Tag: taxes

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)

BUYING YOUR HOME IN SPAIN BEFORE THE 31ST DECEMBER 2012

Written by Gustavo Calero Monereo on 15 November, 2012. Posted in Capital Gains, developer, english speaking solicitor, Headline, Income, Property law, taxes. No Comments on BUYING YOUR HOME IN SPAIN BEFORE THE 31ST DECEMBER 2012

In this year we have published several blog articles regarding tax changes on property subjects which the Spanish Central Government has passed over this year. In that regard, the deadline to implement most of them finishes on the 31st of December.

As a requirement to increase tax revenues, this new year will bring the removal of some tax reliefs which are currently enjoyed by home buyers in Spain.

From the 1st of January, home buyers in Spain should consider that the following tax incentives will disappear:

1) 50% tax exemption on capital gains obtained for the future sale of the property which had been purchased before the 31st of December 2012.

2) The Spanish VAT rate will increase from 4% to 10% for new housing purchases.

3) Tax deduction for main residence purchases, applicable in the event of tax residence in Spain.

Tax saving when buying a home before the 31st of December may become a very significant factor to keep in mind for those looking for a property in Spain and hesitating about different alternatives to take a decision. In these cases, we recommend them to make up their minds before the end of the year in order to take advantage of the above mentioned tax relieves.

Furthermore, sellers have also a reason to sell before the 31st of December—from the 1st of January 2013, Spanish Plusvalia (municipal capital gains tax on land) rate may increase from 66% to 150%, depending on the municipality where the property is located.

It is also worth mentioning that Town Councils reviewing cadastral values in the last 5 years were obliged till now to apply a 40% to 60% reduction on the resulting payable fee for Plusvalia tax. However, from the 1st of January 2013 this obligation will disappear—then, each Town Council may decide whether to apply or not this reduction. Regarding the current economic situation of most Town Councils, all of us may have to get use to the idea that just a few of them may decide to apply this reduction.

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

INHERITANCE TAX IN SPAIN AND NON RESIDENT TAXPAYERS: problems and prospects for the future

Written by Francisco Delgado Montilla on 15 October, 2012. Posted in Inheritance Tax, NON RESIDENT, PROBATE LAW, taxes, wills. No Comments on INHERITANCE TAX IN SPAIN AND NON RESIDENT TAXPAYERS: problems and prospects for the future

Discrimination non-residents inheritance tax

Currently, non-resident taxpayers face two major problems in respect to the payment of Inheritance Tax in Spain:

1. Discrimination: non-residents pay much more taxes than residents.

2. Double taxation: this tax is payable in two different countries for the same inherited property.

Discrimination

In Spain, taxes are paid for inheritance between non-residents—even though they are immediate family members, spouses, parents, children…, upon application of the government regulations, that is, a progressive scale of taxes based on the transferred property value.

However, regarding inheritance between residents—immediate family members—taxes are much lower or even not paid, as a result of the application of regional government regulations which provide very important tax exemptions.

In respect to inheritance between family members who are not immediate (siblings, uncles, nephews, etc…) and between non-family members, very high taxes shall be paid by both residents and non-residents. In this respect, there is no discrimination.

Upon consideration of this discriminatory unfair condition, it is necessary to inform that the European Commission is putting pressure on Spain to avoid this discrimination, as it is contrary to the free movement of persons and capital, one of the basic principles of the EU single market. This fact may provide a significant reduction of the inheritance tax for non-residents, at least for EU residents, because, otherwise, periodic penalty payments may be imposed to Spain.

There are some examples which can guide you to understand this issue over the figures.

Double taxation

Significant cases of double taxation are also occurring. For example, non-resident heirs are bound to pay a high inheritance tax in Spain for inherited property in Spain (money or real estate) and they shall also pay inheritance tax on the same inherited property in the country where they reside, without deduction of the taxes paid in Spain.

The problem is that Spain only has a convention for the avoidance of double taxation with France, Greece and Sweden for inheritance purposes. Double taxation conventions with United Kingdom, Germany, etc… only refer to income tax and property tax, so that double taxation conditions may occur in relation to inheritance tax.

Accordingly, the UE presented last year a global package regarding inheritance tax system just to avoid these two problems of discrimination and double taxation mentioned above.

At this stage and regarding that these serious problems seem to be at least in the process of being resolved in the medium term, C&D Solicitors would like to make the following recommendations:

1. If anybody loses a relative before regulations are modified and is bound to the payment of a high and discriminatory inheritance tax, a procedure could be initiated requesting the refund of the excessive tax which has been paid.

2. It is not appropriate at this moment to hurry and carry out certain actions in order to avoid or reduce inheritance tax in the future—gift inter vivos, contribution to companies, etc. These transactions may involve significant tax consequences to be analysed and as result of them you may pay now higher taxes than taxes to be saved in the future.

C&D Solicitors would rather advise you to make a will for your properties in Spain. This would be an early solution to the above mentioned problems.

“It is an unfortunate fact of life that eventually we all die. It is also unfortunate that no one can predict when that will be. It is because of these two certainties that you are never too young to make a Spanish Will.”

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)

MAKING A WILL IN SPAIN IS ESSENTIAL

Written by Gustavo Calero Monereo on 13 April, 2011. Posted in Featured, Headline, Herencias, Inheritance Tax, malaga, PROBATE LAW, taxes, wills. No Comments on MAKING A WILL IN SPAIN IS ESSENTIAL

Importance Spanish will for heirs of both residents and non-residents

According to our legal and professional experience, there are many reasons for advising our clients to sign a Will before a Notary Public in Spain with regard to their property in Spain.

