LEGAL4SPAIN.COM - Blog-Updates

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Spanish Succession Tax- The Impact of Location in Spain

Spanish Succession TaxPosted by Anne Fri, June 02, 2017 20:52:25

Background

It is well over 2 years now, since the European Court of Justice's Ruling, that the Spanish Tax Authority’s succession tax system conflicted with the European Union principles of freedom of movement of EU individuals and circulation of money within the EU.

That case was specifically in relation to the distinction the Spanish Tax Authority previously made between those who were resident in Spain; and those who were non-resident.

The Ruling was that Non-Spanish Residents (who were also Europeans) should be treated in the same way as Spanish residents, for the purposes of Spanish Succession Tax.

Following the Ruling, Spain revised its practice, as required; and now (for example), British owners of Spanish properties are treated in the same way for Spanish Succession Tax purposes, irrespective of whether or not they are resident in Spain.

But although the Spanish Tax Authority is now compliant in terms of the Spanish residency/ non- Spanish residency distinction, there remains a separate glaring inconsistency in approach, which also amounts to discriminatory treatment of EU individuals.

That is the different levels of Spanish Succession Tax impact, according to which Autonomous Community within Spain is the charging Tax Authority in the case in question.

Continuing Discrimination

In many countries, the calculation and charging of succession taxation is simplicity itself. However in Spain, it is a highly complex system, which creates a great deal of uncertainty, inconsistency and controversy.

Spanish Succession Tax is not always administered centrally; nor is it charged in a uniform way nationally; nor is it charged at a single rate; nor is it subject to universal national allowances and reductions.

At the heart of the complexity is the fact that for Spanish nationals/ Spanish residents, the responsibility for Succession Tax administration lies with the 17 individual autonomous communities within Spain. Each autonomous community has discretion as to charging basis; practice; and allowances/ exemptions.

This fiscal quagmire creates bewildering inconsistencies across Spain. On the attached image, the Spanish Succession Tax impact is indicated, based on the same Estate details, but varying according to which is the applicable Autonomous Community.

And, as a very noteworthy side issue, it is not only foreign owners of Spanish properties who are exposed to the unfairness of this perplexing system; but it has been acknowledged that many Spanish families living in Spain themselves suffer this arbitrary discrimination under the current system, according to where (in Spain) their family members live.

Conclusion

It remains to be seen whether this very worrying anomaly will be regularised by centralizing/ standardising administration of Spanish Succession Tax; or (if that is deemed too radical), at least a harmonisation of practice across Spain.

For non- Spanish owners of Spanish properties, they are fortunate, in that there are opportunities in Spanish Wills and estate planning, to mitigate this exposure to Spanish taxation; and expert advice is recommended to ensure that the fiscal impact is minimised; in planning for future inheritance.

This general commentary is not intended to be exhaustive; and case-specific legal advice should always be sought.

The Legal 4 Spain team provides a full Wills, Estate Planning and Probate service for properties and other assets anywhere in Spain. We are always happy to provide a competitive cost estimate in the first instance, on a no-obligation basis.



Spanish Succession Tax- In Anticipation of Brexit...

Spanish Succession TaxPosted by Anne Tue, May 09, 2017 22:26:45

Background

It is well over 2 years now, since the European Court of Justice's Ruling that the Spanish Tax Authority’s succession tax system conflicted with the European Union principles of freedom of movement of EU individuals and circulation of money within the EU.

That case was specifically in relation to the distinction the Spanish Tax Authority previously made between Spanish Residents and Non-Spanish Residents.

The Ruling was that (European) Non-Spanish Residents should be treated in the same way as Spanish residents, for the purposes of Spanish Succession Tax.

Following the Ruling, Spain (as required) revised its practice; and now, British owners (for example), of Spanish properties, are treated in the same way for Spanish Succession Tax purposes, irrespective of whether they are resident in Spain or not.

Brexit

It is considered probable by most commentators, that the Spanish Succession Tax treatment of British owners of Spanish properties is likely to change again in the light of the Brexit Referendum decision.

In principle, (as regards British owners of Spanish properties who are not actually resident in Spain), the Spanish Tax Authority will no longer be obliged to comply with the EU principles which require equal treatment of EU citizens.

It remains to be seen exactly how the negotiation between the UK and Spain will be concluded as regards fiscal issues. But, it is considered probable that once the UK is outside the EU, (non-Spanish Resident) British owners of Spanish properties will lose this special EU benefit, and will again be subject to the much more onerous 'national' Spanish Succession Tax rules, as applied by the Central Spanish Tax Office.

This would strip from British (but non-Spanish Resident) owners of Spanish properties, the more ‘generous’ succession tax allowances/ exemptions which the autonomous communities within Spain otherwise currently offer. So, a meagre succession tax-free inheritance amount of just below 16,000 Euros per spouse/ descendent beneficiary is then allowed. Any inheritance received above that value is taxable.

Conclusion

Well advised British owners of Spanish properties (but who are not actually resident in Spain) should therefore review their Spanish Wills and Estate Planning arrangements, to be prepared for this anticipated consequence of Brexit.

The tax mitigation steps which are recommended to prepare for this anticipated consequence of Brexit, are in fact, intelligent estate planning steps to take, even if the outcome of Brexit in this context is less onerous than expected.

So, in other words, a Spanish Wills and Spanish Estate Planning review is recommended as a wise process to go through in the run-up to Brexit- whatever the outcome of negotiations between the UK/ the EU. It is quite possible that the Spanish tax exposure can be reduced- whatever the end result of Brexit.

This general commentary is not intended to be exhaustive; and case-specific legal advice should always be sought.

The Legal 4 Spain team provides a full Wills, Estate Planning and Probate service for properties and other assets anywhere in Spain. We are always happy to provide a competitive cost estimate in the first instance, on a no-obligation basis.



Spanish Assets- Lifetime Estate Planning

Spanish Wills &Estate PlanningPosted by Andrew Fri, March 24, 2017 00:05:50

At the outset of many estate planning cases which involve Spanish assets, advice is required as to the options for ownership changes within the family.

A typical scenario is: a married couple, who have owned their Spanish holiday home for many years, but health/ mobility issues as they have got older, mean that their use of the holiday home is on the decline. But meanwhile, their children/ grandchildren are very happily ‘taking over the reins’!

In terms of estate planning then, the Spanish property starts to become more of a liability than an asset- particularly in terms of potential future inheritance tax liability.

The Spanish property is usually non-income producing (particularly in the light of recently introduced increased bureaucratic requirements for short term lettings in Spain). So, it seems logical that the ownership should be ‘passed down’ within the family, to reduce estate size/ future tax liability- but without any loss of income (and still with the possibility of the continued occasional use of the property by the transferor).

This is logical in theory; but other than the obvious practical considerations (the assumed continued solvency/ marital situation of the recipients; and assumed continued harmony within the family), there are important additional considerations which need to be borne in mind; including:

1. There is a Spanish taxation liability for recipients of gifts of Spanish assets, the calculation of which is broadly similar to Spanish Succession Tax, (but without all the regional allowances and deductions). In other words, the Spanish lifetime gift tax has a similar- or higher- impact on the recipient than if they were to inherit the asset. (This is therefore entirely different in concept to a Potentially Exempt Transfer under the UK IHT regime). There can, of course, be situations in which the Spanish lifetime gift tax does not counteract the fiscal wisdom of a lifetime transfer- for example, if in overall (worldwide) estate planning terms, it is still advantageous to pass the Spanish property down a generation (or two); or if a Spanish property can currently be transferred at a low value- so a relatively low tax amount- when a future increase in value is anticipated. It can be better in that case, for the next generation to ‘enjoy’ the uplift in value, rather than storing up an ever increasing Spanish Succession Tax liability in the original owner’s hands.

2. Further on the Potentially Exempt Transfer point- whilst a UK tax payer making a gift of their Spanish property within the family could constitute a Potentially Exempt Transfer- so over time, it comes out of the worldwide taxable estate for UK IHT purposes- one would need carefully to consider the fiscal consequences of the donor failing to survive the qualifying period to achieve the maximum UK IHT benefit.

3. Also for UK nationals considering making a lifetime gift of a Spanish property within the family, UK ‘gift with reservation’ considerations need to be addressed and factored into the arrangements for any continued use of the Spanish property by the donor. As would be the case with a UK asset which is gifted, but then still used by the donor, the continued use of the asset needs to very carefully documented/ financially accounted for, to avoid the gift failing for UK IHT purposes; and the asset therefore not (fiscally) leaving the donor’s estate.

4. A change of property ownership in Spain can be effected by way of a sale between family members rather than a gift- as often, the rate of tax on a sale is less than the rate of tax on a lifetime gift. However, this type of transaction would inevitably be very carefully scrutinized by the Spanish Tax Authority, to ensure that the sale is not a sham, simply to reduce the taxation basis from lifetime donation down to the sale taxation level. So, the property could not be sold at an undervalue; and the Authorising Notary would actually need to see evidence of funds passing between the the buyer and the seller. And of course, the funds for the transaction cannot be provided by one family member to another within Spain, otherwise that would be a taxable lifetime gift of the money! So, any such transaction has to be extremely carefully orchestrated, to be legally and fiscally compliant. And an assessment has to be made on a case by case basis, as to whether or not this is advantageous when compared to a lifetime donation transfer.

5. A change of Spanish property ownership- even within the family- triggers other costs and taxes, so these need to be factored into the equation. In addition to the donation/ purchase tax, the additional expenses include Notary and Property Registry costs; and Plus Valia tax (a local Town Hall tax payable on property transfers, based on rateable value and length of transferor’s ownership. It can also be necessary to update contracts for property services (water/ electricity, etc), and this can trigger a requirement for re-certification for safety/ compliance purposes; and possible updating/ upgrading of supply apparatus.

The above is a non-exhaustive checklist of the issues. In the majority of the cases we see, whilst a full analysis and discussion can be helpful, the conclusion is that the costs and complexities of a lifetime transfer of a Spanish property within the family outweigh the benefits. In this case, the focus returns to tax efficient Spanish Wills and estate planning.

The Legal 4 Spain team is always available to provide preliminary advice on a no- obligation in estate planning cases involving Spanish assets.



