Tag Archives: Spain Tax

Finance

Spain to Reintroduce Wealth Tax

With growing concern at the state of the Spanish economy and ongoing efforts to reduce the budget deficit failing, the Spanish government will today reintroduce a wealth tax (patrimonio), which it abolished just 3 years ago. Spain’s deficit reduction is part of a stability agreement with the European Union in response to the current financial crisis affecting the Eurozone.

The new tax is expected to assess wealth in the 2011-2012 years, with income to the government coming into treasury in 2012-2013. Hoping to raise an additional 1 billion euros, Elena Salgado, finance minister in the PSOE led government stated that the tax will likely affect 160,000 of Spain’s wealthiest people, who will face tax bills of upto 2.5% of their declared assets.

Citing concerns within PSOE that Spain’s former wealth tax unfairly targeted middle class savers, Salgado confirmed the new wealth tax threshold has been raised from 120,000 euros to 700,000 euros, but refused to speculate on post-election threshold. In addition, exemptions for people’s homes will be set at 300,000 euros.

The introduction doesn’t require parliamentary approval, a full sitting of cabinet being sufficient, and it is understood the opposition PP who have previously rejected a reintroduction of the wealth tax will accept the measures, and may choose to retain the tax after the election if successful in forming a government.

The move is expected to be popular with left wing voters, and could reduce the 15 point difference in opinion polls between PSOE and PP, though with decisions by PP recently to back the government on stimulus measures, including the constitutional change to ensuring Spain’s central and community governments balance their books, polls may not be as affected prior to the Nov 20 general election as is hoped by PSOE leaders.

Legal

eBook Review: Spanish Legal Property Information by Perez Legal Group

The current financial crisis in Spain, dwindling property values, and the desperation felt by many as they try to sell their homes before they are repossessed has created a buyers market for those with cash or approved funding. It seems prudent therefore to be aware of the legalities of buying or selling Spanish property, and thankfully Perez Legal Group in Marbella have created a freely downloadable ebook that runs through almost everything you should know.

Raquel Perez created Perez Legal Group with the objective of being different from other legal offices in Spain, and with her offices in Marbella, she and her team are very accessible to expat residents in Malaga province. Her group is the first to offer a weekly free legal clinic, and has created a book entitled “Spanish Legal Property Information” that can be downloaded free from the firm’s website.

“Spanish Legal Property Information” is a mini format ebook, that if printed on paper would be about the size of a typical language phrase book, and is 55 pages of legal advice that aims to give English speaking people a solid introduction to the basics of buying and selling property, property taxes, resident status, Spanish wills and inheritance taxes, and bank accounts.

The first thing to realise is that any transaction of property needs to be completed correctly in accordance with Spanish law, and the laws here in Spain are not the same as the UK, Ireland, or the USA. As well, Spanish law when followed correctly offers all of the protections expats expect back home, but in Spain many have lost a lot of money through incorrect application of the law. In many cases this has been due to unscrupulous sales agents, but the majority of cases might have been avoided if local laws had been better understood.

This is where “Spanish Legal Property Information” steps in. The guide briefly and succinctly explains how property ownership is registered, who has to pay the taxes, what your lawyer (abogado) has to check to make sure your rights are protected, and defines the various values that can be attached to property.

Specific vocabulary that is mentioned and explained includes plusvalia, IBI, escritura publica, catastro, hacienda, fiscal representative, NIE, incremento de patrimonio, padrón, usufruct. Whilst the guide is short (only 55 pages), this type of vocabulary is essential if you wish to understand the jargon used in property transactions, and without which you may misunderstand something important.

As an expat writer in Spain I find the majority of property owners will quickly learn about the legalities of owning property, but often never take the time to understand wills and inheritance, and as a consequence blindly ignore what Spaniards know in the mistaken belief that their foreign will protects them, or that they can register a foreign company to own their assets in Spain and never worry about inheritance tax.

This is dangerous thinking and has led to many dependants losing far more of their inheritance than they needed to, simply because the relative was too bloody minded to research their options for leaving assets to spouses and children before they passed away. In fact a family trust in the form of a Spanish company is possible, but only with foresight and the writing of a Spanish will. Chapters 7 and 8 of “Spanish Legal Property Information” should be considered a mandatory read.

Furthermore, the authors explain that it is possible under existing Spanish law to mitigate upto 95% of the inheritance tax payable upto the 120,000 euros if you were resident in Spain prior to dying. Given today’s depressed property values this amounts to a significant saving.

Whilst “Spanish Legal Property Information” should not be considered an exhaustive guide to property ownership, it is a worthwhile read for anyone considering or already owning property in Spain. It as also small enough that most readers will take on board the essentials in a very short time.

The ebook can be downloaded free from the Perez Legal Group website.

Finance

Spanish Govt Introduces More Austerity Measures, Cuts Taxes on New Homes

As pressure mounts on Spain’s socialist led government from the EU and finance markets, the government has announced further austerity measures in its hopes of reducing the budget deficit and convince investors that positive economic growth can be expected.

Announcing the measures, Development Minister José Blanco stated that 700,000 new homes remain unsold after the property market crash in Spain, and that reducing the IVA on new homes from 8% down to 4% until the end of the year.

Spain’s decade of housing boom ended with the beginning of the financial crisis in 2008, leaving an estimated 2 million new properties unsold, and leading to Spain having the highest private debt burden in the Eurozone. Though the almost complete meltdown of the construction industry has meant more than half of these new properties have since been sold, the resultant slashing of home prices by as much as 50% in some markets has not been without pain to Spanish home buyers.

Corporate tax payments worth some 2.5 billion euros have been brought forward to 2011 with a decree aimed at boosting government coffers before the Nov 20 election. The socialist government is currently polling to lose the election and appears to be frantically aiming to minimise election losses by introducing measures to bring more stability to the economy.

As well, the government announced restrictions on doctors prescribing branded medications, instead insisting the generic or unbranded medicines must now be prescribed in an effort to shave a further 2.4 billion euros off the national debt.

In the last week, the European Central Bank has been buying up Spanish debt to avoid a possible default by Spain, and at the same time German Chancellor Merkel, and French President Sarkozy have been increasing pressure on Spain to make concerted efforts to cut the budget deficit now, and not after the election.

Previous efforts to stabilise the economy and reduce the debt burden included a sales tax (IVA) increase, slashing of public sector wages, and freezing of pensions.

Economic growth has been affected by the austerity measures, with 2011 forecast growth of 1.8% downgraded to 1.3%, though current forecasts from the National Statistics Institute suggest 0.7% growth might be more realistic. This on top of an official unemployment rate above 20%, the highest in the Eurozone.