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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.



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.



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!



10 Points to bear in mind approaching the Spanish tax return deadline

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:21:44

June 6th, 2014

Dealing with the annual Spanish income tax return (‘Declaración de la Renta’) for Spanish residents/tax payers is not one of our professional service areas.

Nevertheless, it is an issue that concerns many of our clients and contacts; and we have been asked to circulate some general information about it.

The final date for submission of Spanish tax returns is 30 June. However, for cases where tax is to be settled by direct debit, the cut off point is earlier. In any event, it is recommended that filing/ payment is submitted by mid June at the latest, to avoid the risk of last minute ‘hitches’.

This summary does not relate to non- Spanish residents owning properties in Spain. The rules that regulate their obligation to file an annual Spanish (non-residents’) tax return in Spain differ substantially. That subject will be covered separately.

Some points of general information we wish to publicise are:

1. Key dates. Spanish tax returns to be filed by 30 June 2014 deal with the calendar year from 1 January 2013 to 31 December 2013. Financial matters from 1 January 2014 to 31 December 2014 will be covered by the tax return to be filed by 30 June 2015.
2. On line filing. It is recommended that the tax returns are filed on line (in preference to posted, paper forms); as it is relatively straightforward and more secure.
3. Professional advice is recommended. It is possible to deal with Spanish tax returns personally. However, we recommend that a certified ‘gestor’ (administrator/ accountant) is consulted; to submit the tax return for the client. For straightforward cases, the charge is generally fairly modest.
4. Avoid errors! Errors in tax returns can be unexpectedly complicated and extremely time consuming and lengthy to regularise subsequently. Accuracy of the data provided and precision in the completion of the tax form in the first place are therefore crucially important. As stated above, professional advice is recommended.
5. Claim allowances! There may be allowances/ credits/ deductions depending on the specific circumstances of the tax payer. To ensure all applicable benefits are correctly claimed, professional input is recommended, as stated above. Also, advance planning and documentation collation is essential, to ensure nothing is missed in a ‘last minute rush’. Some examples of the benefits to consider are: the personal tax allowance; additional allowance for married couples declaring jointly; employment allowance; pension contribution deductions; and pension benefits.
6. Late filing penalties. Failure to submit a tax return on time can result in a late filing penalty (usually 100 Euros).
7. Increases in late-paid tax. Failure to submit a tax return on time when tax is payable can result in additional tax charges- a periodic increase in the tax amount plus interest.
8. Exemption from obligation to file. There is an exemption from the general obligation to file a tax return for those earning under 22,000 Euros annually when tax is deducted at the employment income source. But beware the ‘small print’. In each case when an exemption is relied upon, there are various exceptions to this general rule. For example, cases where: there is foreign employment income; or more than one source of income.
9. File early; reduce rebate delays. An advantage of filing the tax return sooner rather than later is that it brings forward the date of receiving any rebate due. Rebates can in any event, take several weeks (if not months) to come through.
10. Information required. In order to complete the tax return, the information/ documentation varies from case to case; but for employment income, an employer’s certificate is required; receipts for property rates payments; end of year certificates for any bank accounts; statements of any investment income/ disposals/ gains; and any rental income details.

There is a lot of information about Spanish tax returns on the internet, but much of it is out of date and/ or confusing. Caution is therefore strongly advised. There is also the on line guidance provided by the Spanish Tax Authority- indeed, in English for non-Spanish speakers. But many find that resource complex and unwieldy.

For these reasons (and the others stated above) in our opinion, a personally appointed ‘gestor’ (engaged in good time), is generally the best option. This assists in avoiding the pitfalls in this exercise; and ensuring that the benefits due are properly provided for and claimed- thus ensuring full legal compliance, but tax payment at the lowest level legally and legitimately possible.



10 Legal Requirements for Drivers in Spain

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:21:02

May 23rd, 2014

In light of the recently updated traffic laws in Spain, we have obtained from the Guardia Civil an up to date list of the points they are routinely required to check in Spain, when stopping a driver in a ‘control’ (check point), or in the event of a traffic offence.

