Sale of Spanish AssetsPosted by Andrew Thu, February 02, 2017 15:22:36
June 26th, 2014
It is now a clearly
established general principle for Spanish property transactions, that neither
the seller nor the buyer can or should leave it to the estate agent to deal
with the legal work in the sale or purchase. Otherwise this puts the estate
agent in an impossible position professionally; and the seller/ buyer does not
necessarily get the benefit of the full professional service which they need,
in order safely to deal with Spanish properties.
Quite aside from the
very obvious conflict of interest issues, the skill set and professional
regulation and accountability between the legal and estate agency professions
differ to a significant extent. So, it is very rare that a well informed buyer
or seller of Spanish property will confidently conclude that their interests
are properly protected if represented by the same person for both the estate agency
role and the legal function.
The more experienced
and professional Spanish estate agents recognise and accept this; and due to
the highly damaging publicity of scandals and scams in Spanish property
dealings in the recent property boom, professional operators in the Spanish
property market are more concerned than ever to ensure that clients should not
be exposed to this type of
pitfall in Spanish property transactions.
However, there is a
separate ‘variation on the theme’, which Spanish property buyers and sellers
also need to be wise to; and that is: ‘legal advisers’ who are either connected
to or (perhaps of even greater concern) employed by the estate agent dealing
with the sale or purchase.
As an example, an
associate was recently consulted on a Spanish property sale, with a sale/
purchase contract, which oddly contained extensive skillfully crafted legal
drafting to deal with the protection of the estate agent’s commission. But
then, just brief and sloppy wording as to the sale/ purchase, which left the
seller legally at risk; and unable easily to withdraw from the sale- even in
the event of a buyer’s breach of contract.
This was completely at
odds with the reality of the transaction. What should have happened was that
the property sale/ purchase should have been addressed as the main issue; with
the estate agent’s commission very much as a secondary concern.
It transpired that
this contract had been (perhaps unsurprisingly) prepared by the estate agent’s
‘in house lawyer’. This explained the focus on the estate agent’s commission
rather than the sale and purchase agreement.
Some points Spanish
property buyers/ sellers should bear in mind:
1. The Solicitors’
Regulation Authority in the UK (by way of an example) has expressed concerns
about the high level of risk of a conflict of interests where a lawyer employed
by (and therefore seen to be advising) the estate agent is also dealing with
the legal work for the buyer or seller in the same transaction. There are
specific professional conduct rules; and non-compliance can lead to grave
consequences for the professional in question.
2. As such, it is a
well established principle in the UK (and indeed other countries) that the
estate agency representation on one hand, is one professional relationship; and
on the other hand, the legal representation of buyer/ seller is entirely
separate and independent.
3. Many non-Spanish
buyers of Spanish properties, who are very cautious in their own home
countries, following ‘normal’ conventions in terms of taking independent
professional advice in property transactions, come to Spain, and (for some
curious reason) relax and ‘take their eye off the ball’; and take risks that
they wouldn’t dream of taking at home. The best advice when addressing a
Spanish property transaction is to consider all the steps and precautions you
would take if buying or selling a property in your home country; and as far as
possible, apply the same principles to the transaction in Spain. In fact, in
nearly all respects, there is no reason at all why things should be any
different in Spain. Indeed, if anything, people should proceed even more
cautiously in Spain, given the well publicised cases in recent years
(particularly relating to planning issues) where investors in Spanish property
have lost their property or their investment. This underlines the need for top
quality, independent legal advice in Spain.
4. The reality in
Spain is therefore the same as in the UK/ other countries- that the functions
of the estate agent and the legal adviser are entirely distinct; and should
therefore be carried out by separate and unconnected professionals, to ensure
that the three parties with a substantial interest in a property transaction
(namely the buyer, the seller and the estate agent) are each independently advised.
Each needs their interest fairly protected, to ensure an appropriate balance of
the respective interests.