Spanish Succession Tax Update

Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 15:41:44

April 18th, 2016

Introduction

A frequently asked question by new clients prior to making Wills of their assets in Spain, is: ‘How much Succession Tax is payable in Spain?’

A simple enough question; and in the case of UK estates, for example- in the majority of cases- there is a simple enough answer. By contrast in Spain, there are a significant number of potential variables in the
calculation, such that the position is generally very much case- specific. It can therefore be misleading to provide generic advice/ calculations. (But an experienced practitioner will be able quickly to assess- based on the relevant details- and provide an indicative amount or percentage).

In this article, I will briefly review the usual variable factors, to identify the details which are usually required from clients. Then I will examine in more detail, a specific recent legal development as regards the actual location of real estate interests within Spain.

Variable Factors in Spanish Succession Tax (SST) Assessment

The principal factors which will determine the amount of SST which will be payable in a given case include: categories of assets; open market value of assets; actualised rateable value of real estate assets; official value of other assets (eg. vehicles); residential status of deceased; residential status of beneficiaries; number of beneficiaries; relationship/ connection between the deceased and each beneficiary; total deceased estate value; and pre-existing owned asset value by each beneficiary in Spain. The other determining factor for SST calculations which requires particular explanation, given that there have been recent legal changes, is the location within Spain of the real estate assets in a deceased estate.

Effect of Real Estate Location on SST Assessment

Traditionally (for SST calculation purposes), a distinction was made between Spanish property owners who were actually fiscally resident in Spain; and Spanish property owners who were fiscally resident outside Spain (for example, UK families with a holiday home in Spain, for occasional use). Spanish residents had the benefit of the SST exemptions/ allowances of the Autonomous Community (there are 17 in Spain) within which the property was situated for the purposes of calculating SST.

In contrast, non-Spanish residents were allowed no such regional reductions in SST, and were subject to the basic ‘national’ rules. So, even for spouses and descendants, each beneficiary had an SST- free allowance of just 15,957 Euros; and everything beyond that value level was subject to SST in the hands of each individual beneficiary.

A challenge was made against this practice through the EU Courts, on the basis that it created discrimination between European citizens, dependent upon whether they were fiscally resident in Spain or not. This was held to be contrary to the principles of freedom of movement of European citizens/ their capital within Europe.

As such, Spain having duly complied with the EU Ruling, no longer differentiates in SST calculations for European nationals with properties in Spain, between those who are fiscally resident in Spain and those who are not.

So, for UK nationals with properties in Spain, (for as long as the UK remains an EU member), the actual location in Spain of the property in question is of fundamental importance in determining the SST liability. The actual impact of SST varies dramatically between the individual Autonomous Communities within Spain, according to the applicable Autonomous Community’s own allowances and deductions for SST calculations. (As a side issue, many commentators believe that the imposition by different Autonomous Communities of different SST rules also creates discrimination between EU citizens depending on where in Spain their property is situated. No Ruling or Directive has yet been issued against Spain on this front. However, some see it as almost inevitable that eventually Spain will be forced to centralise/ standardise the SST policy across all the Autonomous Communities, to bring an end to this anomalous situation).

But pending any further change, it is important to note the actual location of a Spanish property continues to have a significant impact on SST liability.

Unilateral Relief Treaty

Another issue for UK estate planners to bear in mind in advising clients with Spanish assets, is the availability of Unilateral Relief Treaty credit for the purposes of UK IHT calculation, based on SST actually paid. This enables a final net overall UK IHT/ SST calculation to be made. There are a significant number of rules/ restrictions to bear in mind in this regard- also that the current Treaties are based on the UK’s current status within the EU. Should that change, then it is assumed that the position would need to be revisited; and this could, of course, have an important impact on overall tax rates in the context of inheritance of Spanish assets owned by UK nationals.

The Legal 4 Spain team is always available to provide preliminary advice on a no- obligation basis, in relation to Wills of Spanish assets and Spanish estate planning generally.



Selling a Spanish Property Out of Probate

Sale of Spanish AssetsPosted by Andrew Thu, February 02, 2017 15:36:02

September 21st, 2015

In many cases, whether spouse-to-spouse inheritance or passing down the family line, beneficiaries wish quickly to sell inherited Spanish properties.

In order to complete a Spanish property sale following the death of an owner (or co-owner), the succession process must be completed first.

The seller or sellers must be alive; have legal capacity demonstrated in the personal attendance at the Notary’s on completion of the sale, or be validly represented under Power of Attorney.

In many areas of Spain (even in an active market), the process of selling a property can be fairly lengthy.

There is no problem therefore (in order to get ‘the ball rolling’), in marketing a Spanish property for sale before completion of an inheritance case. But obviously, the legal position must be made clear to any interested parties. Furthermore, any contractual commitment entered into must be of a conditional nature- completion of the sale being subject to prior completion of the inheritance.

The following is a brief summary of the principal ‘paperwork’ and logistical items to attend to, before putting a property on the market for sale.

1. Property Title The original Title Deed (‘escritura’) will be needed- or if it cannot be located, then an official copy should be obtained from the Notary’s. The Registered Title details can be extracted from the Title Deed; and an up to date copy of the Registered Title should be obtained from the Property Registry. In many cases, there are discrepancies between the official Spanish property title and the position ‘on the ground’. So, it is often necessary to get the title updated prior to a sale. Banks (for buyers’ mortgages) and well advised buyers generally will wish to see correct property description in the title. Discrepancies can otherwise seriously impact on achievable value. The title rectification process can be fairly lengthy- usually with architects’ certificates and retrospective Town Hall approval required. So, it is always best as early as possible to be aware of any such issues; and to ensure that they are correctly addressed.

2. Energy Performance Certificate. In order to market a Spanish property for sale, owners are legally required to obtain an up to date Energy Performance Certificate. Competition in the market now for this service means that it is generally a fairly quick and economical exercise.

3. Local Rates Information. The rates details for the property will be needed, together with proof that there are no rates arrears. Reference numbers can usually be found on the receipts for rates (IBI/ SUMA) sent out by the local Town Hall (‘Ayuntamiento’) or the paying bank. Missing information can be obtained from the ‘Catastro’- rates department of the Town Hall.

4. Planning Permission. Such evidence as is available from the time of acquisition of the property will be required, to prove compliance with planning legislation; and permission for the legal occupation of the property. For any missing documentation, official copies- or confirmation of legal compliance- can be obtained from the planning (‘urbanismo’) department of the Town Hall.

5. Community Details. Full details of the Community Administrator should be available, together with a copy of the Community statutes and (if possible) copies of the minutes of recent Community meetings. A summary of Community charges over recent years will be needed; and also details of any forthcoming charges, which have already been notified. The most recent statement/ receipt of Community charges will be needed; and before signing the sale and purchase deed (‘escritura de compraventa’) before the Notary, a Certificate by the Community Administrator confirming that there are no arrears of Community charges will be required.

6. Tax Issues. Capital Gains Tax liability will need to be considered; and also for non-Spanish resident sellers, a tax retention of 3% of the sale price is made on completion; and fairly stringent conditions apply to reclaims, even in the event of a sale at nil gain.

7. Services Contracts. Receipts for the most recent payments of property outgoings (principally electricity/ water; and if applicable, gas) will be required, together with the latest contractual terms of supply- in the absence of copies, these can be obtained from the local offices of the services supply companies. Apportionment between seller and buyer needs to be addressed following completion of the sale.

8. Power of Attorney. If the sellers do not anticipate being personally present in Spain for the legal sale process, then it will be necessary for a Power of Attorney (containing the necessary legal powers to sell and carry out associated administrative tasks) to be signed in favour of the appointed representative/ legal adviser. A well prepared Power of Attorney for the inheritance case should include the relevant provisions, to save duplication.

9. NIE Certificates. NIE (Spanish fiscal) numbers will be required for any registered owner; and up to date NIE certificates will need to be provided to the Notary on completion. These are also required for beneficiaries anyway, so will be available from the inheritance documentation.

10. Mortgage. If there is an outstanding mortgage on the property, details will be required as to the arrangements / requirements of the lender as to redemption; and also any charges which will apply. A mortgagee representative also needs to be available at the Notary’s on completion. So, often this dictates the timing and location of completion.

11. Bank Account. Any Spanish property seller will require a current bank account in Spain into which the completion monies can be paid. Usually a lawyer’s client account will have been opened for the inheritance case and can be used for this. It is advisable to be certain in advance, as to the charges which will be applied in crediting the completion monies to the account; and for the onward transmission of the completion monies. Spanish bank charges can be surprisingly high; and the manner of payment of the purchase price; and onward transmission/ form of Foreign Exchange service used, can significantly affect the costs.

12. Legal Representative. In order to be fully protected in any Spanish property transaction, it is essential to appoint in writing a legal representative, who is independent- both from the other party to the transaction; and also from the estate agent negotiating the transaction. The appointed legal representative must be duly qualified, registered with the applicable Colegio de Abogados (Law Society equivalent); and up to date with their professional practice requirements. They must also carry adequate professional indemnity insurance cover. It is also essential that all communication is in a language which both the property owner and the legal representative speak perfectly. There should be no risk of any misunderstanding. Usually a specialist lawyer will have been engaged for the inheritance case; so they are generally the logical choice for handling the legal aspects of the sale.

13. Estate Agent Appointment. The issue of estate agent appointment in Spain can be something of a potential minefield; and is worthy of an entire separate article! Suffice to say for now that it is an area which needs to be extremely carefully handled and documented.

The above is a non-exhaustive checklist- really just the bare minimum.

The Legal 4 Spain team is always available to provide preliminary advice on a no-obligation basis in relation to probate and/or a sale or purchase of a Spanish property.



Key Points in Preparing for a Spanish Property Purchase

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:35:16

April 28th, 2015

Advance preparation for the purchase of a Spanish property can simplify and speed up the purchase process; and minimise transaction costs.

The following is a reminder of some of the principal ‘paperwork’ items to consider, when dealing with a Spanish property purchase.