1. A ‘Carnet de Conducir’ (driving licence) which is valid for Spain, permitting the driver to drive the vehicle in question. This must be the original document or a copy certified by an official Spanish body- eg. the ‘Ayuntamiento’ (Town Hall) or ‘Jefatura Provincial de Tráfico’ (Provincial Traffic Headquarters).
2. A ‘Documento de Identidad’ (ID document eg. Passport). This is required to verify the identity of the driver and validate the driving licence in cases where the driving licence does not include a photo.
3. The ‘Permiso de Circulación’ (vehicle registration document, showing the vehicle description and registration number; and owner’s name and address). This should be the original document (or certified copy, as point 1. above).
4. The ‘Ficha Técnica’ (the statement of technical specification, which also contains the record (and should have the up to date stamp) of ITV (periodic vehicle inspection) for vehicles requiring an ITV. This should be the original document (or certified copy, as point 1. above).
5. The ITV (periodic vehicle inspection) sticker. The ‘Ficha Técnica’ contains the written record of the inspection history, but it is also a legal requirement (for a vehicle for which an ITV is necessary) to have the ITV sticker clearly displayed.
6. The most recent receipt for the local Town Hall car tax. Although this is not on the official list of requirements, it is recommended to keep it with the paperwork, to be able to demonstrate compliance with all national and local requirements.
7. The original current certificate of car insurance (or certified copy, as point 1. above); and proof of payment of the annual premium.
8. Two warning triangles and a spare set of bulbs.
9. Two reflective safety jackets (kept inside the car- accessible without leaving the car).
10. A spare set of glasses if the driver wears glasses for driving.

The above is a current, general guide to the basic requirements, rather than an exhaustive list. In the case of non- standard passenger vehicles; or any case-specific individual circumstances, there could be additional requirements. Guardia Civil ‘Cuarteles’ (garrisons, attended by officers for contact with members of the public) are located all over Spain. If in any doubt, attend in person and request guidance.

Non-compliance with these simple and basic rules can lead to fines or penalty points.

So, please SHARE this with your friends and contacts who live in Spain, or visit and drive in Spain, to help them to be lawful (and to avoid fines/ penalties!).



New Spanish Traffic Laws Come in to Effect on 9 May 2014

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:20:22

May 8th, 2014

On the grounds that ‘ignorance of the law is no excuse’, all drivers in Spain are advised immediately to familiarise themselves with the detail of the new traffic laws which are coming into effect on 9 May 2014 (Ley 6/2014 modificando la Ley sobre Tráfico, Circulación de Vehículos a Motor y Seguridad Vial 339/1990); a mere 21 pages!

Among the new provisions are the following:

1. Speeding fines apply for exceeding the limit by just 1kph! On some motorways, the speed limit is being increased from 120kph to 130kph, but in many towns, the speed limit is being reduced from 30kph to 20kph.
2. If the Guardia Civil observe a motoring offence and note the vehicle registration number, this provides sufficient evidence to prosecute- no need for them to stop vehicles.
3. A minimum fine of 1,000 Euros will be payable by drivers caught driving whilst double the drink drive limit or above; or in all cases for reoffending drink drivers; and drivers under the influence of drugs.
4. The Guardia Civil can seize any vehicle carrying children without legally compliant child seats.
5. The very specific rules as to where children must sit in the vehicle (according to age/ height) must be observed, otherwise drivers face heavy fines.
6. Cyclists under 16 years of age must wear helmets.
7. Drivers have much higher duties to ensure the safety of cyclists of all ages.
8. Speed camera/ radar detectors are prohibited.
9. An EU Directive is to be implemented so that driving offences committed in one EU country are reported to the EU country of registration of the vehicle in question.
10. Much stricter rules are being implemented for the Spanish registration of foreign registered vehicles kept in Spain.

The above is by no means exhaustive. As can be seen, the new rules are far reaching. Knowledge of the details and observation of the requirements in practice is of fundamental importance.

It is clear from the increased powers to prosecute and fine drivers, that the Spanish Authorities ‘mean business’ with these important legal changes.

