected by administrative or court proceedings which may imply the loss of their assets shall have an effective and real opportunity to defend their situation.

2) Any deprivation of a property to his owner due to the general interest—as the enforcement of planning law, requires a previous compensation for this deprivation. In fact, a recent resolution of the ECHR of the 31st of January 2013 by cautionary measure has cancelled a demolition in Cañada Real (Madrid) until the Town Council provides an alternative accommodation to the family occupying the property and the outlined underlying matter is resolved. In this case, we refer to the demolition of a property in a shanty-town located in specially protected land and without building permit.

Therefore, the Spanish legal system should reconsider certain substantive decisions providing the property right with a fundamental nature and protecting it. As a result of this, the protection of the third party in good faith should be one of the cornerstones of this protection, because this third party must not bear the damage of the unlawful conduct of Public Administration when granting these building permits, both in these cases where the invalidity proceedings were not entered in the Land Registry and were not available and those cases where proceedings are initiated against the building permit once the third party in good faith is the new owner.

In addition, these owners, who built their properties with the corresponding building permits granted by Town Councils, should not be deprived of their property right by means of the property demolition without compensation to cover their loss, as this demolition is originated by the negligence of the Town Council and not by the owner.

Spain should ensure compliance with its obligations as an EU Member State, as the property right concept of the Rome Convention and the European Court of Human Rights (ECHR) case-law is obvious in this regard. Therefore, we understand that this Convention is being infringed by Spain, apart from the fact that the current situation contribute to legal uncertainty.

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

NEW TAX LIABILITY FOR RESIDENT TAXPAYERS

Written by Francisco Delgado Montilla on 23 January, 2013. Posted in Income, lawyer, legal advice, malaga, resident, Tax Law, tax resident, taxes. No Comments on NEW TAX LIABILITY FOR RESIDENT TAXPAYERS

New tax liability for resident tax payer in Spain

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)

INCREASE OF THE VAT AND OTHER TAX MEASURES REGARDING THE PROPERTY IN SPAIN

Written by Francisco Delgado Montilla on 17 July, 2012. Posted in conveyancing, developer, Featured, legal advice, taxes. No Comments on INCREASE OF THE VAT AND OTHER TAX MEASURES REGARDING THE PROPERTY IN SPAIN

The Spanish Government, particularly Mr Cristobal Montoro, Chancellor of the Exchequer, has announced last Friday 13^th of July that, from the 1^st of January 2013, will apply a VAT of 10% (of the declared value of the property) to new build properties, with regard to the current 4%.

During the press conference after the Council of Ministers, the Chancellor has recalled that the application of the reduced VAT (4%) for the purchase of a property had an “expiry date”, that the Government has stated today for the beginning of 2013.

Mr Montoro has also indicated that, according to the recommendation of the EU, from the 1^st of January 2013, “the tax deduction on the purchase of a property in Spain will be abolished”.

So, if you are thinking of purchasing a new property, it will definitely be crucial, from a financial and economic point of view, that you do it before the 31^st of December 2012. To see it more clearly, the difference in a direct taxation regarding a property valued at 200 000,00€ is 12 000,00€.

If you are planning to purchase a property here in Spain, do not hesitate to contact a professional lawyer for a deeper tax planning.

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

Government of Andalusia increases many taxes

Written by Francisco Delgado Montilla on 27 June, 2012. Posted in legal advice, mortgages, New building declaration, New sales, PREVENTION, property law, Stamp Duty, taxes. No Comments on Government of Andalusia increases many taxes

I would like to update you about some new measures carried out by the Junta de Andalucía, containing many reforms in the different existing taxes (not exactly to re-boost the current market situation…).

Concerning those interesting, we will focus on the Stamp Duty (A.J.D.), a tax applied to those public acts formalized on public documents to be registered in the different Public Registry offices with an economic amount (e.g. new property sales, new building declarations, or a mortgage deeds, among any others).

So, last week, the 19^th of June, the Junta of Andalucía approved the new Decree-Law 1/2012, of 19^th of June, which contains a series of tax, administrative and labor measures, published in the B.O.J.A. (Official Journal of the Government of Andalusia) last 22^th of June 2012. You can find it by clicking: http://www.juntadeandalucia.es/eboja/2012/122/BOJA12-122-00014-11216-01_00009593.pdf

Within these measures, regarding the tax ones, we can find an increase of the general rate on the Stamp Duty, going from 1.2% to 1.5% of the declared value.

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

Written by Gustavo Calero Monereo on 6 June, 2012. Posted in Capital Gains, discount, english speaking solicitor, Featured, Headline, Income, legal advice, malaga, NON RESIDENT, property law, resident, solicitor, taxes. No Comments on 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 tax 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)

TAX EXEMPTION WHEN SELLING YOUR PROPERTY IN SPAIN

Written by Francisco Delgado Montilla on 12 April, 2012. Posted in conveyancing, Featured, Headline, Income, lawyer, legal advice, NON RESIDENT, PREVENTION, property law, Property law, solicitor, taxes, torrox. No Comments on TAX EXEMPTION WHEN SELLING YOUR PROPERTY IN SPAIN

The Spanish Constitution and the regulations (tax and social) developed thereof, regarding the protection of the elderly, guarantee that the elderly will receive a comprehensive system of care and protection that promotes and enhances the wellbeing of this section of the population, within which this article highlights the area of economic protection.

The purpose of this type of protection is to formulate a system of regulations that provide the elderly with the necessary economic resources, which will contribute towards their independence and improve their quality of life.

As principle provisions or benefits within this economic protection of the elderly, we can highlight, among other things: retirement pensions (contributory and non-contributory), supplementary economic provisions, various subsidies and aid, which is granted within the scope of Social Services, as well as certain tax benefits.

In relation to this matter, this article will focus on the exemption from capital gains tax, which, for those over 65, occurs at the time that their habitual residence is sold.

Gains derived from the transfer of immovable property are taxed, for non-residents, at a fixed rate of 19%. For residents, the first €6,000 is taxed at 19% and the rest is taxed at 21%.

Moreover, in the case of the transfer of property by a non-resident, the purchaser shall be obliged to withhold and pay 3% of the sale price as payment on account of taxes which should meet the requirements of capital gains for non-residents and that should be paid directly to the Tax Authorities. Said retention from the sale price is not incurred if the seller has the right to tax reduction for the transfer of property that is their habitual residence, for those over the age of 65.

Article 31.4 b) of Law 40/1998, which regulates personal income tax, establishes that those over the age of 65 shall be exempt from capital gains in the event that the property transferred is their habitual residence.

The only two requirements for eligibility for this tax exemption are the following:

The taxpayer must be over 65 at the time that the transfer takes place.
The transferred property must be their habitual residence. In order that the property be considered a place of habitual residence for the purpose of this tax, two temporal limits are established: 1) it must be effectively occupied by the taxpayer within a period of 12 months from the date of acquisition or from the termination of any building work; 2) it must constitute their place of habitual residence for an on-going period of at least three years prior to the date of sale.

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