1. Appointment of Legal Representative. In order to be fully protected in any Spanish property transaction, it is essential to appoint in writing, a legal representative, who is independent- both from the other party to the transaction and also from the estate agent negotiating the transaction. The appointed legal representative must be duly qualified, registered with the applicable Colegio de Abogados (Law Society equivalent) and up to date with their professional practice requirements. They must also carry adequate professional indemnity insurance cover. It is also essential that all communication is in a language which both the buyer and the legal representative speak perfectly. There should be no risk of any misunderstanding or ambiguity. Advice should be obtained also before signing a legally binding contract, as to the structuring of the purchase, for estate planning purposes.

2. Survey. Even if not required for mortgage purposes, a survey by an independent expert is recommended before any Spanish property purchase- both to verify the condition of the property; but also to ensure that the description of the property (in the Property Registry and Town Hall/ rates department) is consistent with the position ‘on the ground’. This avoids later problems. In many cases, there are inconsistencies, which require correction.

3. Power of Attorney. If the buyer does not anticipate being personally present in Spain for the legal / transactional process, then it will be necessary for a Power of Attorney (containing the necessary legal powers) to be signed in favour of the appointed representative/ legal adviser.

4. NIE Certificates. NIE (fiscal) numbers will be required for any Spanish property buyer; and up to date NIE certificates will need to be provided to the Notary on completion.

5. Bank Account. Any Spanish property buyer will require a current bank account in Spain usually- to deal with the purchase funds; and in any event, for payment of the property outgoings following completion. It is advisable to be certain in advance, as to the charges which will be applied in crediting monies to the account; and for making transfers from the account. Spanish bank charges can be surprisingly high; and the manner of funding the purchase price; and transfer/ Foreign Exchange issues, can significantly affect the costs.

6. Mortgage. If mortgage funding is required, the process should be started as early as possible, as significant delays can otherwise occur- as all aspects of the title to the property and its value as security will be scrutinized by the bank’s advisers; and this can be a lengthy process. Also in undertaking any loan in Spain, full clarity on costs must be obtained- not only in servicing the loan, but also the initial/ set-up costs; and any amounts payable to redeem the loan also.

7. Capital Gains Tax/ Accounting. From the very outset of a purchase, attention should be paid to the collation of all financial information and receipts- e.g. construction/ works invoices and other accounting paperwork- principally to build up a solid record of possible future deductions/ allowances for capital gains tax purposes, for the occasion of a subsequent sale of the property.

8. Title Deeds. Following completion, the buyer should receive an official copy of the Purchase Deed (‘escritura’). The Registered Title details can usually be extracted from the Title Deed; as an up to date copy of the Registered Title is usually appended to the rear of the escritura, once the registered title is updated to reflect the sale and purchase of the property.

9. Planning Permission. Proof of compliance with planning legislation; and permission for the legal occupation of the property will be required. Usually for any missing documentation, official copies- or confirmation of legal compliance- can be obtained from the planning (‘urbanismo’) department of the Town Hall.

10. Rates Information. The full rates details for the property will be required, together with proof that there are no rates arrears. Reference numbers can usually be found on the receipts for rates (IBI/ SUMA) sent out by the local Town Hall (‘Ayuntamiento’) or the sellers’ paying bank. Missing information can usually be obtained fairly easily from the rates (‘Catastro’) department of the Town Hall. An apportionment of rates will need to be made between the seller and the buyer on completion.

11. Community Details. Full details of the Community Administrator will be required, together with a copy of the Community statutes and (if possible) copies of the minutes of recent Community meetings. A summary of Community charges over recent years will be needed; and also details of any forthcoming charges, which have already been notified. The most recent statement/ receipt of Community charges will be needed; and before signing the sale and purchase deed (‘escritura de compraventa’) before the Notary, a Certificate by the Community Administrator, confirming that there are no arrears of Community charges will be required. An apportionment of Community charges will need to be made between the seller and the buyer on completion.

12. Services Contracts. Receipts for the most recent payments of property outgoings (principally electricity/ water; and if applicable, gas) will be required on completion, together with the latest contractual terms of supply- in the absence of copies, these can be obtained from the local offices of the services supply companies. Following completion, the services contracts will need to be transferred to the buyer- services apparatus updating works may be required, so the advice of an independent expert is recommended before a contractual commitment is made. An apportionment of costs will need to be made between the seller and the buyer on completion.

13. Energy Performance Certificate. The seller is required to provide an energy performance certificate in relation to the property on completion.

14. Wills. Every purchaser of a Spanish property should ensure that they have an up to date validly executed and registered Spanish Will, which accurately reflects their wishes for the succession of their Spanish property interest in the event of their death.

15. Non-Spanish Resident Tax Returns. Non-Spanish resident owners of Spanish properties have to make an annual tax declaration in Spain. Usually a fiscal adviser is appointed to deal with this, following completion of the purchase.

The above is a non-exhaustive checklist- really just the bare minimum.

The Legal 4 Spain team provides a full property conveyancing service (buying and/or selling) throughout Spain. We are always happy to provide a competitive cost estimate at the outset of a transaction on a no-obligation basis.



Avoiding Legal Problems with Spanish Property Transactions

Sale of Spanish AssetsPosted by Andrew Thu, February 02, 2017 15:34:25

April 6th, 2015

As the Spanish property market news headlines switch to recovery mode- with sales on the increase, profits to be made; so the prominence recedes of the Press focus during the recessionary period, of the supposedly ‘high risk’ nature of Spanish property ownership- from demolition orders for planning defects; through properties falling down with no right to compensation for distressed owners; to unscrupulous intermediaries disappearing with client funds.

But the common theme throughout the previously reported disaster cases must not be forgotten. In the vast majority of problem cases of Spanish property ownership, there was no independent professional legal representation at the time of purchase or sale; or perhaps worse still, reliance upon unqualified/ incompetent legal representation.

Obviously non-Spanish owners of Spanish properties wouldnever dream of property dealings in their own country without proper legal representation. So it is quite astonishing that in Spain, often with no knowledge of the legal system or even the language, private investors decide to ‘take a flyer’ in terms of the detail of the Spanish legal process!

It is precisely because of the well-documented risks in Spanish property ownership and the frequent lack of clarity as to transactional costs and taxes, that independent professional legal representation is essential for Spanish property purchases and sales.

With proper professional advice, instead of taking a high-risk gamble, owners of Spanish property can invest intelligently and securely in real estate in Spain.

Some key points for buyers and sellers of Spanish properties:

1. Ensure that your lawyer speaks your language fluently. For a significant investment such as real estate, everything must be completely clear.

2. Ensure that your lawyer is qualified and registered in Spain with the Colegio de Abogados, to be certain of professional regulation. (And check that there is adequate professional indemnity insurance in place to cover the risk of anyproblem with their work).

3. Ensure that your lawyer is dual qualified and professionally regulated both in Spain and in your own country, to have a full grasp of all the tax implications of your Spanish property investment. This enables dealings in Spanish real estate to be conducted in the most tax efficient way, having regard to your tax liabilities both in Spain and crucially, also in your own country.

4. Ensure that your lawyer acts independently from the estate agent, developer or other parties to the transaction. If there is any connection, ensure impartiality and the usual professional clearance of anyrisk of conflict of interests.

5. Ensure that your lawyer provides you at the outset with a clear written budget of all costs and taxes; and undertakes to follow up at the end of the case with a final, clearly detailed cost and tax summary.

6. Ensure that your lawyer operates an individually designated client accounting system for your full financial security.

7. Ensure that your lawyer provides a written report on title, well in advance of a contractual commitment, confirming all title and planning information in relation to the property. All parties to a transaction must be completely clear on all aspects before a contractual commitment is made.

8. Ensure that an initial private contract is entered into, with a deposit paid on exchange of contracts. This provides security for both parties; and protection against wasted/ abortive costs and unscrupulous behaviour in terms of last minute negotiations.

9. Ensure that your lawyer (usually in conjunction with the estate agent) attends to the transfer of services to the property following completion.

10. Specifically ask your lawyer to confirm the above points, to ensure that nothing is overlooked; and that you are fully protected by your legal representation.

The above is a non-exhaustive checklist- really just the bare minimum.

The Legal 4 Spain team provides a full property conveyancing service (buying and/or selling) throughout Spain. We are always happy to provide a competitive cost estimate at the outset of a transaction on a no-obligation basis.



Non-Spanish Residents’ Tax Returns for Spanish Property Owners- Update

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:33:38

March 5th, 2015

Overview

Every non- Spanish resident owner of a property in Spain has to file during each calendar year (in respect of the immediately previous calendar year), a tax return in Spain (Form- Modelo 210). It is a simple matter, involves a relatively modest cost; and (generally) a fairly modest amount of tax to pay, based on the property’s rateable (Catastral) value.

Background

Although it is obligatory for these tax returns to be made, the follow-up by the Spanish Tax Authority against those who have failed to declare in the past has been fairly limited in practice; and the consequences not disturbingly significant.

But this is changing.

Purchasing or Inheriting a Spanish Property Puts The New Owner ‘On The Radar’

Very simply (and quite unsurprisingly) technological advances in the manner of operation of the Spanish Authorities- and therefore improvements in communication between them- are occurring at a rapid pace.

It is therefore naïve in the extreme to assume that dealing with a Spanish asset through one Spanish Authority does not trigger awareness in others.

Shortly following completion of Spanish property purchases and inheritances now, those acquiring the property are immediately notified of the awareness of the change of ownership by the corresponding tax authorities. (A helpful ‘pointer’!)

Consequences of Failure to File Non-Spanish Residents’ Returns

1. A significant issue (which we are now seeing occurring automatically) is that if a filing date is missed, a recalibrated demand is sent out including penalties/ interest. The powers of enforcement for failure to pay can be extreme- legal action, embargoed accounts/ assets; ultimately the facility for the Spanish Tax Authority to seize and auction assets to cover tax debts due. (Extreme cases obviously, but the point being that the Spanish Tax Authority does have- and does exercise on a case by case basis- extensive rights and facilities to recover tax debts).

2. A further potentially alarming consequence is something which is coming as a nasty surprise for many sellers of Spanish properties who have failed to file their annual tax returns.

When a non-Spanish resident sells a Spanish property interest, 3% of the declared sale price is retained for the Spanish Tax Authority. This is, in effect, on account of Spanish capital gains tax liability. But if the retention is greater than the actual tax liability, the seller can reclaim the tax.

But the Spanish Tax Authority is now scrutinising the tax return history in dealing with reclaims- and if found to be inadequate or incomplete, the tax retention on sale may not be refunded.