5. In some cases,
estate agents who disregard these conventions (against the interests of their
clients, it has to be said), convince the client that the client is saving
money; as the estate agency fee of 3, 4 or even 5% (plus IVA) includes legal
representation. But as this is not independent legal representation, properly
safeguarding client interests, it is therefore impossible for this to be seen
as ‘good value’. Better that the corresponding proportion of the estate agent’s
fee in such cases be applied instead to the engagement of entirely independent
legal advice. Economically, this should make no difference to the buyer/
seller, as the same total fee is payable. And it should make no difference to
the estate agent, as one assumes that there is a cost to ‘their’ provision of
legal services in this regard, so unless they are profiting from that also, the
release of this function and the corresponding cost to an independent
professional should be economically neutral for them.
6. If the estate agent
indicates there is no cost to the provision of ‘in house legal representation’;
then that also raises alarm bells, as it is impossible to provide a high
quality professional service such as legal property sale/ purchase
representation without any cost base- unless the skill/ quality/ qualification/
regulatory compliance of the person/ people behind the legal service simply
isn’t what it should be.
7. This article should
not in any way be viewed as a criticism of estate agents in Spain generally. On
the contrary, the reality is that the vast majority with whom we work are truly
skilled and knowledgeable property professionals- expert negotiators and transaction
facilitators. It is unfortunately the very few who potentially spoil it for the
many. And this is a matter of deep frustration for all who are committed to
building confidence in the Spanish property market as a secure destination for
inward investment. You are referred to our Blog of 1st October 2013, with
advice on appointing estate agents in Spain (prepared with the helpful input of
professional Spanish estate agent contacts, as indeed has been this article).
8. Equally, a Spanish
property buyer/ seller has to be extremely careful in selecting a legal adviser
on a Spanish property transaction. You are referred to our Blog of 27th
November 2013, with some general advice/ pointers in this regard. The title
‘abogado/ lawyer’ does not automatically imply all the necessary knowledge and
experience to be able to advise a non-Spanish national dealing with Spanish
In relation to any
proposed Spanish property sale/ purchase, please contact the Legal 4 Spain
team, to ensure you have the best quality, completely independent legal
representation to protect your interests fully; but always at a competitive
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
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.
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
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
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
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!).
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
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
6. Cyclists under 16 years of age must wear helmets.
7. Drivers have much higher duties to ensure the safety of cyclists of all
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
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
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
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
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
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
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
Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 15:18:49
April 11th, 2014
Spanish tax law can
undoubtedly lead to very unfortunate fiscal consequences in the event of
inheritance by beneficiaries who are unrelated to the deceased- including
unmarried / same sex partners, particularly if the relationship is not
‘recognised’ with civil status.
So, the bad news is
that advisers who warn of the exposure to Spanish Succession Tax rate of 80%
(or even slightly more) are confirming what could theoretically happen.
However, it should be
stressed that such a high rate of taxation would only apply in the very worst
Spanish tax case scenario. For example, with a very high value Spanish estate;
already wealthy beneficiaries; and no family or marriage connection between the
deceased and the beneficiaries.
But in any event, even
with Spanish estates of more modest value, the impact of Spanish Succession Tax
can still be unexpectedly harsh. So, it’s clear that planning is essential in
all family situations involving Spanish property ownership, to prevent the risk
of legally avoidable Spanish tax liability arising.
owners of Spanish properties is complex and specialised area of Spanish legal
practice, and without the correct advice, major Spanish tax problems can easily
We are happy to talk
through any potential cases (without obligation). Together we can explore the
solutions that are available to achieve succession wishes, in a tax efficient
Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:18:03
March 24th, 2014
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
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!
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
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.
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.
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
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 Succession TaxPosted by Andrew Thu, February 02, 2017 15:15:58
January 27th, 2014
In many cases, the
answer is: yes!
It is often possible
to deal with Spanish estate planning and structuring so as to reduce the impact
of Spanish Succession Tax within the Spanish Will.
If you have a Spanish
Will, this can assist in reducing Spanish Succession Tax in the following ways:
1. It ensures that you
have the flexibility you are legally allowed to select your beneficiaries; so
that the most tax advantageous succession route in the circumstances can be
identified and provided for.
2. It secures the best
legal basis for a fast and economical succession process, following a death.
