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We blog legal and tax information targeted to resident and non resident UE citizens in Spain to help them with these issues and to solve doubt and generate controversy about these matters.

Taxation of the Spanish rentals economic aids: a bitter candy?
31 July 2009

 

I would like to make some comments on the taxation on these aids approved by the Spanish Government by Real Decreto 1472/2007.
 
But first let us make a small introduction of how the Spanish Income Tax works.
 
This tax is one of those called progressive: this means that the more you earn, the more you pay, but there are some kind of incomes (like capital gains) that are aside this rule and its taxation is fix, in this case an 18%, doesn´t matter how much you might earn.
 
The taxation of the rental aids granted by the Government is absolute, there is no exemption on them, and their taxation is not fixed on the 18%, but on the general scale of the Income Tax.
 
There are other aids forseen on the Income Tax regulation that have no exemption but at least the law allows you to fractionate in several years their imputation, so you avoid the harm effect of having all the revenue imputed in one year. There is not the same to impute 8.000 € in one year, that imputing 2.000 €, 2.000 € 2.000 € and 2.000 € You pay much less tax this last way.
 
The rental aids granted by the Government have no exemption, have no fixed tax rate and have no way to impute them in several years, so those people that have applied for them and become victims of the lateness of the Spanish bureaucracy might have a very nasty surprise if they apply for these aids by mid of 2008, and have them granted during year 2009, because they will have to add to the aids corresponding year 2009, the ones corresponding year 2008, so their taxation will increase considerably
 
These aids are quite interesting, but they might end up having a bitter taste.
 
Antonio Robles Jara
Abogado y asesor tributario


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Divorce and distribution of properties
29 July 2009

 Unfortunately divorce happens. Fortunately when it happens in civilized and amicable terms and the ex-spouses keep talking to each other, this make the process shorter and smoother and it is easier to finish the process of distribution of the common assets.

It happens sometimes that a British couple has a property in UK and bought a second one in Spain in equal parts (i.e. 50% each one) Then the Spanish property is in a legal situation called proindiviso). Later the couple gets divorced and agrees that the property in UK will be for one of the spouses and the property in Spain for the other one. This share out is formalized in the sentence of divorce passed by the British judge.
 
Now the problem is: how do we get application of the British sentence in Spain, break the proindiviso and change the ownership at the Land Registry in order that the spouse who got the Spanish property appears as the sole owner?
 
The first thing that a solicitor thinks is: Will it be necessary an exequatur?
 
An exequatur is a procedure to make valid in a country a sentence passed in a different country, and yes, the process can be long and expensive.
 
The good news is that as far as we have seen in our professional experience the Land Registers have common sense and ask only for something as “simple” as what we call Escritura de extinción de proindiviso (that we could translate as Deed to finish the proindiviso).
 
We say simple in inverted commas because the simplest formality can be quite complicated for a foreigner in Spain. If we are lucky and the Land Register who must change the ownership of the property has, as we said, common sense, the procedure could be like this:
 
1) The ex-couple must obtain a copy of the sentence with the stamp of the Court.
 
2) If the ex-couple doesn’t want or cannot come together to Spain the best thing is to give power of attorney to a Spanish solicitor. This power of attorney can be prepared in UK.
 
3) You need to find a notary in UK, sign the power of attorney attaching a copy of the passports and NIEs of the ex-spouses. You need to tell the UK notary that both the power of attorney and the sentence of divorce must be stamped with La Hague Apostille to make them valid in Spain. Once that you have the power of attorney and the sentence stamped with La Hague Apostille you send them to the Spanish solicitor.
 
4) Then the Spanish solicitor can go to a Spanish notary and obtain the Escritura de extinción de proindiviso.
 
5) Before inscribing the Escritura at the Land Registry, it is necessary to pay the Stamp Tax (1% of the minimum value established for the property by the corresponding Comunidad Autónoma). It is debatable if it is necessary to pay this 1% over the total value of the property or over the 50% of that value.
 
6) Once the Stamp Tax has been paid, the solicitor sends to the Land Register the Escritura and change the ownership of the Spanish property, so only one of the spouses will appear as the owner of the property.
 
It could be necessary also to have an official translation of the sentence of divorce (which increases the time and the price of the procedure). Fortunately the Land Registers of the cities and towns near the Spanish coast use to speak English. If we are lucky they won’t ask for the official translation or they will ask for a simple translation of the British sentence.