Please SHARE this with your friends and contacts who drive in Spain, to help them to be lawful (and to avoid fines!).



10 Reasons to Register on the ‘Padrón’ in Spain

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:19:39

April 28th, 2014

The Padrón is the register kept by each Town Hall in Spain, of the people who live in the town- either as property owners or tenants. The closest UK equivalent is the electoral roll.

It is compulsory for residents of more than 6 months in an area to ‘empadronarse’- to be registered on the Padrón (as a separate administrative process from residency applications) but many fail to do so.

Some of the advantages of ‘empadronamiento’ (being registered on the Padrón) are:

1. It can provide taxation advantages (eg. Spanish Succession Tax).
2. It enables children to be enrolled for local education.
3. In the case of limited school places, it is used as one of the criteria for awarding places (determining catchment area).
4. It is required in order to be registered for local healthcare services.
5. It provides an entitlement to vote in local and European elections.
6. In some areas, it is required to be able to use municipal facilities at discounted rates.
7. Town Hall funding is affected by the number of people on the Padrón. So, registering helps boost your local Town Hall’s resources for local services and facilities.
8. It is necessary in order to purchase and register a car in Spain.
9. It is necessary in order to marry within the local municipality.
10. It is necessary for benefits/ social services access; and to use the local employment agency (Job Centre equivalent) facilities.

Registration on the Padrón is a simple exercise- and is either free or just a nominal charge is made, depending on the area. Specific requirements in terms of documentation vary from town to town. So, before applying, it’s always best to make a preliminary visit to the Town Hall, to get a full up to date list of requirements.



Does Spanish Residency Mean Painfully High Taxation?

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:18:03

March 24th, 2014

Spain’s fabulous weather, its rich culture, its relatively modest cost of living, and its close proximity to other European countries, have always meant that it is a dream destination for many, to reside and to savour all the country has to offer. For those who are prepared to ‘take the plunge’, the demographic changes in Spain over recent years; and the economic impact of the financial crisis have in many ways only added to its desirability and feasibility as a potential country of residence.

Official figures confirm that 13% of Spanish nationals have emigrated from Spain in the last 2 years. And as a result of the impact of the economic crisis and concerns over taxation changes, a huge number of non-Spanish nationals have returned to residency in their countries of origin over the same period. So, the total population of Spain now stands at around just 70% of the UK population. But Spain is almost 4 times larger than the UK!

Also, the over-building in Spain during the pre-crisis period and subsequent Spanish property price crash mean that there remains a significant over-supply of properties- in many cases, owned by very keen sellers. So, a relatively under-populated country offering clear quality of life benefits and incredibly attractive property investment opportunities…

OK, so where’s the catch?!

Many who have abandoned Spanish residency over recent years have expressed concerns about taxation- in particular, the impact of the Spanish Wealth Tax and Spanish Succession Tax.

The Spanish Government’s recent reintroduction of the Wealth Tax; and obligation for Spanish nationals and Spanish residents to disclose (and be taxed on) overseas assets, was met with dismay by many. But in fact, the impact has been found by the vast majority to be far less harsh than was originally feared.

Also, much has been made of the reductions in allowances in Spanish Succession Tax. But again, under Spanish tax law, when expert estate planning advice is obtained and implemented, there are many ways quite legally and legitimately to reduce the impact of succession taxation.

As regards Spanish income tax and other direct taxes, there are agreements and practice directives in place between the Spanish Tax Authority and those of many other countries, to ensure fair fiscal treatment in dual jurisdictional cases. So, for those who are properly advised and correctly meet their tax declaration and payment obligations, the position (in most cases) is neither as complicated nor as onerous as might be feared.

Of course, individual circumstances always need to be considered carefully- it is never a case of ‘one size fits all’ when it comes to Spanish taxation and estate planning.

Many factors are relevant to determining tax liability, including even which part of Spain you are dealing with.

In conclusion, we always recommend that before any decision or investment commitment in Spain is made, our clients take the opportunity to understand fully their fiscal obligations, and to implement their tax and estate planning accordingly. By planning intelligently to reduce tax liability as far as Spanish law permits, and then promptly filing tax returns and paying the tax that is due, one invariably achieves the most efficient result.