So, 3% of the property sale price can be ‘lost’ (even if there is no gain on the sale) for a simple failure to make this tax return. To put that in context, on recent property sale we saw for 900,000 Euros (at a loss) the seller waved goodbye to 27,000 Euros, for this administrative oversight.

Particular attention therefore needs to be paid to this issue in the context of (and indeed following) a Spanish property sale.

Conclusion

The Spanish Tax Authority ‘means business’ over this. Compliance is, in reality, neither complicated nor expensive. We will be happy to refer enquiries to associates who provide this service extremely efficiently and cost-effectively; and their service being provided in English, for non-Spanish speakers.

This general commentary is not intended to be exhaustive; and case-specific legal advice should always be sought.

Please speak to us at Legal 4 Spain when considering a sale or purchase of a Spanish property, to ensure you have the best quality legal representation to protect your interests fully; but always at a competitive cost.



Avoiding Excessive Spanish Bank Charges- Part 2- Foreign Exchange

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:32:46

January 30th, 2015

Having previously covered the concerns many owners of Spanish properties express regarding the level of Spanish bank charges, it has been recommended that the issue of Foreign Exchange (FX) should also be specifically mentioned.

The current weakness of the Euro currency is fueling interest in the Spanish property market, where- even with the currency issue on one side- prices in many areas remain attractively low.

However, the converse of this happy consequence of Euro weakness for inward investors, is that sellers of Spanish properties wishing to repatriate funds to their countries outside the Eurozone, are facing unattractive exchange rates- which can impact strongly on final returns from Spanish property sales.

But an important (and potentially very costly) issue which faces all individuals coming into or going out of the Euro currency is often overlooked. This is the process and cost of FX- particularly in the context of larger transactions, e.g. buying and selling properties. It comes as a shock to many, to find that the total cost of a High Street bank to High Street bank transfer where currency changes between Euros and Sterling (for example) can be as high as 5%. That is a 5% ‘loss’ to the individual making the transfer!

And a significant proportion of this cost represents the banks’ profit in the FX trade. Indeed, several major banks make a point of emphasising their free or low cost electronic transfers in and out of the Eurozone- superficially making this option appear to be economical. However, as the real profit for the bank is in the FX trade itself, the relatively tiny cost to the bank of the actual electronic transfer is of no real consequence in larger transactions.

It is therefore advisable before committing to an FX transaction, to be absolutely clear (based on comparing the actual amount debited from your account in one country; to the final net amount which will be credited to your account in another and considering official FX rates) as to the cost to you of the FX transaction. This also enables a like for like comparison between the cost of your High Street bank to High Street bank transfer; and the deal offered by an independent FX specialist.

Of course, before engaging an independent FX specialist to save money on the FX trade, it is essential to be assured of the legal and regulatory standing of the FX specialist in question, to avoid the obvious risks and pitfalls.

But professionals engaged in transactions in Spain for foreign nationals where there are frequently FX requirements, will generally be able to recommend a pre-vetted independent FX specialist, to assist in minimising the otherwise hidden costs in the FX process.

Please speak to us at Legal 4 Spain when considering a sale or purchase of a Spanish property- or if you have any FX requirement- as this is an area we will be able to assist, to protect your interests fully; but always at a competitive rate.



Avoiding Excessive Spanish Bank Charges

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:31:27

January 5th, 2015

Since we covered this subject previously, there have been significant changes within the Spanish banking sector, principally to save failing Spanish banks. The Press has has then had a field day as directors’ dealings and conduct are scrutinised, with unsavoury findings.

But notwithstanding all this, there seems to have been little improvement- complaints of poor customer service and excessive charges are continually levelled at the remaining Spanish banks. This is particularly the case from non- Spanish account holders, who are used to free current account banking; and very modest fixed rate charges for electronic funds transfers.

Nearly all Spanish property owners are obliged to have a Spanish bank account, to pay property outgoings; and also to have a Euro banking facility, for general expenditure in Spain.

But invariably, they are shocked at the high charges for holding and operating a Spanish bank account. And then the real sting for Spanish bank customers can come when a funds transfer needs to be made, either in or out of a Spanish bank account.

Two cases have been referred to us recently- one where a client made a transfer from their Spanish Euro account to their UK Euro account (having sold their Spanish flat), and the Spanish bank sought to charge 1,000 Euros for the transfer. Another, where an inward receipt of Euro funds from a UK Euro account was charged at 300 Euros. Both cases involved major Spanish banks; and in both cases when challenged, the banks substantially reduced the charges.

It is curious that Spanish banks should purport to charge such high fees in the first instance; and then with little discussion, simply back down.

The first issue is quite straightforward. UK nationals in particular, are accustomed to fairly modest fixed fees (or even zero cost) when making electronic payments; and routinely zero cost for electronic receipts of funds. In Spain however, when the electronic transfers are international, (even transfers in Euros), the default position in many cases, is for the bank to try to charge on a percentage basis, rather than a fixed fee.

Clearly this is commercially unjustifiable; as the process/ cost to the bank is identical, whether the transfer is for 10,000 Euros or 1,000,000 Euros. So logically, a standard fixed fee should be applied.

And also, the implementation of the SEPA (Single Euro Payments Area) European Union Regulations, is certainly a helpful factor for Spanish bank customers who are concerned about high charges.

In Regulation 924/2009, the European Parliament decreed in particular, that charges for electronic payments between EU member states (of up to 50,000 Euros) must not exceed the applicable charge for an equivalent national transfer.

As national transfer charges are very much lower (and generally zero for electronic receipts) the SEPA Regulations should be introduced into the discussion with your Spanish bank as to applicable charges, before any significant transfer into or out of your Spanish bank account is authorised.

Quite possibly for larger funds transfers, (and depending on the bank account terms) splitting the payments into smaller amounts (sub- 50,000 Euros) can considerably reduce the charges. Indeed, the most PR conscious Spanish banks are already including in their standard terms, free transfers for up to 50,000 Euros within Europe, waiving even the limited fee they would otherwise be entitled to charge under the SEPA Regulations.

These are very positive developments for Spanish bank customers; but during this process of realisation/ change, it remains necessary to discuss and negotiate charges with your Spanish bank before authorising significant funds transfers, so as not to be caught by the bank’s default charging structure.

If necessary, new bank account opening in Spain is now easier than ever before. A small amount of research and paperwork can lead to huge savings, by moving to an alternative Spanish bank that offers competitive charges as a standard feature.



Preparing for Selling a Spanish Property

Sale of Spanish AssetsPosted by Andrew Thu, February 02, 2017 15:30:36

December 2nd, 2014

Advance preparation for the sale of a Spanish property can simplify and speed up the sale process; and minimise transaction costs.

The following is a reminder of the principal ‘paperwork’ items to attend to, before putting a property on the market for sale.

1. Title Deeds. The original Title Deed (‘escritura’) will be required- or if it cannot be located, then an official copy should be obtained from the Notary’s. The Registered Title details can be extracted from the Title Deed; and an up to date copy of the Registered Title should be obtained from the Property Registry. Sometimes there are matters which may require attending to before the property can be sold- for example, references to previous mortgages may need clearing off the Registered Title; or there may be inheritance issues which require completion; or title/ property description corrections.

2. Energy Performance Certificate. In order to market a property for sale, Spanish property owners are legally required to obtain an up to date Energy Performance Certificate. Usually, estate agents are able to recommend local authorized certificate providers.

3. Rates Information. The full rates details for the property will be required, together with proof that there are no rates arrears. Reference numbers can usually be found on the receipts for rates (IBI/ SUMA) sent out by the local Town Hall (‘Ayuntamiento’) or the paying bank. Missing information can be obtained from the ‘Catastro’- rates department of the Town Hall.

4. Planning Permission. Such evidence as is available from the time of acquisition of the property will be required, to prove compliance with planning legislation; and permission for the legal occupation of the property. For any missing documentation, official copies- or confirmation of legal compliance- can be obtained from the planning (‘urbanismo’) department of the Town Hall.

5. Community Details. Full details of the Community Administrator should be available, together with a copy of the Community statutes and (if possible) copies of the minutes of recent Community meetings. A summary of Community charges over recent years will be needed; and also details of any forthcoming charges, which have already been notified. The most recent statement/ receipt of Community charges will be needed; and before signing the sale and purchase deed (‘escritura de compraventa’) before the Notary, a Certificate by the Community Administrator confirming that there are no arrears of Community charges will be required.

6. Capital Gains Tax/ Accounting. If applicable, (check with fiscal adviser) all construction/ works invoices and other accounting paperwork should be collated to be ready to provide along with fiscal submissions relating to Capital Gains Tax liability- principally to ensure readiness for claiming any applicable deductions/ allowances.

7. Services Contracts. Receipts for the most recent payments of property outgoings (principally electricity/ water; and if applicable, gas) will be required, together with the latest contractual terms of supply- in the absence of copies, these can be obtained from the local offices of the services supply companies.

8. Power of Attorney. If the sellers do not anticipate being personally present in Spain for the legal sale process, then it will be necessary for a Power of Attorney (containing the necessary legal powers) to be signed in favour of the appointed representative/ legal adviser.

9. NIE Certificates. NIE numbers will be required for any registered owner; and up to date NIE certificates will need to be provided to the Notary on completion.

10. Mortgage. If there is an outstanding mortgage on the property, details will be required as to the arrangements / requirements of the lender as to redemption; and also any charges which will apply.

11. Bank Account. Any Spanish property seller will generally require a current bank account in Spain into which the completion monies will be paid. It is advisable to be certain in advance, as to the charges which will be applied in crediting the completion monies to the account; and for the onward transmission of the completion monies. Spanish bank charges can be surprisingly high; and the manner of payment of the purchase price; and onward transmission/ form of Foreign Exchange service used, can significantly affect the costs.

12. Legal Representative. In order to be fully protected in any Spanish property transaction, it is essential to appoint in writing a legal representative, who is independent- both from the other party to the transaction and also from the estate agent negotiating the transaction. The appointed legal representative must be duly qualified, registered with the applicable Colegio de Abogados (Law Society equivalent) and up to date with their professional practice requirements. They must also carry adequate professional indemnity insurance cover. It is also essential that all communication is in a language which both the property owner and the legal representative speak perfectly. There should be no risk of any misunderstanding.

