Posts Tagged ‘Location Spain’
What’s on in the Murcia region?
If you live in Spain or are coming to Spain you may find this site of great use, it gives lots of information on a weekly news letter and tells you what is on and where in the Murcia region. You can subscribe to the weekly newsletter, it is FREE and gives much more information about places of interest, museums, ferias, fiestas, shows, concerts, entertainment and where to eat and drink . You can advertise or list goods for sale.There is something new to be learnt every week. Great ideas to get the best out the region.
Go to:- http://www.simplynetworking.es/index.php
Admin: 03 September 2010
Britons need to make a “distinct break” with the UK for non-residency status – employees excluded
Britons who move abroad to live need to be able to show that they have made a “distinct break” with the UK if they wish to ensure that they cannot be treated as UK tax resident after leaving UK shores. If you do not clearly sever ties with the UK, HM Revenue & Customs (HMRC) could argue that you are liable for tax in the UK, even though you live elsewhere. The exception is if you leave the UK for full time employment abroad.
It has been suggested that employees leaving Britain will have to cut their ties with the UK like selling their home, and not set foot in the UK for at least a year to become non-UK resident, but this is not the case.
The recent judicial decision involving Robert Gaines-Cooper and UK residency reaffirmed that in order to become non-UK resident it is not necessary for an employee to do anything other than be employed overseas full time for at least a full UK tax year.
Lord Justice Moses said: “It is not enough that the taxpayer has left the UK, he must have left to work full time. Absence is not sufficient; it must be absence while engaged on a full-time employment for at least a whole tax year. No more however is required. The absence need be neither permanent nor indefinite. Accordingly, … there is no requirement, for a taxpayer to demonstrate that he has severed family and social ties within the UK.”
The employment must be on a full time contract as an employee and not simply your own company set up to give you an employment.
When Gaines-Cooper moved to the Seychelles in 1975 he did not take up full time employment there and had to rely on HM Revenue & Customs’ (HMRC) guidance in its booklet IR20 (now HMRC6) on residency and non-residency. Under the heading “Leaving the UK permanently or indefinitely”, the booklet stated: “If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year.”
Gaines-Cooper argued this meant that all he had to do was leave the UK and thereafter spend less than 91 days a year there. The Court of Appeal referred to the words “permanently or indefinitely” in the heading:
“The adverbs “permanently or indefinitely” make, as a matter of construction, all the difference. The extent to which a taxpayer retains social and family ties within the United Kingdom must have a significant and often dispositive impact on the question whether a taxpayer has left permanently or indefinitely.”
IR20 has since been replaced by HMRC 6 and HMRC is adamant that the information given is for guidance only. However, it is clear that if you are not an employee – eg, you are retired, even if below retirement age – and wish not to be treated as a UK tax resident after leaving the country you must demonstrate that you are leaving the UK “permanently or indefinitely”.
Ties to sever to establish UK non-residency
- Set up a new main home outside the UK. It is not strictly necessary to give up having a home in the UK altogether providing it is “consistent with” you moving abroad to live “permanently or indefinitely”. So if you retain a UK home it would be prudent for your home abroad to be larger than the UK one. However retention of a UK home available for your use is a factor that connects you to the UK, so to strengthen a claim to non-UK residence we would recommend you sell or rent it out to a third party.
- Move personal effects, cars etc to your home abroad.
- Your spouse and any minor children should move abroad with you. There is however no need to sever all family and social ties – it is not necessary for adult children or aged parents to move with you as has been suggested in the UK press.
- Resign membership of sporting and social clubs and cut all UK business connections.
- Notify your UK doctor and dentist that you have left the UK and register with different ones in your new country of residence.
- Dispose of UK investments and plan to re-invest abroad.
- Close UK bank accounts and credit cards and open new ones in your new country.
Once you have made a ‘clear break’ with the UK, it is still possible to visit, providing you keep well within the 91 day limit – i.e. spend less than 91 days or nights there per UK tax year taken on average over four years.