This helps to ensure that the legal process can be completed within the very
tight timescales allowed under Spanish tax law. Conversely, any failure to
comply with the statutory timetable (for example, delays caused by not leaving
an up to date and valid Spanish Will) can expose beneficiaries to increased tax
liability, through the imposition of interest and penalties on the tax debt.
It is perfectly legal
and acceptable to organise your estate succession in Spain, so as to minimise
the exposure to Spanish Succession Tax- as far as legitimately possible in the
circumstances. In advising our clients, we consider all available routes to
achieve this. As our team is independent and not tied to any single process or
structure; we are able to provide objective and case- specific advice in each
individual client scenario. This ensures the most cost effective estate
planning solution within the constraints of each case.
Sale of Spanish AssetsPosted by Andrew Thu, February 02, 2017 15:15:12
January 8th, 2014
legal advice is always necessary when purchasing properties in Spain, both to
avoid legal problems; and also to avoid unwelcome tax surprises.
A detailed fiscal
analysis is essential in order to evaluate costs and taxes at the time of the
transaction. But furthermore, to assess the risk of exposure to future tax
Anyone who has bought
or sold property in Spain will be aware that Spanish properties have two
values- the market value; and the official fiscal value.
Prior to the collapse
in Spanish property prices over the last 5 years, in the majority of cases, the
market value exceeded the fiscal value. But now in many cases with reduced
market values, the fiscal value exceeds the market value.
Buyers of Spanish
properties pay a transfer tax of 8-10% of the declared purchase price.
But if the fiscal value
of the property is greater than the declared purchase price, during the 4 year
period following the transaction, the Spanish Tax Authority can demand an
additional amount of transfer tax, by substituting the (higher) fiscal value
for the declared purchase price.
For example, take a
Spanish house previously fiscally valued at 500,000 Euros. Quite commonly, this
may now be sold for 250,000 Euros. The buyer now pays the transfer tax of
25,000 Euros. However, the buyer must budget for a further 25,000 Euro tax
liability, which may be demanded (along with interest/ penalties) any time
within the 4 years following the purchase.
This is nothing new-
but it is convenient for many advisers involved in Spanish property
transactions to ‘play down’ the risks. Also, many advisers are inexperienced;
or lack legal and fiscal expertise; and are therefore simply unaware of the
At Legal 4 Spain, our
mission is to be clear with our clients as to the risks and liabilities in
Spanish property dealings. This ensures that all relevant legal and financial
details are ‘factored in’ to the negotiation of a price and budgeting.
Armed with the correct
advice and knowledge, property investment in Spain needn’t be viewed as the
risky proposition many commentators would have you believe.
Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:14:18
December 17th, 2013
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.
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 Wills &Estate PlanningPosted by Andrew Thu, February 02, 2017 15:13:23
It occurs to many
existing owners of Spanish properties that transferring their properties into
their children’s names could provide future inheritance tax savings.
Unfortunately, once the
Spanish property has been purchased and registered in the parents’ names, it is
often too late in economic terms, to achieve this.
For non- Spanish
nationals, the tax consequences of passing a Spanish property down to the
children need to be extremely carefully considered- both in Spain and also in
their own country.
In Spain, a lifetime
gift is subject to taxation at a level which is, in many cases, even higher
than the tax payable in the event of a parent’s death. As an alternative to a
gift, a sale/purchase between parents and children can result in a lower tax
liability; but the transaction has to be meticulously executed to avoid it
being treated by the Spanish Tax Authority as a gift in any event; and
therefore taxed at the higher rate.
There does exist in
certain circumstances, however, a further alternative option- the property
ownership structure can be collapsed, to reduce the number of co-owners in a
comparatively tax efficient manner. But this only enables transfers to other
co-owners. For example, a transfer can be made from one co-owning spouse to
another; or (if children are already registered co-owners of the property), in
favour of children.
So, for families to
avoid being ‘locked in’ to a Spanish property ownership structure which stores
up unnecessarily onerous tax liabilities in the long term, careful thought
needs to be given at the outset- when the property is first purchased- as to
the most efficient holding structure.
But (as an example of
the complexities which can arise) even for English buyers of Spanish
properties, it is not simply a case of ‘buying in the children’s name’. There
are also UK taxation ‘gift with reservation’ issues which need to be addressed.