Salvador Manzano

salvadormv@serveco.es

Lawyer of www.serveco.es and www.tecnivalorestate.com



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Answer to the comment Taxation of non-residents. Ficitious revenue from the ownership of a property
28 July 2009

Hi Myra, We are talking about the Income tax, el impuesto de la renta (and related to residents) When I say that you first dwelling is not tax I am only talking about the Income tax of residents in Spain and I referr to the habitual dweilling, your usual home. This is foreseen in the Law 35/2006 as "imputación de renta inmobiliaria" and if you take a look at its article 85 this fictious revenue it is only generated over second properties-buildings, but for example if you own a plot with no building on it, then this fictious revenue doesn´t exist. The other things you comment are related to other taxes. The plusvalia is payable always, it doesn´t matter if it is a plot, a builiding, your usual dwelling or whatever. What happens, is that in the plusvalía tax related to a transmission as cause of death of the owner, and depending the city (for example Murcia) you can have deduction of 95% on the plusvalía tax. And regarding the inheritance tax residents in Spain, and residents in Murcia for at least 5 years, the closest relatives, have a reduction on the Inheritance tax of 99%. Other Communities have similiar reductions but conditions might change. So we are talking about different taxes and it is mistake to mix them up. One thing can mean a thing in a tax and a complete different thing in other tax.



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Watch out the Town Halls in Spain. Sentence TS 4/02/2009 Real Decreto Legislativo 2/2004
23 July 2009

Hi all,

I would like to make some comments regarding this sentence of the Supreme Court of Spain. This is a proof of how necessary is to have Courts independent from politicians.

The Economic Activities Tax is a tax regulated by Spanish Town Halls within the margins given by the Real Decreto Legislativo 2/2004 de Haciendas Locales. It is a very unfair tax because you have to pay just for being holder of a bussines and it doesn´t matter if you win or loss in your normal bussines traffic. From year 2002 is only payable by companies that have a turnover over 1.000.000 € and private people don´t pay, doesn´t matter how much is their turnover, so thing have become a little bit better from year 2002.

One of the parameters to calculate the tax is the category of the street where the bussines is established that, within some margins given by the Real Decreto Legislativo 2/2004, is given by the Town Hall to all the streets of its town.

But a street can only have one category. I mean, you cannot divided the same street and say that 500 meters of the street have first category and the rest 2nd category.

In this case, a big great department store had an establishment located in a street of 6th category for many years. What did the Town Hall of Palma de Mallorca do? They fraccionated the street in two categories. Bet what kind of category corresponded to the specific sport where this big great department and what category corresponed to the rest of the street.

Correct, the big great deparment first category, rest of the street the same 6th category that always had.

Great for the Supreme Court of Spain to reject all the challenges made by the Town Hall.



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Is the Community Autonomous of Murcia aware of the real estate crisis?
21 July 2009

In my opinion the answer to that question is NO.

The Community Autonomous of Murcia (and probably the other 16 Communities Autonomous) don´t care about this issue. For them the prices of the properties have never dropped.

Murcias has an informatic program calle P.A.C.O, where everybody can enter the details of a property (built square meters, situation on the city/town/village, year of construction...) and then the authorities give you the value, that according to those details, the property has for them.

In times of wealthness this is a reasonable way so people don´t fraud declaring on the purchase deeds values under the market value and paying the rest in black money.

But today it is crazy to keep the same values as in 2007 and even more, and some times upto twice more. It is notorious that market has fallen down and properties are much cheaper than a year or two years ago.

It doesn´t matter for them. So beware if you are thinking to buy a property in Spain. Specially if the property is sold not by a profesional developer but from a private person. Why?

Very easy, if the property comes from a developer this one will charge you 7% VAT ( tax that belong to the State) and you will pay to the Community of Murcia (or any other) usually 1%, so if you discover that your property, to the Community, is worht 150.000 € instead 100.000 €, is not that much. But if you buy from a private person, then the tax payable to the Community is 7%, and a extra difference of 50.000 € could be really painful.

Check with your solicitor to find out, before signing the contract, how much is worth the property for the authorities besides the price you pay, because the tax will be paid not over the price, but over the value given by the authorities (obviously if this one is higher than the price, but not viceversa)

Best regards to all of you.

Antonio Robles

Solicitor www.serveco.es antoniojara@serveco.es



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Taxation of non-residents. Ficitious revenue from the ownership of a property
21 July 2009

Hi Myra,

As mentioned  in your comment that in the UK there is not a tax over the first property you own.

In Spain there is no taxation either on your habitual dwelling or just plots. And about your comment regarding what happens when the value of the property drops, usually the value to estimate the ficitious revenue taxed by the Non-resident tax is the value of the catastro, of the IBI tax, also called contribución. And those values are usually quite low.

If you want to see something really outrageous then read my new post about: Is the Community Autonomous of Murcia aware of the real estate crisis? 



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Taxation of donations and gifts in Spain STS 18-02-2009
17 July 2009

The taxation of donation and gifts in Spain is very high, and the higher the amount of the gift the higher the taxation.