If you have not made a ‘clear break’ with the UK, you may be treated as remaining UK resident, regardless of the number of days you spend in there each year.
A tax and wealth management firm like Blevins Franks can advise you on tax and residency issues in the UK and many other countries, including advice on how tax planning can reduce your tax liabilities, even if eventually you return to the UK to live.
By David Franks, Chief Executive, Blevins Franks
Paying Tax in Spain – Exploding the Myths
Many British expatriates arrive in Spain to live without fully understanding the local tax situation or any obligations that may remain to the UK taxman. There are quite a few myths around and unless you are properly informed you may get your tax planning wrong. This article looks at some of the common misconceptions and separates fact from fiction.
I am resident in Spain but complete a full tax return in the UK
► You become resident for tax purposes in Spain if:
- you spend more than 183 days in one calendar year in Spain (the days do not have to be consecutive), or
- your “centre of economic interests” is in Spain, or
- your “centre of vital interests” is in Spain, or
- your spouse is resident in Spain unless you can prove you are resident in another country.
► As a resident of Spain you are liable for income and capital gains taxes on your worldwide income.
► If you receive a gift or inheritance as a Spanish resident, you may be liable to Spanish succession tax.
► You must complete a Spanish tax return in respect of your worldwide income.
► A UK tax return only needs to be completed in respect of certain non-exempt income, such as rental income from UK property.
I am taxed at source on my UK assets and therefore I am not liable to tax in Spain on these assets
► You are entitled to double tax relief if you have income subject to tax at source in the UK which is also taxed in Spain.
► You can usually make arrangements for tax not to be deducted at source in the UK on certain types of income. This income would then be received gross and taxed solely in Spain.
I am taxed at source on my offshore bank accounts under the EU Savings Tax Directive and therefore am not liable to tax in Spain
► Paying withholding tax on offshore interest payments does not mean that you have no further tax liabilities on the same income in Spain.
► You still must declare such earnings on your Spanish tax return.
► If you pay the withholding tax and declare the income in Spain you are unlikely to receive any tax credit in Spain and could pay tax twice.
I can withdraw 5% of my UK/offshore insurance bond per year for 20 years without any liability to Spanish tax
► The 5% rule only applies to UK residents.
► As a Spanish tax resident, your offshore insurance bond will be taxed according to the Spanish rules.
There is no tax to pay if I have not taken withdrawals from my insurance bond
► The taxation of insurance bonds in Spain depends on whether the bond is ‘qualifying’ (issued by an EU country and compliant with Spanish regulations) or ‘non-qualifying’.
► Non-qualifying bonds are valued at 31st December each year and any increase in value from 1st January is taxed in full as income, even if there has been no withdrawal. The taxable income is taxed as savings income, so at 19% on the first €6,000 and 21% on any balance. For example, if an investment bond increases in value by 10% from €200,000 to €220,000 in any one year, the tax payable in Spain is €4,080 (€6,000 x19% = €1,140, + €14,000 × 21% = €2,940).
► Any fund located in a ‘tax haven’ (eg Isle of Man, Jersey, Guernsey) is non-qualifying and will receive this unfavourable tax treatment.
A withdrawal from a qualifying offshore bond will be taxed at 19% on the first €6,000 and 21% on any balance
► There is no tax to pay until a withdrawal is made from qualifying bonds in Spain.
► The taxation is very favourable because only the growth in value element is taxed, not the whole withdrawal. Using the above example, if you withdraw €20,000 you will only need to pay tax on roughly 10% of it. The taxable income is therefore €2,000 and your tax liability (at 19%) is only €380.
UK investment bonds are tax free in the UK for Spanish residents
► A UK investment bond is taxed at source in the UK.
► The tax deducted can be set against your tax liability in Spain, so you do not pay tax twice on the same income.
► If you have either a non-qualifying insurance bond or a UK investment bond it will be advantageous to transfer it to a qualifying, non-UK, bond.