The Legal 4 Spain team provides a full property conveyancing service (buying and/or selling) throughout Spain. We are always happy to provide a competitive cost estimate at the outset of a transaction on a no-obligation basis.



Dealing With Spanish Probate

Probate in SpainPosted by Andrew Thu, February 02, 2017 15:29:55

November 12th, 2014

In preparation for dealing with the administration of estates which include Spanish assets, it can be useful to have an overview of the Spanish probate process- to be prepared; and to avoid surprises.

Ten key procedural stages in the Spanish probate process are:

1. Collating Documentation and Information. As with any estate succession, thorough preparation at the outset is essential. Principal items to locate/ cover for Spain typically include: Death Certificate; Will; title deeds for Spanish properties (‘escrituras’); most recent property rates receipt; Spanish registered vehicle documentation; asset valuations; bank account details (and official extract covering the date of death); full details/ date of death statements for any Spanish loans, mortgages, investments; and Spanish fiscal number certificates (N.I.E’s) for deceased and beneficiaries. If the deceased left no Spanish Will, then an official sealed copy of the UK Grant (with UK Will annexed, if applicable) may be required; and possibly further proof of legal status and relationship with the deceased (e.g. Birth and Marriage Certificates).

2. Signature of Power of Attorney. A professional Spanish representative is generally appointed under Power of Attorney, in order to minimise inconvenience for beneficiaries, as the Spanish inheritance process involves a significant amount of personal attendance. UK estate administrators may also need to be represented in Spain (under Power of Attorney), in addition to beneficiaries. Usually, experienced Spanish practitioners will have arrangements in place with UK Notaries’ Society members and The Foreign and the Commonwealth Office, to enable the Power of Attorney to be signed just as easily in the UK as in Spain- for signatories’ convenience. Generally, the entire Spanish legal process can be conducted without the need for UK executors/ beneficiaries having to go to Spain.

3. Obtaining N.I.E’s. As indicated, a Spanish fiscal number is required by each estate representative/ beneficiary. Often seen as a significant hurdle, but experienced Spanish practitioners will have a system in place for these to be simply and rapidly obtained- including within the UK.

4. Spanish Central Wills Registry Search. An obligatory early step in the process is that a search must be carried out to confirm the existence or absence of a Spanish Will. If it is revealed that there is a Spanish Will, but no official copy can be found; then usually a copy can be obtained via the Spanish Notary.

5. Certification of Law and Official Translations. Any non-Spanish legal documents which are required to prove beneficial entitlement (Death Certificates; Grants of Probate, etc) may need to be Apostilled by the Foreign and Commonwealth Office, in order to be legally admissible in Spain. In some cases, they must also be translated and certified by an official translator. An advantage of the existence of a valid separate Spanish Will (if there is one), is that it reduces the complexity and extent of the documentation, which has to be produced to the Spanish Authorities. In many cases, the Authorising Spanish Notary will require a Certificate of English law, confirming the legal entitlement of the beneficiaries and/or to provide any case-specific comfort as may be required on cross-border legal issues.

6. Opening of Client Bank Account. It is fundamentally important before provision of client funds, to ensure that the Spanish probate representative operates a client accounting policy/ facility which fully protects the estate and the beneficiaries. The standard obligatory requirements in Spain can be less extensive than in the UK.

7. Execution of the Inheritance Deed before the Authorising Spanish Notary. Generally, the procedural urgency in achieving the signature of the official Inheritance Deed and concluding the Notarial process, is that this then enables the Spanish Succession Tax to be paid. Payment of the tax must be made within 6 months of the date of death, in order to avoid interest/ penalties accruing on the tax debt. As the tax can generally only be paid once the Spanish Notarial process is completed, it is critically important that the Spanish process is commenced at the very earliest stage possible; and proactively pushed forward, to settle matters with the Notary as quickly as possible. Otherwise, there is a danger that an unnecessarily inflated Spanish tax liability will arise.

8. Payment of Tax. It is important to have obtained from the Spanish practitioner at the outset of the case, a detailed estimate of all applicable costs and taxes. This ensures adequate preparation time for provision of funds, to enable the tax payment to be made immediately following the signature of the official Inheritance Deed. In addition to Spanish Succession Tax, Plus Valia Tax may also be payable. This is a local Spanish Town Hall tax, payable upon the transmission of a property interest. Most Spanish Town Halls charge this on inheritance, as well as property sales. It is calculated by reference to the Spanish property’s rateable value; and the period of ownership. Traditionally, this was a nominal amount. But with revisions to rateable values in particular, in some areas of Spain it can be a very substantial amount.

9. Banks. Dealing with bank accounts in Spanish probate cases can often be the longest and most frustrating part of the process, but this can only be fully addressed once the Inheritance Deed has been signed and any Spanish Succession Tax paid. Succession of bank accounts is not addressed at local bank branch level in Spain. The bank’s central legal department instead usually deals with succession matters. Direct contact with the bank’s central legal department is generally fairly difficult. For the Spanish banks, succession work is decidedly low priority.

10. Property and Vehicle Registries. Following the signature of the Inheritance Deed; and payment of any Spanish Succession Tax; applications can be made to the Property and/or Vehicle Registries, in order for the Spanish estate assets to be registered in beneficiaries’ names. The Property Registration process in particular, involves a further level of legal scrutiny. So, in some cases, additional requisitions can be raised at this stage, beyond matters covered with the Authorising Spanish Notary earlier in the process.

Conclusion.

The Legal 4 Spain team offers a full Spanish probate service; and is always available to provide preliminary advice on a no-obligation basis in relation to probate cases, which include Spanish assets.



Reclaiming Wrongfully Charged Spanish Succession Tax

Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 15:29:12

November 2nd, 2014

Introduction

As covered previously, the European Court of Justice has ruled that Spain’s practice of charging non-Spanish resident beneficiaries Spanish Succession Tax (SST) at a different rate from Spanish residents is discriminatory; and therefore unlawful.

Entitlement to demand a repayment of previously paid SST

Thus far, there are no exhaustive guidelines. But in principle, where a non- Spanish resident has accepted an inheritance of Spanish assets and has paid SST during the last 4 years at a rate which is higher than they would have paid had they been Spanish resident, then they are entitled to demand a repayment of the difference between the non-resident rate and the resident rate.

For these past ‘discriminatory’ cases, it remains to be seen whether a specific, official process will be established in Spain, to enable repayments of previously paid SST to be reclaimed.

In the absence of a clear administrative process in Spain for demanding a repayment in these circumstances, an individual legal action needs to be mounted by each beneficiary who considers that they have overpaid SST and are therefore entitled to demand a repayment.

And the legal right in these cases to demand a repayment is time critical, so the right could be lost unless prompt action is taken.

Issues with the legal process for reclaiming SST

The assessment of eligibility for making a claim can be a fairly complex and time consuming exercise. In particular, there have been changes in the way several of the Spanish autonomous communities have charged SST over the last few years (mainly reducing allowances for residents). This means that in a surprising number of non-resident beneficiary cases, despite significant SST charges, no discrimination can be shown.

Pending official guidelines, it is considered to be essential that cases must be fully prepared and demands submitted within 4 years of the date of the original tax payment, otherwise the legal right to demand a repayment could be lost.

It should also be noted that the reclaim would only be in relation to SST, not in relation to other Spanish probate costs and taxes (eg. Plus Valia tax).

It is considered unlikely that the Spanish Tax Authority will establish a rapid, simple and economical system for processing applications for repayment. There will inevitably be detailed documentation requirements; and certification of a receiving bank account will be required.

The reclaim process is therefore likely to be fairly lengthy. The consensus is that the period from commencing the case to reaching a conclusion is likely to be typically in the region of 3 years.

The process of demanding a repayment is also likely to be fairly costly. Preliminary estimates are that, to assess/ initiate the process will be likely to involve a cost of a minimum of 250 Euros per claim. And then the total cost of the reclaim process could be in the region of up to 20-30% of the amount reclaimed in total. (Although some interest may be recoverable, partly to offset the costs).

If a credit for the SST paid has been obtained in the beneficiaries’ own country (for example, against UK IHT), then this could undermine the Spanish case for demanding a repayment.

From initial discussions with specialist practitioners in this area, the range of minimum cases (below which they would not consider it worthwhile taking a case on) is between 1,500 Euros- 2,500 Euros SST paid (per beneficiary).

Of course, any entitled beneficiary can pursue their own claim for any amount of SST which is reclaimable- with or without professional representation. There is no minimum level. But independent professional advice is always recommended, to ensure the case is worthwhile pursuing; and is handled correctly.

Spanish legal proceedings generally can be lengthy and complex; and therefore costly. So it is essential at the outset of any Spanish legal case, to have a clear understanding of the costs which will be incurred; and the chances of success, to avoid the risk of ‘throwing good money after bad’.

Conclusion

For Spanish probate cases currently in progress, the obligation remains for beneficiaries to pay SST according to the current Spanish law (even though not EU compliant); and then (maybe) subsequently have the right to make a reclaim.

From the Spanish property owner or beneficiary’s point of view, this situation is far from satisfactory. But the EU Court Ruling has unavoidably created a ‘legal limbo’; pending fresh fiscal legislation/ directions from Spain.

Many practitioners have concluded that the SST reclaim process is likely to be so fraught with potential issues- delays, costs, procedural uncertainty, that the number of individuals who will pursue cases- and see them through to a successful conclusion- will be relatively small.

It is anticipated also that some beneficiaries will conclude that, irrespective of the potential legal entitlement, they have drawn a line under completed Spanish probate cases; and have little interest in reopening the cases; and/ or taking on the cost and stress of embarking upon this Spanish legal process.

But, for those individuals who do wish to pursue an SST reclaim, it is recommended to be in the hands of a specialist professional, as any procedural errors could be fatal to the claim. Another risk inherent in reclaim opportunities of this nature is that non-specialist operators tend to ‘spring up’, even taking on claim cases with no real merit, but charging hefty up-front fees. As with all professional services providers, some investigation as to background, reputation and professional regulation/ indemnity cover is essential.

This general commentary is not intended to be exhaustive; and case-specific legal advice should always be sought.