Ignorance of Spanish tax law is no excuse; and equally, proper awareness and fiscal compliance (in accordance with expert professional advice) need not be as financially devastating as many fear to be the case.



How to get an N.I.E. Number for Spain

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:16:57

February 27th, 2014

In many cases, particularly for Spanish property sales and purchases; and inheritance matters, N.I.E. numbers (Spanish fiscal numbers) are of critical importance. They are usually required extremely urgently, in order to avoid delays in legal transactions and/or increases in tax liabilities.

There are three principal ways to obtain N.I.E numbers:

1. In person, in Spain at a National Police office. This usually involves three stages: the attendance to present the paperwork and ID documentation; payment of the issuing tax; and finally, return (in person) to collect the N.I.E. Certificate (usually after 7-10 days). There are independent service providers available, who assist with the paperwork and provide guidance on the process. So, for individuals who are able to be in Spain for the period indicated for this process (and whose knowledge of the Spanish language is adequate), it is quite straightforward.

2. In person, at a Spanish Consulate office (for example, in the UK: in London, Manchester or Edinburgh). In this case, the process can be extremely lengthy and inconvenient, as the Spanish Consulate operates as a ‘post box’ for submitting the application to Madrid; and thereafter, communication has to be to a Spanish address. We would only usually recommend this option in exceptional and non-urgent cases.

3. Through an authorised representative, in Spain. There have been changes of practice and procedural requirements over the years; and also documentation requirements differ between areas of Spain. ID and legal representation has to be specifically proved, so expert/ professional representation is generally essential, to avoid problems and delays.

The issue of N.I.E. numbers is one of the first points to be covered in any of our client cases. We provide full guidance and assistance to our clients in overcoming this legal hurdle. Obtaining N.I.E. numbers is not usually a ‘stand alone’ service that we provide (although there are others who specialise in this service). However, we do have a system in place for our client cases, where we can quickly and simply obtain our clients’ N.I.E. numbers for them, when needed.



Spanish Residents also facing 3% retention tax on property sales?

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:14:18

December 17th, 2013

The understanding since its introduction has been that the 3% tax retention on Spanish property sales by foreign owners is applied only to non- Spanish resident sellers. Conversely, Spanish resident sellers should not suffer the same deduction.

However, the recent tightening of the rules and practice guidelines in this area has meant that in many cases, sellers who are Spanish residents are falling into the traps for the unwary; meaning they are also losing 3% of the proceeds of their Spanish property sales, in tax retention.

The reclaim process in applicable cases can be very lengthy and convoluted. So, many Spanish property sellers end up simply ‘writing off’ the 3% even though really, they should be entitled to have the tax retention refunded, hence the reference to the loss of the 3% in practice.

It is important to appreciate that in this context, Spanish residency has two component elements. The first is legal or factual residency (generally evidenced by a Certificate of Residency). The second aspect, which is of equal importance, is that the positive step must also be taken to become fiscally resident in Spain; and annually to file the corresponding tax declaration in Spain. (In most cases, this is an obligation of Spanish property owners, in any event).

Provided that these fiscal obligations have been complied with in all respects and for the requisite period; when a Spanish property sale is agreed, the Spanish Tax Authority should issue a Certificate of Fiscal Residency. This, combined with the evidence of factual residency, should satisfy the Notary and the Spanish Authorities that no 3% tax retention should be made.

It should be noted though, that even for non-Spanish residents, a later tax assessment can be made following the sale, and capital gains tax charged, depending on the facts and figures of the case in question.

Additionally, all sellers (Spanish resident and non- Spanish resident alike) still have to pay ‘Plus Valia’, the municipal tax on Spanish property sales. This is calculated by reference to Catastral (rateable) value and the period of ownership.

In conclusion, it is essential to have reliable professional guidance on tax issues and transactional costs, before agreeing terms for a Spanish property sale. Otherwise, there is no certainty as to the net sale price which will be received. Please speak to our team at Legal 4 Spain, for clear advice and competitively priced legal representation on Spanish property sales.