I am a UK national and not liable to Spanish succession tax (SST)
► SST is payable if the inheritor or recipient of a gift is resident in Spain, or the asset being gifted or passed on death is situated in Spain.
► The tax rate can be as high as 34% for inheritances or gifts within the immediate family or higher for more distantly related recipients.
► Depending on which region you live in, there are usually deductions available according to the closeness in relationship between the recipient and the deceased, and other exemptions may be available.
► SST can often be avoided through use of an offshore trust.
Contact an experienced international tax and wealth management adviser like Blevins Franks for advice on tax mitigation strategies in Spain.
Note that the tax treatment(s) detailed above are current at the time of writing and may change in the future.
By Bill Blevins, Managing Director, Blevins Franks
Data Disappointments For Sterling
Wider UK trade deficit and falling factory gate prices dampen appetite for the pound. Stability returns to the euro as the Greek panic subsides.
Sterling spent a second week paying the bill for its post-budget honeymoon. It has now returned all the way to its position before the chancellor stood up to deliver his speech on 22 June. There was nothing dramatic about the decline and no sense of the panic that would have been typical six months or more ago. To some extent the fall was a completion of the technical head-and-shoulders formation that peaked a fortnight ago.
The UK economic data were mixed. Monday’s services sector purchasing managers’ index (PMI) fell by one point to a less-than expected 54.4. It suggested that companies were still growing their activity but at a progressively slower pace. Wednesday’s production figures were good in parts. Although manufacturing production grew by only 0.3% in May instead of the +0.5% analysts had predicted, it was a far better result than April’s -0.8% decline. The broader industrial production figure, which includes such things as mining and energy, reversed the previous month’s decline with a +0.7% rise. The Halifax house price index went down for a second month, this time by -0.6%, leaving house prices 6.3% higher than a year earlier.
The most disappointing data, at least as far as sterling was concerned, came on Friday with June’s producer price index (PPI) and the balance of trade for May. The input and output components of the PPI, representing manufacturers’ costs and factory gate prices, were lower in June by -0.2% and -0.3% respectively. The numbers supported the Bank of England’s projection that inflation will fall back towards its 2% target without the need for higher interest rates. The UK trade figures were also unhelpful. The deficit in goods widened to more than £8 billion while goods and services together registered a £4.5 billion shortfall. Both deficits were bigger than expected and cast renewed doubt on the alleged benefits of a weak pound.
Other events during the week saw an announcement from the new Office for Budgetary Responsibility (OBR) that its boss, Alan Budd, did not intend to renew his initial three month contract and that the two other members of the triumvirate would also be leaving before the end of the year. Critics of the new setup wondered why he was leaving. Could it be because of lack of independence? Perhaps not, for the International Monetary Fund (IMF) came out later in the week with economic growth projections remarkably similar to those put together by the OBR. The IMF agrees with the OBR that Britain’s gross domestic product will grow by 1.2%. Its forecast of 2.1% growth in 2011 is lower than the OBR’s 2.3% prediction.
After months of punishment as a result of the problems in Greece the euro has made a good fist of regaining some semblance of stability. There has been a correction to what commentators retrospectively describe as an ‘oversold’ condition, in much the same way that sterling recovered from its near-parity lows a year and a half ago.
The euro zone’s services PMI came in better than its British or US equivalents at 55.5, minutely higher than the previous month. Retail sales also performed better than forecast in June, rising by +0.3% instead of falling by that amount as analysts had predicted. Finalised figures for economic expansion in the first quarter of the year showed a +0.2% growth in gross domestic product (GDP), probably a tad short of the +0.3% growth that is expected to have demonstrated. Germany performed better than Britain on the industrial production front, with growth of +2.6% in May, while it demonstrated slower inflation at +0.8% in the year to June. If the Bank of England is under no pressure to raise interest rates in the War on Inflation, the European Central Bank (ECB) seems to be under no greater pressure.