Costs of Selling a Spanish Property

Sale of Spanish AssetsPosted by Andrew Thu, February 02, 2017 15:28:29

October 14th, 2014

Before setting a sale price, Spanish property owners who are considering selling should be aware of all the associated costs and taxes, in order to be able accurately to calculate the net amount they will receive from the sale.

The costs and taxes on selling a Spanish property can typically be in the range of 10-15% of the sale price, in total. The following is a reminder of the principal areas to consider.

1. Estate Agency Fee. The seller usually covers the estate agency fee. The applicable percentage of the fee needs to be individually negotiated in each case. It will be determined by the nature and location of the property; its price; and the detail of the service which will be provided by the estate agent. The typical range of estate agency fees for ‘ordinary’ Spanish property sales is 3-5% plus IVA. (A higher % applies if it is a low value transaction).

2. Energy Performance Certificate. In order to market a property for sale, Spanish property owners are legally required to have an up to date Energy Performance Certificate. Usually, the estate agent will be able to recommend a local authorized certificate provider. In terms of pricing, it is a fairly competitive market now; and there are a number of certificate providers covering wide areas, so it is easy to determine a fair price for this service.

3. Tax Retention on a Spanish property transfer. When a non-Spanish resident owner of a Spanish property sells, the buyer has to retain 3% of the declared sale price and pay this to the Spanish Tax Authority. So, this is a 3% deduction from the amount the seller receives. In some cases, the retention can be reclaimed subsequently, but the reclaim process can be quite convoluted and expensive to pursue.

4. Plus Valia Tax. When there is a transmission of a Spanish property interest, the local Town Hall is entitled to charge Plus Valia Tax, which is calculated by reference to the rateable value of the property and the period of ownership. In a sense, it is a hybrid between a stamp duty and a local level capital gains tax. The amounts in question vary widely from area to area; and in some areas the charge is surprisingly high. So, it is always essential to have a clear idea in advance of the Plus Valia which will be payable on a sale.

5. Community Administrator Certification. It will ordinarily be a term of the sale that the seller pays all outstanding community charges up to the date of completion. This is confirmed by the provision of a Community Administrator’s Certificate, which the seller procures (and pays for). The charge for the provision of this certificate typically ranges from 50-100 Euros.

6. Capital Gains Tax. A seller of a Spanish property might potentially face an obligation to account for any profit in Spain and/ or in their home country (if a non-Spanish resident). But this is a case-specific issue, so advice should always be sought in both jurisdictions before proceeding with a sale, to ensure full fiscal compliance.

6. Legal Fees. Expert independent legal representation is essential when selling a Spanish property (please see our previous Blogs for details). The cost depends on the value of the transaction and its complexity. But typically, 0.75- 1% plus IVA (usually subject to a minimum fee level) should be budgeted for.

7. Bank Charges. Bank charges in Spanish property transactions can be surprisingly high. Some Spanish banks even charge to receive funds; and always to transfer funds following completion. Often the charge is a significant %. So, this should be confirmed in advance. If net sale proceeds are to be repatriated to the seller’s country of origin, then (if outside the Eurozone), a specialist Foreign Exchange broker should be used. This will improve on the direct bank to bank FX rate; and there is then greater control over the timing of the transfer; and agreement of the applicable FX rate. This specialist service can also be useful, in case Tax Authority source of funds certification is required.

8. Mortgage Redemption Charges. If the property is owned subject to a mortgage, then before agreeing a sale, the terms of redemption of the mortgage (or its transfer to another property) must be confirmed with the bank. Sometimes a substantial redemption fee can be payable.

9. Notary Costs. Although technically this should be a shared cost, it is often the case that the buyer pays the Notary fee. But sellers need to be aware that this is an area of possible negotiation. The amount of the Notary fee will depend on the value and complexity of the transaction. But we recommend that the budgeted figure is around 0.75-1% plus IVA. So it is important to agree before exchanging contracts, how this cost will be borne.

10. Property Registry. The buyer almost always bears the Property Registration cost, so this should not be an issue of concern to the seller. But as an aside, the Property Registration cost also depends on the size/ complexity of the transaction; and also the type of property and its location. The Property Registration cost is typically around 0.5-0.75%.

In conclusion therefore, most well advised Spanish property owners will assume a typical range of 25-30% to cover the ‘in and out’ costs and taxes when assessing the total cost of buying and then later selling a Spanish property.

This general commentary is not intended to be exhaustive; and case-specific legal advice should always be sought.

The Legal 4 Spain team provides a full property conveyancing service (buying and/or selling) throughout Spain. We are always happy to provide a competitive cost estimate at the outset of a transaction on a no-obligation basis.



Spanish Succession Tax Under Review Following European Court Ruling

Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 15:27:50

September 29th, 2014

Overview

The European Court of Justice has ruled that the Spanish Tax Authority’s succession tax system conflicts with the European Union principles of freedom of movement of EU individuals and circulation of money within the EU.

Spain must comply with this EU Court Ruling by making changes to its succession tax system, to become EU compliant within 6 months. Otherwise, Spain will face financial penalties.

As yet, there has been no formal response from the Spanish Tax Authority as to its proposals to comply with the EU Court Ruling.

Background

Spanish Succession Tax is not administered centrally; or charged in a uniform way nationally; or at a single rate; or subject to universal national allowances and reductions.

In many countries, the calculation and charging of succession taxation is simplicity itself. However in Spain, it is a highly complex system, which creates a great deal of uncertainty, inconsistency and controversy.

At the heart of the complexity is the fact that for Spanish residents, the responsibility for succession tax administration lies with the 17 individual autonomous communities. Each autonomous community has discretion as to charging basis; practice; and allowances/ exemptions.

This fiscal quagmire alone creates bewildering inconsistencies across Spain.

But the further peculiarity, (central to the EU Court Ruling), is that for non-Spanish residents, succession tax is administered by the Central Spanish Tax Office, which strips from non-Spanish residents, the more ‘generous’ succession tax allowances/ exemptions which the autonomous communities otherwise offer. So, for non- residents, a meagre succession tax-free inheritance amount of just below 16,000 Euros per spouse/ descendent beneficiary is allowed. Any inheritance received above that value is taxable.

And as a side issue of great consternation, it has been acknowledged that many Spanish families living in Spain also suffer discrimination under the current system, according to where (in Spain) their family members live.

So the current system not only unlawfully discriminates against non- Spanish owners of Spanish properties. For Spanish families also, its haphazardness can be financially ruinous.

The ball is now in Spain’s court, to see how they will react, in order to bring Spanish Succession Tax into line with the EU requirements.

It remains to be seen whether this will be by centralizing/ standardising administration or (if that is deemed too radical), at least a harmonisation of practice across Spain; and/ or a switch of criteria from individual place of residency to asset location.

Commentary

• A period of just six months is very tight indeed for Spain to implement a complete overhaul of- and radical change to- its succession tax system.
• With Spanish elections on the horizon, it is perhaps unlikely the current Spanish Government will progress matters with great dynamism. Any change will benefit some, but disadvantage others. Succession tax can be an emotive issue for voters.
• If the six month deadline is not met, then Spain will face EU financial penalties; but meanwhile, continue to administer succession tax on the current basis.
• Pending fresh Spanish legislation/ directives, any individual wishing to challenge a Spanish Succession Tax charge or to reclaim previously paid tax, will presumably need to bring their own legal case, citing the EU Court Ruling.
• If (to comply with the EU Court Ruling) Spain reduces the succession tax impact on non-residents, to be equal to the current impact on residents, then not only would that add fuel to the fire for a potentially massive number of reclaimants, but this would guarantee a reduced future fiscal income; therefore being hugely expensive for Spain.
• Conversely, if Spain were to increase the succession tax impact on residents, to be equal to the current impact on non-residents, then the issue of demands for refunds could be conveniently complicated. And overall, this would significantly benefit Spain by increasing future succession tax revenue.
• So, a feasible strategy for Spain could be: to leave matters as they are for now; and just pay any EU fine for interim non-compliance. Then, after the elections, introduce new national regulations to standardize succession tax, with the emphasis on asset location rather than individual residency. And in so doing, phase out resident reductions, to equalize the impact of succession tax across the board.
• Perhaps a cynical posture, to react to the EU Court Ruling by increasing succession tax impact. But with the stark choice between potentially facing a huge fiscal loss; and increasing fiscal revenue, it would be surprising for Spain to choose the former option.
• Ultimately therefore, the EU Court Ruling could mark a turning point, from which the overall impact of succession taxation in Spain, (although standardized in some form, to satisfy EU requirements), actually increases- in particular for Spanish residents.
• In terms of reclaims for previously paid tax, even if a clear reclaim route is established, if the reclaimants had received credits against fiscal liability in their own countries (e.g. pursuant to double taxation relief treaties), it is assumed that any Spanish reclaim application would be denied.
• It is also likely that if a clear reclaim route is established, the process itself would be complex, lengthy and therefore expensive to pursue. It is unlikely that the Spanish Authorities would be inclined to make it a rapid, simple and economical process.

Conclusion

As regards Spanish inheritance cases currently in progress, the current Spanish legal/ fiscal obligation continues, pending fresh Spanish legislation/ fiscal directions. So, inheritors of Spanish assets are legally obliged to continue to pay succession tax on the basis of the current system- even though it has been determined by the European Court of Justice to be operating contrary to EU rules!

An uncomfortable position for inheritors in the meantime. And furthermore, if they fail to make tax payments when due, they may face interest/ penalties on late tax payments. But then having paid tax sums due, although there are certainty changes anticipated to the Spanish succession tax system, the exact nature and timing of the changes is uncertain. And finally, if any reclaim option does arise, it is likely to be lengthy, complex and expensive to pursue.

We will report further as soon as a decision on the way forward for Spanish Succession Tax is announced.

This general commentary is not intended to be exhaustive; and case-specific legal advice should always be sought.

The Legal 4 Spain team provides a full probate service for properties and other assets anywhere in Spain. We are always happy to provide a competitive cost estimate in the first instance, on a no-obligation basis.



New European Law Affecting Wills and Inheritance in Spain

Spanish Wills &Estate PlanningPosted by Andrew Thu, February 02, 2017 15:27:03

September 15th, 2014

A new European law will come into full effect on August 17th 2015, with the intention of simplifying inheritance cases across Europe.