You cannot imagine how complex it may be for the heirs of a deceased to formally take the assets situated in Spain (properties, current account deposits, insurances, company shares or stakes … etc). when the only Will available is the one made by the deceased in his/her country of origin, or even worse, when the deceased did not make a Will in his/her country of origin.

In order for the heirs to take the said assets when the Will has been granted in the decesased´s country of origin, the heirs must have a number of documents legalised in the said country. For example, if the decesased is British, documents such as the probate and the grant of probate, among others, are required in order to distribute and formally take the property of the deceased in Spain between the heirs, in accordance with the Will made in the deceased´s country of origin.

However, if the deceased had not even made a Will in his country of origin, the procedure turns out to be more complex, as the rules of intestacy in Spain would be the ones applicable. According to which, only the deceased´s descendants and his/her widow/er would have inheritance rights, and the consent of all the interested parties would be required.

Therefore, the importance of making a Will in Spain is based on:

1) Economic reasons: if you make a Will in Spain, the inheritance proceedings will be more economic for you heirs, as they will not have to apply for any documents in your country of origin.

2) Time saving: If you have not made a Will in Spain, it will take longer to obtain all the necessary documents; on the same line, in the absence of a Will on the deceased´s country of origin, the intestacy procedure in Spain will take several months.

3) Family reasons: Easier legal procedures make everything more agile and less stressing for the heirs.

To finish with, I must remind you that inheritance in Spain is subject to Inheritance Tax. Different regulations apply in each region. In Andalusia, there are a number of benefits and exemptions for a resident who dies in Andalusia, provided certain requirements are met. Therefore, residing in Andalusia (which differs from fiscal residency or from obtaining the residency card) can save a lot of money tax wise. I can assure you that I know of many people who have been living in Andalusia for a long time, and whose heirs will not be able to receive such Inheritance Tax benefits and exemptions for not having seeked professional advice.

In conclusion, if you have any assets in Spain, always make a Will and get professional advice. A professional will study your personal and family circumstances properly in order to draft a Will that suits your interests, minimising at the same time the tax implications for your heirs.

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

BE CAREFUL, NON TAX RESIDENTS

Written by Gustavo Calero Monereo on 2 March, 2011. Posted in Featured, Headline, Income, NON RESIDENT, property law, taxes. No Comments on BE CAREFUL, NON TAX RESIDENTS

Presently, by the fall of prices on the property market, many owners sell their homes for a similar or lower price than the purchase price when they originally bought them, which the main result is that there is no capital gains or this is not that high on the sale of the property.

However, if these owners are non-resident tax in Spain, that is, if they pay taxes in another country, then the buyer has the legal obligation to withhold 3% of the purchase price and to pay it to the Tax Office, on account of the capital gain tax that the seller must pay for the gain on sale of his property. 18% is the tax rate that the Spanish Tax Authorities apply on the capital gain from the sale of a property.

If the seller has not obtained any capital gain or if the tax that he should pay for the gain is less than 3% retained by the buyer, the seller may request a refund of the whole amount or part of it

Well, in the moment that the Tax Office receives the request of the seller for the reimbursement of the income of 3% from the property sale, they firstly check whether the owner has submitted the form 210 –Income Tax Declaration for Non-residents when owning a property in Spain– (before 2008 it was the form 214), for the last 4 years prior to the sale of the property; in case he has not submitted it or he has not submitted any during these obligatory periods, the Tax Office demands the vendor to regularize the situation before returning anything.

In view of this requirement, the seller must submit and pay the corresponding tax due for every year that he has not submitted the form 210, with late payment interest and a financial penalty from the Tax Office for not fulfilling the obligation of submitting the form on time.

Because our experience tells us that many non-resident tax owners do not undertake the obligation of submitting the Form 210, we would recommend you to do it from this year. In case you would decide not do it now, you will probably have to do it later, paying a penalty as extra cost, and if it was your situation, an extra deadline in order the Tax Office to return the amount that the buyer withheld in the purchase of the property.

If you are trying to sell your property, and you have not submitted this tax during the last four years, we do recommend you to regularize the situation and submit the tax. This will prevent you a possible financial penalty from the Tax Office, because if you submit this form with no requirement from the Tax Office, that is voluntarily, you will not be sanctioned by the Tax Authorities.

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

ANNUAL TAXES FOR NON-RESIDENTS WHEN OWNING A PROPERTY IN SPAIN

Written by Francisco Delgado Montilla on 19 November, 2010. Posted in Featured, Headline, Income, Inmobiliario, NON RESIDENT, property law, taxes. No Comments on ANNUAL TAXES FOR NON-RESIDENTS WHEN OWNING A PROPERTY IN SPAIN

Inheritance tax Spain — solicitor english speaking

All property owners in Spain are liable for some taxes every year. Even if you are (tax) non-resident, when owning a property, you must fulfill your fiscal obligations here in Spain by submitting your yearly income tax declaration for non-residents (IRNR).

In the event you are non-resident in Spain, the reason why you are subject to this tax is because your Spanish property is not your principal residence. Non-residents remain subject to the tax because, by definition, Spain is not their principal residence, so that it is necessary to calculate your property owners’ imputed income tax on your second and further homes you may have.

Be aware of tax year in Spain ends by the 31^st of December, so that your income tax declaration should be submitted to Tax Authorities before this date, by filling out the application form number 210.

The calculation of the IRNR will depend on several factors, among others, the type of property (urban or rustic), when the rated value of the property for tax purposes was raised, price or valuation of the property, etc.

If you are in this situation and you still have not submitted your Property owners’ imputed income tax, you have one month approx. to be up-to-date with Tax Authorities.

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