Indeed, the ECB sided with the Bank of England in leaving its policy interest rate unchanged at Thursday’s meeting. President Jean-Claude Trichet expressed guarded optimism at the pace of economic growth but found no difficulty in containing his enthusiasm. Of more interest to investors was that he did not say about the ’stress tests’ that Euroland banks have recently undergone. The purpose of the tests is to examine how those banks would survive another serious economic or financial shock. Investors are uneasy that the ’stresses’ to which the banks’ balance sheets are subjected might not in fact be real life worst-case situations. The results of the tests will come out in a couple of weeks’ time and are eagerly awaited.
That sterling spent the whole week on the slide does not bode well for it in the immediate future. With UK statistics for Gross domestic product, inflation, consumer confidence, employment and earnings all due this week there is scope for further setbacks if the numbers are not supportive.
Buyers of the euro should hedge half their requirement until sterling’s future course becomes clearer.
Credit:- Moneycorp 13 July 2010
Reduce Spanish and UK Inheritance Tax with A QNUPS
British expatriates living in Spain want to feel confident that their wealth will last them for the rest of their retirement and keep them in a comfortable lifestyle. Paying less tax is one way to protect your assets and legitimate tax planning methods can help with this. The latest arrangement available to British expatriates is QNUPS (Qualifying Non-UK Pension Schemes) which can reduce taxation in Spain –as well as UK inheritance tax (IHT).
Spanish tax savings which can be made with a QNUPS are:
- QNUPS can avoid succession tax in Spain as well as succession law.
- There is no Spanish tax on the transfer into a QNUPS.
- Funds within the scheme will grow free of Spanish income tax.
- If you make a withdrawal in the form of an annuity from the fund itself (as is usually the case), very favourable Spanish tax provisions may apply.
- There is no need to buy an annuity from an insurance company.
- You can withdraw up to 25% as a lump sum from a QNUPS. If a lump sum is taken Spanish tax is due, but is calculated only on the difference between the capital received and the contributions you made. The tax rate is 19% (on the first €6,000 of total savings income, including that from other sources) and 21% on the excess.
- The balance of your investment can pass onto your heirs on your death.
- A QNUPS can avoid wealth tax if a rate is reintroduced in the future.
No UK IHT with a QNUPS
If you are a British expatriate, you may be liable to UK IHT on your worldwide assets, even if you are Spanish tax resident. This is because liability to IHT is based on domicile and not residency.
Shaking off your domicile is not easy to do and usually takes at least three years and involves pruning your ties with the UK to the bare minimum. For example, you would need to sell your UK property or at least not have it available for use; close surplus bank accounts, credit and debit cards and other investments; sell your vehicles and cut down social and business connections in the UK. You need to be able to provide evidence that you do not intend to return to the UK, and establishing a permanent home in Spain and making a Spanish Will will help. Even if you do lose your UK domicile status, you would regain it as soon as you move back to the UK to live.
Many Britons who relocate to Spain do so without a thought of moving back to the UK. But the fact is that as the years go by many do for a variety of reasons, such as on the death of a spouse or partner or to be closer to grandchildren as they grow up. Returning to the UK means returning to a UK liability to IHT, currently at 40% above the nil-rate threshold of £325,000 per person or £650,000 for spouses and civil partners.
Investing in a QNUPS takes away the worry over whether or not you are still UK domiciled and liable to IHT, or whether you may later return to the UK. Assets in a QNUPS are immediately exempt for IHT – even if you are UK domiciled.
Other advantages of a QNUPS
- Investable wealth can be placed in a QNUPS. You cannot invest a UK pension plan directly into a QNUPS, although it is possible after you have been non-UK resident for five complete, consecutive UK tax years, as long as you go via the QROPS route first.
- There is no maximum age at which you can invest in a QNUPS.
- There is no maximum contribution.
- You do not need to have any earned income from an employment.
- Income and a lump sum can be taken from age 55, or can be deferred until the age of 75 (although if you take income earlier, the lump sum needs to be taken then).