This new law will apply to owners of Spanish properties.

The problem the new law addresses

There has been legal uncertainty previously in the estates of many non-Spanish owners of Spanish properties, as to whether Spanish succession law applies or the owner’s own national succession law.

The distinction is particularly important for English owners of Spanish properties, where their own (i.e. English) succession law effectively enables them freely to choose their heirs (including as to Spanish assets), without limitation in the majority of cases.

Conversely, if an English owner of a Spanish property were to choose (or be legally forced) to follow Spanish succession law, then a strict division of the Spanish estate would be imposed under Spanish law- with a minimum of two thirds passing to descendents; and very limited discretion generally as to who receives the Spanish estate.

The solution provided by the new law

The new law gives people affected by the problem, choice as to which succession law applies to their estate.

Well advised English owners of Spanish properties will in any event, have already made separate Spanish Wills in anticipation of the new law, clearly electing for their own national succession law to apply. So they can be certain that their Spanish estate will pass as they wish; and not pursuant to the strict Spanish legal requirements (which in the vast majority of cases, are incompatible with English testators’ actual wishes).

In any event, English (and indeed other nationality) owners of Spanish properties are advised to take this opportunity in anticipation of the new law, to review their Spanish Wills with their legal advisers, to ensure that they have clearly and unambiguously chosen for their own national succession law to apply to their Spanish assets (if that is what they wish). Also, to ensure that their Spanish Wills are in all other respects, fully up to date; legally compliant in Spain; and tax efficient.

In the event of a failure of by an English owner of a Spanish property to leave a valid Spanish Will electing for English succession law to apply to their Spanish estate, the position under the new law will be determined by a new statutory ‘habitual residence’ test, such that:

• If the English owner of the Spanish property is habitually resident in Spain at the time of death, then Spanish succession law will apply to the Spanish estate.
• If the English owner of the Spanish property is habitually resident in England at the time of death, then English succession law will apply to the Spanish estate.
• If the English owner of the Spanish property is neither habitually resident in Spain at the time of death nor in England, then it could be either English law or the law of the actual country of habitual residence. This scenario would need to be legally determined on the circumstances of the case.

Conclusion

In order to avoid uncertainty- bearing in mind also that many people change residential status in the final period of their lives, particularly due to healthcare considerations- it is always best not to rely on the ‘default’ position under the new law. Instead, it is always best practice for a Spanish property owner to sign a professionally prepared, up to date Spanish Will with a clear statement of their wishes as to the succession of their Spanish estate. This can also ensure that any up to date tax saving opportunities are used to their full advantage.

This general commentary is not intended to be exhaustive; and case-specific legal advice should always be sought.

The Legal 4 Spain team provides a full estate planning and Will writing service for properties and other assets anywhere in Spain. We are always happy to provide a competitive cost estimate in the first instance, on a no-obligation basis.



Costs of Owning a Spanish Property

Sale of Spanish AssetsPosted by Andrew Thu, February 02, 2017 15:25:39

September 1st, 2014

Before committing to the purchase of a Spanish property, it is important to have a full understanding of the on-going costs and taxes associated with Spanish Property ownership.

1. Rates (IBI/ SUMA). Town Hall rates are payable by almost all Spanish property owners (whether resident in Spain or not). The amount is calculated by reference to the rateable (Catastral) value of the property- an important figure, also for other taxation purposes. Some Town Halls charge rates in installments; others in a single annual charge. Following a property transfer, it can take the Town Hall up to a year to update their records with the new owner’s name.

2. Rubbish Collection (Regogida de Basura). Some Town Halls include rubbish collection services in the rates charge (above). But, some Town Halls chare separately for this aspect of local services – either in installments or annually. In applicable areas, all property owners have to pay this, irrespective of whether or not they are Spanish resident; and irrespective of the number of days they occupy the property, actually generating rubbish!

3. Non-Spanish Residents Tax (Renta de no residentes imputada de Bienes Inmuebles). This tax is payable annually in arrears by Spanish property owners who do not live in Spain, but who own property in Spain for their personal use. For example, the tax is payable by 31 December 2014 in respect of the calendar year 2013. The tax is calculated by reference to the Catastral value (see above). The Spanish Tax Authority in effect, charges a tax for the lost opportunity of renting the property out- (which would otherwise generate a taxable Spanish income). It is a difficult head of taxation to explain/ justify. Perhaps an assumption at one time was made that non-Spanish resident property owners would rent out their Spanish property, but would not declare the rental income to the Spanish Tax Authority. For legally/ fiscally compliant Spanish property owners, it is generally regarded as an unfair tax; and therefore an (unavoidable) irritation.

4. Tax on Rental Income. This head of taxation is for owners of Spanish properties (whether resident in Spain or not), who do actually rent out their property. The applicable rate of taxation is 24.75%. Specific fiscal/ accountancy advice is needed in each case, not just to meet fiscal filing requirements; but also to ensure that deductions and allowances are properly applied, to minimize the taxation burden as much as legally possible. If a non-Spanish resident rents out their property for only part of the year, then an apportionment has to be made between the period of imputed rental income (see 3 above) and actual rental income.

5. Wealth Tax. Both Spanish residents and non-residents need to consider whether they are liable to pay Spanish wealth tax each year. The Spanish Tax Authority regularly changes the requirements. Generally, the exemptions are substantial. In the vast majority of cases of non- Spanish resident owners of Spanish properties, as it is only their assets in Spain which are taxable, the allowances are more than sufficient to provide a full exemption.

6. Community Charge. The vast majority of Spanish properties form part of a Community of owners. Each individual owner must pay their proportionate part of the Community (or block) costs. The amount and regularity of payments depends entirely on the nature of the Community; its facilities; and timing of the expenditure cycle (i.e. whether in a period of routine maintenance/ expenditure, or if exceptional work is to be carried out). In the purchase of a Spanish property, a buyer must: obtain Community charge payment history; review recent Community meeting minutes and resolutions; and make enquires of the Community Administrator, in order to be clear as to the anticipated liability.

7. Parking/ Street Access. Some Town Halls enforce an obligation for Spanish property owners to pay an annual charge/ tax for a ‘Vado Permanente’, being a right of access from the property on to the adjoining road (where applicable). Again, this is a difficult tax to explain/ justify, as it presupposes that the property owner has paid the rates on the property; and local car tax. But then an additional annual tax is levied in applicable cases, in order to be entitled to move your car from your property on to the public road! At the time of purchase of a Spanish property, an enquiry should be made of the local Town Hall to see if this charge applies. Also in some areas, there are street parking/ local residents’ street parking charges.

8. Utilities/ Services. Spanish property services costs are very much case-specific; and a full understanding is necessary before buying a Spanish property. The nature of the services available varies according to the location of the property and the type of property. For example, some areas have mains gas supply, others don’t. Rural properties may have Community arrangements for the (non-mains) supply of water; some Communities include mains supply water charges in Community charges, others do not. Most properties have postal delivery services, but some do not. Also, following the purchase of a Spanish property, in order to have services contracts put into new owners’ names; independent certification of the installations (and updating works) may be necessary. So in all cases, this must be carefully investigated and budgeted for.

9. Insurance. In all cases of Spanish property ownership (as it differs from property to property), a full understanding is needed of the extent of the insurance cover which applies through the Community services/ charges; and the ‘gap’ which the individual property owner needs to cover- either with their own insurance policy or accepting the risk personally. In many cases, a good starting point is to ask the insurance agent who deals with the Community cover. It can be beneficial to have the Community insurance and individual homeowners’ insurance through the same agency/ insurance company, in order to avoid the risk of gaps in insurance protection.

10. Bank Account. All Spanish property owners need to have a Spanish bank account, for the payment of property outgoings/ local taxes, etc. Spanish banks distinguish between Spanish residents’ bank accounts and non-residents’ accounts. The account charges also vary according to the type of account. In selecting a Spanish bank, branch location and facilities are obviously important factors. However, a full understanding is also necessary of the applicable charges. Unlike many other countries, banks in Spain charge separately for everything imaginable- account holder certification; account ‘maintenance’; issue of debit card; obligatory postage of statements (despite internet access); receipt of funds into the account; funds withdrawal; issue of cheques; etc. Banking in Spain can be a surprisingly expensive business; and there are significant differences in charges from bank to bank. So, claims of ‘standard practice’ should be disregarded; and as with other services, ‘shopping around’ is recommended in selecting a Spanish bank.

This general commentary is not intended to be exhaustive, but a handy guide to some of the regular costs/ taxes Spanish property owners face.

The Legal 4 Spain team provides a full property conveyancing service (buying and/or selling) throughout Spain. We are always happy to provide a competitive cost estimate at the outset of a transaction on a no-obligation basis.



Costs of Buying a Spanish Property

Sale of Spanish AssetsPosted by Andrew Thu, February 02, 2017 15:24:53

August 12th, 2014

In budgeting for the purchase of a Spanish property, buyers should be prepared for all the associated costs and taxes, to ensure that the total cost of purchase can be properly assessed.

The associated costs and taxes can easily add up to an additional 12-15% on top of the purchase price; and the following is a reminder of the principal areas to consider.

1. Survey/ independent valuation. The buyer must be satisfied as to the property’s true open market value and its physical condition, before entering into a contractual obligation to purchase. Independent professional advice is recommended; and the cost will depend on the nature and complexity of the property and advice needed. But typically (if not included in a mortgage budget), 0.5-1% plus IVA should be budgeted for as a minimum, for obtaining reliable independent professional advice of this nature.

2. Purchase taxes. The rate of purchase tax the buyer faces depends on where the property is situated. Also, whether the seller is a developer selling a newly built property; or it is a private/ resale of a property. But this tax alone can be as high as 10% of the purchase price, so it is essential for buyers to be clear at the outset as to the applicable tax rate for an intended purchase.

3. Tax retention on a Spanish property transfer. When a buyer purchases from a non-Spanish resident seller, the buyer has to retain 3% of the declared purchase price and pay this to the Spanish Tax Authority. But although the buyer takes responsibility for this retention and accounting to the Spanish Tax Authority, it is actually an amount paid by a non-resident seller on account of the seller’s own tax liability. So, although confusion over this issue does arise, this ‘cost’ is actually a deduction from the amount the seller receives; and it is therefore a seller’s cost, not a buyer’s cost.

