LEGAL4SPAIN.COM - Blog-Updates

LEGAL4SPAIN.COM - Blog-Updates

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Spanish Wills
Estate Planning
Probate in Spain
Spanish Assets Sales

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An Introduction to Spanish Probate

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

July 8th, 2014

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

Some key points are:

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

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

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

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

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

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

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

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

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

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

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

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

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



Always Use independent lawyers in Spanish Property Transactions

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 property.

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 cost.



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.



Warning of 80% tax charge on Spanish inheritance

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.

Advising non-Spanish owners of Spanish properties is complex and specialised area of Spanish legal practice, and without the correct advice, major Spanish tax problems can easily arise.

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 manner.



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.



Can Spanish Succession Tax be reduced by having a Spanish Will?

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.



Tax Shock for Poorly Advised Buyers of ‘Bargain’ Spanish Properties

Sale of Spanish AssetsPosted by Andrew Thu, February 02, 2017 15:15:12

January 8th, 2014

Expert professional 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 liabilities.

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 risks.

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 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.



When to Gift Spanish Properties to Children

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.



Avoiding the pitfalls with Estate Agents in Spain

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 appointments include:

• 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 of interests.
• Exclusivity generally; and automatic extension of an exclusivity period.
• Failure to secure confirmation of any of the points listed at the end of this article.

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 IVA.

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% plus IVA.

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 body.
• 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’ interests.
• 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.



European Inheritance Law Changes- Avoiding Spanish Inheritance Problems

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.



What are the risks of not having a Spanish Will?

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 planning.
• 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 documentation.
• 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 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.



Is non- resident Spanish Succession Tax illegal?

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 treatment.

We are monitoring the situation and will advise our clients and contacts as and when there are further developments in this regard.



Will Spain follow Cyprus and tax bank deposits?

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 Government guarantee;
· 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;
and finally,
· the fact that many Spanish savings products are not covered by the Spanish Government Guarantee.

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 misleading.

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



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