- Assets can be invested and benefits taken in any currency of your choice, giving you the opportunity to remove currency risk.
- Income which is taken is drawn down from the fund, leaving your scheme assets invested and rolling-up free from tax.
A QNUPS provides an opportunity for flexible investing and choice. It doesn’t matter how old you are or how long you have been retired, investing in a QNUPS will give immediate tax benefits, especially for Spanish succession tax and UK IHT. Within QNUPS the funds will remain fully invested and will be subject to investment risk, in line with your investment objectives.
Blevins Franks is an established international wealth and tax management firm with full knowledge of the rules of taxation in both Spain and the UK. Contact an adviser such as Blevins Franks to learn how QNUPS can help you.
Note that the tax treatment(s) detailed above are current at the time of writing; these are based on our understanding of current UK and Spanish legislation and taxation practice, and may change in the future.
By David Franks, Chief Executive, Blevins Franks
Home repossessions are on the increase.
The government has accepted to reform the code of civil procedure to raise the threshold for salaries that cannot be seized when executing a mortgage in order to protect low income families and follow through with a proposal from the IU-ICV parliamentary group.
With the new legislation, pending final approval, the minimum salary limit that will be untouchable even when someone’s salary is seized for failure to pay a mortgage will be raised to a level 10% above the minimum inter-professional salary. In other words, whatever happens, such people would be left with 696.60 euros per month. This figure is increased by an extra 20% for each additional family member under their responsibility.
In practice, this means that if a bank has repossessed your home but you continue to owe the bank money, it will only be able to “take” the part of the salary you earn each month over this amount. For example, if someone earns 1,200 euros per month, the bank will be able to take 504.40 euros and leave them with 696.60 euros. If that person has a family member for whom they are responsible, the bank would have to leave them with 836 euros and 975 euros if that person was responsible for two family members.
Remember that in Spain, if someone has their home repossessed and the sale at auction of the property does not cover the mortgage, they continue to owe money to the bank.
WHAT HAPPENS IF I AM UNABLE TO PAY MY MORTGAGE?
We are living in unprecedented times and there is tension in the air. No-one can be sure of anything anymore and what was once unthinkable (not being able to pay the mortgage) is unfortunately becoming commonplace nowadays. With the constantly rising Euribor and increasing number of redundancies, paying the mortgage is moving away from being simply a chore towards becoming impossible. When we ourselves reach that situation, what can we do?
If you are unfortunate enough to be one of those people being suffocated by their mortgage and who cannot meet their monthly repayments, it is essential you read this before taking any decisions. The first think you need to know is that stopping to pay the mortgage would be an incredibly bad idea; far from ending the problem, you would only be aggravating it. From the moment you first fail to meet a repayment, the bank will remind you it is obliged to collect your debt and you can rest assured it will do so eventually. It will start out nice and politely at first but, over time, will eventually move from words to actions. If the situation is not resolved within a few months, it will ask the courts to initiate a process to auction your house and guarantee itself the collection of the money it lent you.
Be warned however, the auction of your property does not always put an end to the problem. If the bank is unable to settle your debt, you will continue to owe it money. To settle your mortgage, it is not simply enough to hand over the keys to your home to the bank. That system, which has grown exponentially in the United States, is not how things work in Spain. Here, when you sign a mortgage, you are subject to personal repayment. In other words, if the bank cannot cover the debt you hold with it by selling the house, it will continue to demand repayment of the remaining amount and could even partially seize your salary until it has recovered all the money it lent you.
THE PROCESS STEP-BY-STEP
Month one
After the first missed repayment, the bank will call you to rule out the possibility that there has been a misjudgment or error on either part. If you meet the repayment, plus the delay interest for the corresponding days since the repayment was due, the problem will end there.