4. Estate Agency Fees. The buyer should only be responsible for agency costs if a property finding service has been contracted. Otherwise, the estate agency fee should ordinarily be a cost covered by the seller.

5. Mortgage costs. A buyer who is taking out a mortgage to fund a Spanish property purchase typically needs to budget on an additional cost exposure of 2% plus IVA, taking into account: survey/ independent valuation (to be recommended even if there is no mortgage- see above); additional Notary/ registration fees; and lender charges.

6. Legal Fees. Expert independent legal representation is essential when buying a Spanish property (please see our previous Blogs for details). The cost depends on the value of the transaction and the complexity. But typically, 1-1.25% plus IVA (usually subject to a minimum fee level) should be budgeted for.

7. Bank Charges. If the purchase monies are coming from outside Spain and from non-Euro currency, then a specialist Foreign Exchange service should be used. Otherwise, up to 3- 5% can be ‘lost’ in a direct bank to bank FX/ transfer.

Additionally, some Spanish banks even charge to receive Euro transfers above a certain value. So, sometimes it can be cheaper to make multiple smaller transfers. This should be checked in advance.

Spanish banks will also charge for issuing the bankers’ draft on completion, and that alone can cost between 0.25-1% of the amount being paid. The type of cheque required and applicable charges should be specifically discussed with the bank in advance.

8. Notary Costs. Although technically this should be a shared cost, it has become normal practice in most Spanish property sales for the buyer to pay the Notary fee, but this is an area for possible negotiation. The amount of the Notary fee will depend on the value and complexity of the transaction, but we recommend that the budgeted figure is around 0.75-1% plus IVA.

9. Property Registry. The buyer almost always bears the Property Registration charges. Again, the amount will depend on the size/ complexity of the transaction and also the type of property and location. But we recommend that the budgeted figure is around 0.5-0.75%.

10. Sellers’ Costs. Thinking ahead to the future sale of a Spanish property should also be part of the buyer’s assessment at the time of purchase. In the following weeks, we will post a summary of sellers’ costs in a separate Blog. But, all matters considered, the total cost of selling a Spanish property is generally not dissimilar to the total cost of buying (so a typical guideline range being 12-15% of sale price). Additionally, a seller might also face a capital gains tax liability following the sale.

In conclusion therefore, most well advised Spanish property buyers will typically assume a range of 25-30% to cover the ‘in and out’ costs and taxes when assessing the total transactional cost of Spanish property ownership.

The Legal 4 Spain team provides a full property conveyancing service (buying and/or selling) throughout Spain. We are always happy to provide a competitive cost estimate at the outset of a transaction on a no-obligation basis.



Don’t Fall for the Summer Scams in Spain

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:24:09

July 24th, 2014

Summer in Spain inevitably brings an unwelcome visitor– the bogus gas inspector, preying on those who are enjoying their relaxing holidays. Like all the best scams, this one evolves from an element of truth. In Spain, mains gas supply is relatively scarce, so supply is usually by bottled gas- and the pipes and apparatus must be inspected every 5 years by law.

The scam works as follows: a ‘representative’ usually wearing a uniform and carrying a clipboard turns up unannounced, to carry out a ‘compulsory gas inspection.’ An ID may be fleetingly presented; and even forced entry into your property attempted. After a brief inspection, the gas installation is condemned, and the financial pain commences. Several recent cases we have heard of have involved charges of between 300-500 Euros for replacement of an out of date pipe, yet all the ‘inspector’ did was dust the pipe- usually actually in need of renewal, so still left in a dangerous state.

Any official company would make an appointment to carry out an inspection, and their employee’s ID should be offered for thorough examination. The two principal companies dealing with gas supply in Spain, Repsol and Cepsa, may contract out the inspections to authorised companies. Your local Ayuntamiento (Town Hall) should be able to tell you who is authorised to carry out gas inspections in your area. Make a note of the name of the company and contact details, so you can check that your gas inspector is legal.

If you have any doubts at all, refuse entry and do not sign anything. If your uninvited caller refuses to leave, threaten to call the Police. This will usually see them on their way. Sometimes these conmen operate in pairs- one of them ‘casing’ the property with a view to burglary either then or at a later time; whilst the other one carries out the ‘gas inspection,’ thus perpetrating two scams in one.

Some very obvious, but worthwhile precautions are:

1. Never allow any casual callers into your home.
2. Do not sign anything until it is fully understood; and the service provider verified.
3. Never allow unsupervised access to your home.
4. For official matters, always ensure you speak a common language or have an interpreter present.

Legitimate company representatives or tradesmen will not object to your verifying with their office, and the vast majority of (legitimate) Spanish companies operate an appointments based system anyway, so you should always receive advance notice of any inspection visits.

Another property services related scam in Spain is operated by genuine but unscrupulous employees of official companies. They may seek to sell other services (eg. insurance or fumigation services). Sometimes an up-front deposit is requested for bogus add-ons. Any such offers should be carefully scrutinised and never agreed to on the spot, without further investigation/ consultation.

These crooks (when dealing with Spanish and non-Spanish alike) capitalise on supposed ignorance of householders- so be aware of the scams, to ensure that you are not separated from your hard earned Euros!



An Introduction to Spanish Probate

Probate in SpainPosted by Andrew Thu, February 02, 2017 15:23:20

July 8th, 2014

Discovering that there are Spanish assets in a non-Spanish estate gives rise to a number of issues in preparing for the estate administration.

Some key points are:

Location of Death. If the death occurred outside Spain, then the death has to be proved to the Spanish Authorities as the first stage of the legal/ procedural work. This enables the compulsory search of the Spanish Central Wills Registry to be carried out, to establish with certainty, the presence or absence of a Spanish Will.

Will. A major factor in assessing the complexity of a Spanish probate case (and of course, actual beneficial entitlement) is determining whether: there is a valid Spanish Will; no Spanish Will but a foreign Will covering the Spanish assets; or no Will at all. The search of the Spanish Central Wills Registry confirms whether or not there is a valid Spanish Will; and also (if there is), the date and Notarial location of the last such Will. However, it should be noted that the Spanish Authorities will admit evidence of later revocation of such a registered Spanish Will by a subsequent non-Spanish Will. (Hence, drafting of English Wills where there is a pre-existing Spanish Will has to be undertaken with considerable care).

Location of Assets. Generally, it is unnecessary that the legal practitioner appointed to deal with the Spanish assets is in the actual locality of the Spanish assets. Administration of Spanish estates for non-Spanish individuals is a specialised area of legal practice. So, the key factor in appointing a legal practitioner is not their actual location, but that they have the necessary dual-jurisdictional qualification and experience in dealing with the succession of Spanish estates for non- Spanish individuals.

Asset Type. The exact legal procedures and necessary documentation in a Spanish probate case will be determined principally by the type of Spanish assets. In some cases, a simple monetary legacy left in a Spanish Will can involve the same amount of procedural documentation and legal/ Notarial work as the succession of a Spanish property.

Property ownership. The regime of property ownership in Spain for multiple owners is the equivalent of tenants in common in the UK. Spain also has a forced heirship law which may-or may not- apply in dealing with the Spanish assets of non- Spanish individuals, depending on the circumstances.

Power of Attorney. A Spanish representative is generally appointed under Power of Attorney, in order to minimise inconvenience for beneficiaries, as the Spanish inheritance process involves a significant amount of personal attendance. Estate administrators may also need to be represented in Spain (under Power of Attorney), in addition to beneficiaries. The form and wording of the estate legal documentation will determine this.

NIE Number. Having a Spanish fiscal number is obligatory for beneficiaries and sometimes for estate administrators also. Generally the NIE number can be obtained under Power of Attorney, without the need for the applicant to be personally present in Spain.

Apostille. Non-Spanish legal documents which are required to prove entitlement (Death Certificates; Grants of Probate, etc) may need to be Apostilled by the Foreign and Commonwealth Office, in order to be legally admissible in Spain. In some cases, they must also be translated and certified by an official translator. An advantage of the existence of a valid separate Spanish Will is that it reduces the complexity and extent of the documentation, which has to be produced to the Spanish Authorities in a Spanish probate case.

Taxation. The Spanish Succession Tax liability in a Spanish probate case must be very carefully assessed at the outset. The more remote the relationship between the deceased and the beneficiary, and the higher the value of the estate, the higher the tax rate. There are other major differences of approach between Spain and other countries- for example in Spain, there is no automatic inter-spouse exemption. Also for real estate interests, in addition to Spanish Succession Tax, there is also usually a local Town Hall (Plus Valia) tax liability payable on succession. Although post-death Will variations are not allowed in Spain, depending on the family circumstances and the estate documentation, it may be possible to achieve alternative succession routes in the succession process; thus potentially reducing the tax exposure. Any such strategy in the case handling must be determined right at the outset, agreed upon with the beneficiaries; and implemented during the course of the case handling. It cannot be addressed retrospectively.

Banks. Dealing with bank accounts in Spanish probate cases can often be the longest part of the process. Succession of bank accounts is not addressed at local bank branch level in Spain. The bank’s central legal department instead deals with succession matters. Direct contact with the bank’s central legal department is generally fairly difficult. For the Spanish banks, succession work is decidedly low priority. So, considerable patience is required on the part of the practitioner and beneficiaries!

Sale of Inherited Assets. In order for beneficiaries to be able to sell registered Spanish assets, the Spanish probate process must be completed first. For relatively minor estate assets such as vehicles, this can be inconvenient, as there can be a significant delay, before a sale can be completed.

Conclusion. As the exact procedures and documentation are always case-specific, an initial full analysis of a Spanish probate case is always essential. This ensures certainty from the outset as to the procedural steps which will be required; and the information and documentation which will need to be produced. Unless a Spanish probate case is carefully planned and programmed from the outset; and meticulously managed as matters proceed, there is a very significant risk of delays. Any such delays can be frustrating and time consuming for the practitioner; and costly for the beneficiaries- as Spanish tax liabilities can increase over time, with the imposition of interest and penalties.

The Legal 4 Spain team is always available to provide preliminary advice on a no-obligation basis in relation to probate cases, which include Spanish assets.



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