If the parents pay for the Spanish property, then register it in the children’s
name but continue to use the property themselves, they then need to pay (and
carefully document) an appropriate rent or contribution towards outgoings.
Failing that, the gift of the money to buy the Spanish property could end up
not leaving the parents’ UK IHT estate.
In summary therefore,
when acting for clients on the acquisition of Spanish properties, it is
essential that the legal adviser provides full advice both under Spanish tax
law and also having regard to the buyer’s own national tax law, as to the most
efficient way to hold the Spanish property. This enables the buyer to secure
the best overall tax position; and to ‘keep their options open’ as regards future
tax and estate planning within the family.
Sale of Spanish AssetsPosted by Andrew Thu, February 02, 2017 15:01:06
October 1st, 2013
In Spain, many estate agents offer a
high quality, professional service at a fair cost. But (as is also the case in
many other countries), since professional accreditation in Spain is voluntary,
there are many less reputable operators in the real estate sector; and a quick
scan of postings on the internet predictably confirms many ‘horror stories’.
Reasons for problems in estate agent
• A lack of clarity at the outset on
target sale price and charging structure.
• A demand for an excessive commission (bearing in mind that officially
recommended commission levels are generally 3-5% plus IVA).
• An agreement that the estate agent receives money from a buyer/ holds money
for the seller. Funds should always pass under the responsibility of a
professionally regulated lawyer; and should only go to the credit of a
designated client bank account.
• An estate agent offering to secure a fixed price for the seller, but
receiving commission instead, from the buyer. That can mean the estate agent
(and not the seller) keeps any amount secured for the property over and above
the figure stated. Instead, the estate agent should always be appointed as the
agent of the seller; and be paid an agreed percentage (or fixed fee) by the
seller, which accords with official guidelines.
• Where an estate agent says that independent legal advice is unnecessary; or
recommends the use of the estate agents’ own lawyer. This does not guarantee
best impartial professional advice; but instead creates a real risk of conflict
• Exclusivity generally; and automatic extension of an exclusivity period.
• Failure to secure confirmation of any of the points listed at the end of this
A client of ours who is an elderly
widow, asked us to address this subject. Unfortunately she had consulted us
only after being persuaded to sign (incredibly) a legally binding automatically
renewable exclusive term contract with a city centre estate agent in Spain,
which effectively guaranteeing a minumum property sale commission of 21% plus
By way of a contrast, having
consulted one of the principal (voluntary) professional bodies in Spain (the
Colegio Oficial de Agentes de la Propiedad Inmobiliaria); their recommended fee
scale for a property sale in an equivalent case is usually in the range of 3-5%
So, whilst clients are best
protected by appointing an estate agent who is officially an ‘Agente de
Propiedad Inmobiliaria’ (or proven current member of equivalent professional
body or association); the points you should check with an estate agent in Spain
before appointing them include:
• Proof of relevant official
professional qualification by a nationally recognised academic/ professional
• Confirmation of professional regulation and complaints procedures.
• Certification of current valid professional indemnity insurance, to provide
cover in the event of negligence.
• Demonstration of experience and knowledge of the market generally, in order
to be able to provide reliable advice, so as best to protect clients’
• Demonstration of detailed knowledge of the title to the property in question;
and its local and regional planning law status.
• Confirmation of willingness to work alongside and cooperate with other
professionals (e.g. lawyers) involved in the transaction in question.
• A clear explanation of the nature and extent of the service to be provided-
in writing; in a form approved by your lawyer; in your own language; and signed
as agreed. The terms must include full details of all applicable charges.
Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 14:23:37
September 16th, 2013
New European rules will come into
force on 17 August 2015, which affect the inheritance of Spanish assets of
non-Spanish individuals who die after that date.
These changes will benefit the
families of owners of Spanish properties who leave up to date, professionally
prepared and correctly worded Spanish Wills.
However, those who leave no Spanish Will;
or Spanish Wills which are out of date or do not take into account the new
Regulations, could leave significant problems and unintended consequences for
their families or chosen beneficiaries.