The normal marriage economic regime in Spain is called gananciales and it means that assets and goods belong to the marriage not by halves to the husband and the wife as in the marriage economic regime called separation of goods, which is the normal one in Great Britain.

The problem was that Spanish law considered that if a couple married under the economic regime of gananciales made a gift to a son, (or whoever) the was only one donation, and then the Tax Office calculated the tax over the whole value of the gift, and not the half of it per each member of the marriage, as it would happen in case the very same couple was married under the economic regime of separation of goods.

As the taxation increases as the value of gift increseases, it is not the same taxation to receive a gift of 1.000.000 € than two gifts fo 500.000 € each.

Supreme Court of Spain has said that it is illegal, and so, it doesn´t matter what is the economic regime of the marriage that grant the gift, the person who receives it will pay tax over two halves, and then, that person will pay much less tax.

So good news.

Antonio Robles Jara

antoniojara@serveco.es

Lawyer of www.serveco.es www.tecnivalorestate.com

 

 



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How is ti possible Christiano Ronaldo pay less taxes than his Real madrid mates?
08 July 2009

The answer is very simple.

The Spanish Income Tax for residents has an especific regime that allows workers that come over to live in Spain, to choose whether the want to tribute as residents (and then they could tribute upto a 43% of their incomes) or to tribute as non-residents for a period of 5 years (taxation of work incomes  of non-resident is only 24%).

The reason of the especific regime is to atract talents to the Spanish economy. Not only football talents, but also scientist and all that kind of people.

Curious.

Antonio Robles

antoniojara@serveco.es

 



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The unfairnes of the Non-resident tax
08 July 2009

Well,

It is quite unfair indeed, that just the ownership of a property might a generate a revenue that is completly fictitious. I don´t know if back in the UK there is a similar figure like this. But things where quite worse last year, when you had to fill form 214, because that form covered the Income Tax and the Heritage Tax.

The residents in Spain also paid the tax over this fictious revenue. The treatment given to the non-residents regarding the abolished Heritage Tax was really discriminating comparing to the residents. And the reason is because residents had an allowance under of its limit had no Heritage tax to pay, but non-resident had to pay this tax from the first euro they had in Spain. 

So things have become a bit better. 

Antonio 

antoniojara@serveco.es

 



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The new non-resident tax form 210
06 July 2009

From the July the 1st of this year, the web page of the Spanish tax office, has open the possibility of setting up a direct debit for the payment of your non-resident tax form 210.

You can only set a direct debit if you are paying taxes for holding the ownership of a property. If you rent that property, you will have to fill that same form, but you won´t be able to set a direct debit to pay it.

Here I display the link of the web page of the Spanish tax office where you can download the form.

http://www.agenciatributaria.es/AEAT/Contenidos_Comunes/La_Agencia_Tributaria/Modelos_y_formularios/Declaraciones/Modelos_200_al_299/210/mod210e.pdf

Antonio Robles

 



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Open the term to submit the non-resident tax form 210 (former form 214)
06 July 2009

 

Once you have bought your property in Spain we feel that we have to inform you about the taxes related to this purchase.
 
There is one local tax payable to the Town Hall of the city, town or village where your property is located and that it is automatically calculated by it, and it is called IBI or contribución. You only have to be aware of receiving the letter of payment first year and from years on set a direct debit to pay it at your bank.  This tax is paid by resident and non-resident.
 
But there is another tax paid to the State called Tax over Non-Residents´ Revenues that is not automatically calculated by the State. You have the obligation to fulfil the tax form and pay it.
 
Revenues involved
 
What revenues have to be declared at this tax? The following:
  • Economic activities
  • Personal work
  • Interests paid by banks operating in Spain from your non-resident accounts
  • Dividends
  • Gains from selling properties
  • Holding the ownership of a property in Spain: this is a fictitious revenue established by the law and probably will be the normal reason why you have to make your tax declaration of non-resident.
How much should I pay?
 
How much tax should I have to pay in the holding of owner ship of a property in Spain?
 
The fictitious revenue that comes from this ownership is estimated by law in a 1.1% over either 50% of the price of purchase or the valued given by the Town Hall and over that amount 24% tax.
 
For example: a new property bought for 286.000 €. 50% of the price is 143.000 €, 1.1% of this amount is the fictitious revenue: 1.573 € and the tax payable is 24% o/1.573 € so the final figure is 377,52  €
 
And for Heritage Tax this year, this tax has been abolished, so you won´t pay anything for it.
 
Usually, according with British-Spanish Treaty to avoid double taxation, if you are charged back in the UK for similar taxes that would include these revenues, you could deduct back there what you have paid here in Spain, check with your tax advisor back in the UK.  
 
Term to pay and fulfil the tax declaration
 
The term to fulfil and pay the tax is from January the first upto December the 31st  of the following year the revenue is referred to. Form 210 (former form 214)


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