Spanish tax surprise for ex-pats with second homes

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 14:21:15

June 28th, 2013

The new requirement earlier this year for declaration of overseas assets by Spanish nationals and Spanish residents was expressly intended to be ‘for information purposes only’.

Most took this to mean that there would no immediate adverse fiscal consequences based on the declaration made. Indeed, where income and gains arising from the overseas assets in question were already being declared in Spain, the declaration of the details of the assets should make no difference at all (pending any Wealth Tax revisions).

However, it appears that some were unaware of one fiscal consequence of the declaration, being the impact of the Spanish tax which arises from ‘imputed income’ arising from non-principal residence properties.

To clarify, a Spanish national or Spanish resident who owns a property which is not their principal place of residence is deemed to derive an income from the property (based on its rateable value) even if no actual income is received in respect of the property.

For second (etc) homes in Spain, the Catastral value is used to calculate this liability. But for ex-pat Spanish residents for example, who still keep a property in their country of origin, the tax is assessed on the basis of the last declared value of the property. In the case of the overseas asset declaration, the requirement is to declare open market value of overseas assets.

So, in some cases, Spanish residents are now being required to pay a significant amount of additional tax in Spain in respect of their property in their home country, even though the property is non-income producing.

It is unclear as yet, whether this is being universally applied- or indeed was an intended consequence of the overseas asset declaration. Hopefully some clarification will be forthcoming from the Spanish Tax Authority, as it is a factor which will need to be taken into account by those considering becoming resident in Spain, but keeping their ‘bolt-hole’ back in their country of origin.



New energy law exposes Spanish property owners to risk of fines and legal action

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 14:18:39

May 16th, 2013

From 1 June 2013, a new legal obligation arises for sellers and landlords of Spanish properties to obtain an Energy Performance Certificate. Failure to do so can expose the Spanish property owner to the risk of very high fines (3,000€- 600,000€); and also the risk of legal action from buyers/ tenants.

There are undoubtedly multiple benefits from improvements in energy efficiency. However, just at a time when, more than ever, Spanish property owners need reductions in costs and complexity in dealing with Spanish properties, this change has been met with dismay by many property professionals and economic commentators alike. The definitive step of immediately imposing a ‘sellers’ obligation’, rather than making a ‘buyers’ recommendation’ as a first step at least; at this difficult juncture for the Spanish property market generally, is quite baffling.

Cost estimates for obtaining the certificate are varying significantly at the moment, as the market for this relatively new service settles. For example, estimates we have seen for a small flat have ranged (for an identical service) from 150€- 500€ plus IVA. Obviously the type of property; size; age; and location will have a bearing on the cost.

Nevertheless, the Spanish legal position is as it is. So, owners of Spanish properties who have a view to the sale or rental of their property need to bear this requirement in mind; and always to raise the issue with the estate agent/ representative prior to any marketing campaign for sale or letting.

The other consequence of this new law is that the issue of energy efficiency is going to be higher on the agenda of buyers and tenants. So, Spanish property owners will need to consider more carefully the cost/ benefit of energy saving property improvements during ownership and in anticipation of sale/ letting. Energy inefficiency will clearly place yet another potential bargaining chip in the hands of buyers and tenants.



Do I have to be in Spain to inherit Spanish assets?

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 14:04:20
January 25th, 2013

This is often the first question we are asked by clients who have been informed of a right to a Spanish inheritance – but are leading a busy life elsewhere in the world. The short answer is: ‘it is not necessary to be personally present in Spain, provided that you have a reliable and trusted legal representative in Spain’.

We have agreed form documentation for signature with Public Notaries throughout the UK and all 3 Spanish Consulate offices in the UK (and also with the Spanish Consulate offices; and with public Notaries in numerous other countries), which enables the legal procedures to be securely and professionally conducted in Spain on behalf of our clients. This avoids the requirement for our clients to be physically present in Spain.

This form of representation also enables all other dealings with Spanish properties (eg. sales and purchases) to be conducted for clients who are unable to be in Spain for the duration of the transactional process.