Between months 2 and 5
If you accumulate between 2 and 5 months of missed repayments, the bank will do everything within its powers to make you pay. If it fails, it will make an appointment with you to negotiate changes to your mortgage conditions. It will ask you for proposals to pay less and will study their viability in an attempt to reach an agreement. Extending the term of the mortgage or paying the interest only for a certain time, are the most commonly used alternatives. If you have already reached this stage, you will now have several months’ worth of delay interest to pay, meaning your debt will have grown.
During this period, an important event takes place at the bank: if you do not pay, the entity must make provisions for your debt on its balance sheet. In other words, it must reserve monies equivalent to your credit, in accordance with regulations from the Bank of Spain. That money does not leave the bank but is “frozen”, let’s say. At that moment, you become a problem for the bank, whereas before you were simply a pain.
Month six
After, approximately half a year and once the bank has made written demands without a response from you, the bank will then consider recovery of the loan through ordinary channels as difficult. Therefore, the entity will execute your mortgage, which is nothing more than asking a judge to activate the guarantees you all signed in front of a notary public when you signed the mortgage papers. It is still possible for you to resolve the problem at this stage by paying everything you owe plus the delay interest, which will be adding up all the time.
After a year or a year and a half
The judge will set a date for the auction of your property. Until almost the very day they auction your property, you can still pay the debt and the corresponding delay interest (which will be quite considerable by now) and put a stop to the process. If you do not, you will reach a critical and painful moment: your home will be auctioned and you will be forced to leave.
THE AUCTION OF YOUR PROPERTY
Once the auction of your property has been appropriately announced, the auction itself will take place. The property will be put out to auction for the sum you owe to the bank plus the interests and other costs that may have been incurred to date.
It is possible that the property will not sell at the first auction, meaning the process will be repeated and could even be put out to auction with no reserve price for people to make whatever offer they want. If it does not sell, the judge will tell the bank what to do but the bank could keep the property even though your debt has not yet been settled.
If the property does get sold during these process, one of two things may happen:
1) the money obtained is more than the debt plus the costs, in which case the bank will settle, collect the debt and return the surplus money to you.
2) the debt is not covered, in which case the bank will keep the money from the sale but you will still have an outstanding debt to settle with your bank and it will come after you, and more importantly, after your guarantors should you have made use of any when you signed your mortgage. In this process, the judge must determine the best course of action to settle the outstanding amount. A decision may be taken to seize other assets that you own, those of your guarantors, part of your salary, etc. The objective of the bank will be to recover the money it lent you and that it was unable to recover through the sale of your home.
Credit: Fuster & Associates
The Spanish property Market is at an Impasse, says an expert.
What does the immediate future hold for the Spanish property market? Stagnation or another lurch downwards, according to one industry leader.
“The property market is under observation. Either we have touched bottom, or we are going to fall again.” That was Juan Fernández-Aceytuno, Managing Director of Sociedad de Tasación, one of Spain’s leading appraisal companies, speaking at the launch of stvalora.com, a new online valuation service.
Almost 4 years since property prices peaked, the market is still stuck in what some call a correction. “We are at an impasse, with everyone waiting to see what happens to the market. Few people will dare to say if we have touched bottom or just a bottle neck before falling again,” said Fernández-Aceytuno.
No rebound in property prices.
A rebound in prices is the one thing that Fernández-Aceytuno confidently rules out, despite the forthcoming increase in VAT that will put up the price of new homes. If anything he is more worried about a potential increase in interest rates forcing house prices down further.
Fernández-Aceytuno also points out that house prices tend to rise in good times and fall in the bad.
“Nobody has a crystal ball when it comes to prices, but at times when disposable incomes and credit have risen, prices have risen, and conversely, when these have fallen, so have prices.” In Spain today incomes are falling, there are more than 4 million unemployed, credit is scarce, and there is no sign of the situation improving anytime soon.
The Spanish property market recovery, when it comes, will be lead by a change of attitude in the sector, argues the boss of Sociedad de Tasación. “What the sector really needs is to regain trust and credibility,” he said, whilst admitting that some companies inflated valuations for mortgages by 15-20% during the boom. With prices down around 20%, that leaves some borrowers sitting on losses of 40%. “That’s what I would call suffering a bubble.”