There are numerous benefits of the
new Regulations for non-Spanish owners of Spanish properties (provided that
their Last Wishes are validly expressed in the correct form of Spanish Will).
These benefits include:
• Non-Spanish nationals with
properties in Spain are officially entitled to exclude the restrictive Spanish
‘forced heirship’ succession law from applying to their families.
• Through Spanish Wills, significant opportunities are now allowed securely to
mitigate Spanish Succession Tax.
• Flexibility as to succession route is permitted in carefully drafted Spanish
Wills, to enable beneficiaries to elect the applicable succession route
following a death. This means the route which best suits family circumstances
and tax efficiency at the time, can be applied. This principle sits comfortably
with English nationals, who are allowed under English law to make certain
variations to deceased’s Wills, following their death.
• Confusion as to what constitutes ‘habitual residence’ (becoming the main
criteria for choice of law in Spanish inheritance) can be avoided. Certainty
and security in succession now prevails in Spanish estate planning.
Although these developments are
extremely positive for Spanish property owners (and those considering investing
in Spanish property); it must be emphasized that those who fail to obtain up to
date professional Spanish estate planning advice could fail to secure the
benefits of the new Regulations for their families or chosen beneficiaries.
Spanish Wills &Estate PlanningPosted by Andrew Thu, February 02, 2017 14:22:29
August 1st, 2013
There unfortunately continues to be
a lot of misinformation in circulation on this subject- particularly ‘opinions’
posted on the internet by those not in professional practice.
The starting point is that if you
own a Spanish property, you must have a Spanish Will.
Notwithstanding this; and quite
possibly because of incorrect advice, many British owners of Spanish properties
die each year, having made no Spanish Will. This can result in complex and
expensive Spanish probate cases.
However, the mission of our team is
to inform our contacts and clients during their lifetime as to the best
solution in each individual case.
In the vast majority of cases, as
indicated, the best solution is that during their lifetime, non- Spanish owners
of Spanish properties should ensure that they make separate up-to-date Spanish
Wills, to deal with their Spanish assets. The main benefits are:
• It avoids ambiguity as to which
national succession law is to be followed. In many cases, this can present
testators with greater choice in selecting beneficiaries.
• It avoids protracted and potentially highly costly Spanish probate procedures.
• It provides opportunities for efficient tax
• It enables clients to enjoy the protection and peace of mind of being able to
use Spain’s excellent compulsory national Wills Registry.
The quality of the professional
service in provision
of Spanish Wills is of
paramount importance. We have identified the main features of our Spanish Will
service which we consider to be of key importance to our clients:
• Our clients can be confident that
our documents have been produced with both Spanish and English legal input and
taxation analysis, which is absolutely essential when dealing with dual (or
multi) jurisdictional estates.
• Our clients can be confident in the professional qualification, regulation
and accountability of those responsible for advising and producing
• All our Spanish legal documentation includes at no extra charge, a
professional translation into ‘real’ English (we only work with sworn
translators, qualified and authorized by the Spanish Ministry of Foreign
Affairs). It is obviously fundamental that the translation is completely
accurate, to ensure that the testator fully understands what is being signed.
• We organise the whole Notarial process for our clients, providing our clients
also with full guidance notes as to the signature process, as well as helpline
advice, any time. So, the whole process is extremely straightforward and
stress-free for our clients.
• Our proven track record of working alongside our extensive network of
Notaries throughout Spain, ensures efficiency of process and confidence and
convenience for the client.
• As our priority is to work with Notaries with an in-house bilingual facility,
clients do not have to pay extra (as can otherwise commonly the case) for
interpretation services at the signature appointment.
• All documentation is discussed and agreed at the client’s pace, to ensure
that everything is carefully considered and thought through before
documentation is finalized and ready for signature.
• From our extensive and broad ranging experience of Spanish probate cases,
clients can be confident that all documentation is designed to ensure
efficiency and ease of Notarial/ Registry acceptance in the event of Spanish probate.
• As we offer a full range of Spanish estate planning tools (without being tied
or committed to any single product or process), clients can be confident of a
truly independent and unbiased approach to Spanish estate planning; to find the
best solution in each individual case.