Credit:- Posted on May 21, 2010 by Mark Stucklin
Changes in the Spanish Justice System
Citizens may now grant powers of attorney to act in legal proceedings free of charge, and without having to contract a notary.
The Judicial Office, which was inaugurated last week, will enable citizens to bring actions for debts of up to 250,000 euros through fast track proceedings.
Forget about going to the notary’s in order to grant a power of attorney when taking legal action. As from now you can grant a power of attorney to act in legal proceedings free of charge before the judicial notary public. This is one of the many improvements to the legal system that citizens can take advantage of as of yesterday, when the procedural law reform came into force and created the new Judicial Office. Nor is this the only reform. The justice system is starting to change.
The changes to the judicial system, which came into force last week, mainly affect the division of functions between judges and court clerks. The latter will perform all the tasks that do not strictly fall within the remit of the judges in order to reduce the judges´ workload and enable them to devote more time to issuing sentences. As from now court clerks may call witnesses, impose court costs, decide whether a claim should be allowed to proceed etc.
According to the Ministry for Justice, this change will not affect the rights of citizens but will instead speed up judicial administration and improve the quality of the public services that it provides.
For the time being however, citizens may not find that legal proceedings are much quicker. «Although some of the changes, such as the power of attorney to act in legal proceedings, have been implemented immediately, we will have to wait for the common procedural services to come into force before citizens can enjoy a judicial administration that operates using quality, efficiency, and rationalisation criteria in the provision of services », explained Javier Luis Parra, Chief Court Clerk of the High Court of Murcia (TSJ) last week. According to Juan Martínez Moya, President of the High Court of Murcia, the second stage of the reform will not be implemented until October of this year.
However a wide variety of reforms to the judicial system will be implemented before this date, including some which citizens will be able to use immediately.
One of these reforms increases the amount that can be claimed in small debts proceedings from 30,000 euros to 250,000 euros. As a result, citizens will be able to claim for debts up to this amount through very easy legal procedures. As Javier Parra explained « This type of proceedings make up the majority of civil actions, and increasing the amount that can be claimed greatly increases the scope of the proceedings, and therefore significantly enhances the legal system’s capacity to resolve this type of claim ».
Furthermore, the regulations regulating judicial auctions have been amended in order to establish an electronic bidding system, to be managed by the court clerk, provided that it is technologically feasible. This will allow bidders to participate in judicial auctions over the Internet without having to be physically present in the law court where the auction is taking place. This measure improves the justice system, «leading to greater transparency and publicity, and will ensure that better prices are obtained, while practices such as two people entering into a pact that can damage a third party will be prevented ». As remarked above, reforms that improve the justice system and prepare it for the future.
Credit: www.spainsolicitors.com
Fuster & Associates
Rise in Spanish IVA
From the 1st July, 2 of the 3 categories of Spanish VAT will rise.
16% to 18%
7% to 8%
4% (is to remain the same).
What does this mean for the Spanish Property market which is already struggling to survive the current climate?
It will certainly increase the cost of buying and selling property and obtaining a mortgage in an already crippled market.
What is the government thinking?
Of course it will generate income for them but may push the market further backwards and no doubt they are hoping that prices will fall still further and generate increased interest from buyers and steady the industry but at what cost? More likely it will force more builders, promoters and agencies out of business with knock on job losses. The banks will come under further pressure and there will be many owners caught in the trap of having mortgages far greater than the value of their property causing an increase in repossessions as people struggle with their own economic crisis, losing jobs and putting more people on the bread-line.
Then there is the knock on effect for furniture and electrical companies and many other suppliers with steady drops in sales already recorded.
Buyers and Investors
No doubt there are people watching the situation with interest and for the general buyer now is the time to buy a property before the IVA increases and with so many properties available at low prices.
For the investor, they will probably sit it out and wait for rock bottom distressed sales and then pounce as the drop in price will by far outweigh the increase in purchase costs.
With the pound rising against the euro, buying a property is looking even more attractive.
Mortgages
As the banks continue to come under pressure they will negotiate on distressed properties in order to clear their overflowing books and are currently making mortgage offers which pre crisis would be unheard of.
If you have the money now is the time to buy Spanish Property.
Admin: 5 May 2010
Spanish Capital Gains Tax Relief on the Main Home
Does It Apply On Overseas Properties?
The Spanish gains tax regulations can provide relief on the sale of the main home for Spanish tax residents whose property qualifies as their habitual main residence. If you are 65 years or older the gain is tax free even if you do not buy another property. If you are under 65, the exemption only applies if you reinvest the proceeds of sale into a new main residence within a four year period, starting from two years before the sale. There is some confusion about whether this relief applies if your new main home is located outside Spain, so this article looks into this issue.
How does the relief work?
For the property you are selling to qualify as your main home, you need to have lived in it for a continuous period of at least three years from the date the property was bought or construction was completed. If you have to sell earlier because of a change of job, marriage, separation or death of a partner, the tax relief can still apply.
The relief is based on the proportion of the total sales proceeds reinvested in the new home. If it costs more than the sale price of the old home, the full gain is exempt. If only half of the sale proceeds are reinvested, then only half of the gain is exempt and the other half is taxable in the year of sale.
If the property being sold has a mortgage on it, it is the net sale proceeds (after deducting the mortgage) which need to be fully reinvested to escape capital gains tax.
The taxpayer must declare the gain on his Spanish tax return together with his intention to reinvest the proceeds into a new main home, or the relief will not apply.
Location of the properties
While the tax relief is only available to Spanish tax residents (as the property cannot be your main home if you are not Spanish tax resident), the properties themselves do not need to be located in Spain – either the residence you are selling or the new one you are buying.
So, if you move to Spain and sell your main home in your former country of residence (eg the UK) after you become Spanish resident, you may be able to avoid Spanish capital gains tax under these provisions. You have to purchase your Spanish home within the two years preceding the date of sale of the UK property or within two years following the sale. The purchase price of the Spanish property should be at least the net sale proceeds of your UK property for full relief to apply.
If the Spanish property costs less than the amount you received from the sale of your UK property, you will be charged tax in Spain on a proportion of the gain equivalent to the sale proceeds not reinvested.
Similarly, if you sell your main home in Spain and move to another country, reinvestment relief can still apply to the former Spanish home even though the new home is not located in Spain, provided that you and your family make this property your new main home. The purchase of the new home must take place within the relevant time limits and the full sale proceeds must be reinvested for full relief to apply. If the family members move overseas to the new home, but the taxpayer remains in Spain, the relief will not apply as the property has not become the taxpayer’s new main home.
An example of relief applying in such a case is given in a formal response to a query submitted to the Spanish tax administration.
Furthermore, it would be a clear breach of EU law if Spain did not allow the relief for reinvestment in a new home situated within another EU country. This situation arose in Portugal, and so the European Commission took action, as below:
“In July 2004 the European Commission invited Portugal to change its rules which prohibit the capital gains tax relief where the new main home is situated outside Portugal. The European Commission considers these rules to be discriminatory and contrary to the EC Treaty rules on the free movement of people, etc.
“Portugal did not amend its legislation within the 2 months time limit given by the Commission, so in January 2005 the Commission decided to refer Portugal to the European Court of Justice.
“On 26 October 2006, the European Court of Justice ruled that the restriction of the relief to the purchase of a primary residence located in only Portugal was an infringement of the fundamental freedoms guaranteed by the EU Treaty.
“As a result of the European Court decision, taxpayers should be able to benefit from the main residence relief in Portugal, provided the proceeds are reinvested in another primary residence within the European Union.”
By David Franks, Chief Executive, Blevins Franks