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
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
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.
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
Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 14:17:45
April 8th, 2013
The issue in contention, which many
families with Spanish properties are very concerned about is that the amount of
Spanish Succession Tax payable by non- Spanish resident beneficiaries can
differ substantially from the amount payable by Spanish resident beneficiaries.
Where the individuals concerned are
European Union Citizens, there should not (according to European Law) be
discriminatory treatment on the grounds of residency/ non- residency.
A firm ruling is awaited from the
European Commission, but pending that, the anomaly remains that (whether or not
they are EU Citizens), non- Spanish resident inheritance cases are in practice
generally subject to significantly more onerous Spanish Succession Tax
We are monitoring the situation and
will advise our clients and contacts as and when there are further developments
in this regard.
Spanish Wills &Estate PlanningPosted by Andrew Thu, February 02, 2017 14:16:20
March 17th, 2013
The EU bailout conditions for Cyprus
have sent shockwaves throughout Europe and beyond. Indeed, anybody with bank
accounts in what are perceived to be the weaker European countries should
review carefully where their funds are held; and assess the risk of exposure to
bank insolvency and taxation.
We are certainly not subscribing to
the knee-jerk reaction of many-being immediately to transfer all funds out of
Spanish banks (save for the minimal amount to cover property outgoings and day
to day requirements). The official line remains that Spain does not require the
form of bailout which Cyprus has sought; and for which the draconian conditions
have been imposed.
Indeed, it would be reckless in the
extreme to recommend a run on the Spanish banks, as the consequences would be
disastrous. We would hope therefore, that an urgent assurance is given by the
Spanish Government as to Spain’s position; and also that a categorical
assurance is given that no such levy will in any circumstances be imposed on
Spanish bank accounts.
Failing the immediate provision of
those assurances, irrespective of calls for caution to avoid dramatic liquidity
problems for Spanish banks, it is worrying but perhaps inevitable, that a
significant outflow of funds from Spanish banks will now be seen.
Aside from this latest development,
many of our clients have also expressed concerns about what they are reading in
the Press about the security of their savings in some of the Spanish banks.
Also, although there is a capped
Spanish Government guarantee of funds deposited with Spanish banks, many are
expressing concerns as to:
· the limit of the Spanish
· the ability of the Spanish Government to honour the guarantee in the event of
the insolvency of a Spanish bank;
· how long it would take for the Spanish Government to honour the guarantee;
· the fact that many Spanish savings products are not covered by the Spanish
Obviously each individual’s
circumstances and banking arrangements are unique, so it is impossible to
provide ‘standard’ advice on the issue; and to attempt to do so could be
But we do encourage those with
savings in Spanish banks to take this opportunity review their arrangements;
and take such action (or take no action) as they conclude to be prudent in
their own circumstances.
In terms of cash holdings being
returned to other countries, if conversion to Sterling (or another currency) is
required, there can be significant variances in the rates given between banks
and the best specialist Foreign Exchange (FX) brokers. So, there can be a very
substantial hidden cost in this process or repatriation of funds for
individuals who do not give the matter careful thought and attention.
We are able to refer our clients to
a leading specialist FX broker, so that we can provide the required
certification to have an FX facility set up in a matter of minutes. This
ensures that the clients we introduce have a fast, secure and top quality FX
service; saving substantial sums on each and every FX transaction. The service
is available for all major currencies.
We will be happy to provide further
details on request
Spanish Wills &Estate PlanningPosted by Andrew Thu, February 02, 2017 14:11:06
March 11th, 2013
For English nationals with property
in Spain, in the majority of cases we deal with, the answer to this question
is: no. Most English nationals are not subject to the Spanish law of succession
(which would otherwise require parents to leave specified proportions of their
estates to their children).
However, individual circumstances
have individual legal consequences. So, this is a matter which has to be
considered carefully in each client case in dealing with Spanish Wills and
estate planning- both from the Spanish and UK legal perspectives. This ensures
that correct legal advice is given; and appropriate and secure legal
documentation is signed.
To have clear, correct and
individual advice on this point, helps to avoid anxiety and uncertainty when it
comes to Spanish estate succession.