International Tax Law Barrister, Lawyer & Attorney : Leon Fernando del Canto : Private Clients, Tax Planning, Spanish Tax : Spain, UK, Europe

The Spanish tax authorities grant a 15% tax relief on the investments used during any year for the acquisition of the primary residences. This amount is deducted on the calculations of Income Tax. 

This is not applicable to non resident individuals and not enough of an incentive to become resident, or at least not the only one.

Our British friends see in this relief a reminiscence of the MIRAS, (mortgage interest relief at source) which was in place in the UK years ago.

The limit of  allowable amounts paid is  9,015 Euros, to which 15% is applicable. Therefore the maximum tax relief  available will be 1,352 Euros.

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Raul Villanueva, accounting manager at www.konsilia.es inform us that new legislation has been published in the Spanish official gazette (B.O.E 19/12/07). The ORDEN EHA 3695/07 regulates the Form 030 to apply for the National Identification Number. 

It is now clear that  EU citizens who are not planning to establish their primary residence in Spain and will not stay  for more than three months per year, are not obligated to obtain a NIE number (Numero de Identificacion de Extranjeros or Non resident tax identification number), neither at the Police Station nor the Spanish Consulate.

Those citizens, interested in opening a bank account, buy property or do other businesses in Spain where the tax identification is needed will be able to apply for a NIF ( Numero de Identificacion Fiscal) via internet.

This simplifies the process to obtain the NIE number that has become very laborious in the past months.

The new regulations are now in place and will need to wait and see how they are going to be implemented. At least there has been some progress here and we want to congratulate the Spanish Tax authorities for their response. 

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Published in 2005 by the Spanish Embassy in London and Dublin (ICEX), the book How to Buy your Home in Spain still offers sound advice on legal and tax matters. It is important to note that the tax information regarding Capital Gains Tax has changed and currently the rate is 18%.

Please read the article attached which includes the 2007 tax reforms in Spain.

Otherwise, at today's date everything remains very much the same in the book. Contact Fernando@konsilia.es if any queries.

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Also known as Beckham Legislation, as the former Real Madrid player benefited from this tax regime prior to moving to LA. This excellent tax regime for international executives moving to Spain provides a 25% flat income tax rate and exempts foreign income and assets for a five years period. Please read the article published in the Tax Journal (UK) under the title España Mañana

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I am looking into the possibility of buying some properties in Spain for investment purposes. Is it better from a tax point of view to do this as an individual or as a company? D. Searle, Brighton UK

From an investment point of view the company option must be considered. The main reason is that the company offers the possibility of organising the business in a more professional way, keeping it separate from your private assets. The company will pay corporation tax when disposing of the property of 25-30% which is higher than personal tax at 18%. This is perhaps the only downside of the company option. The company structure is exempted from the annual Wealth Tax and Income Tax for non resident individuals, which means that usually for more than €600,000 it could be more efficient to run the properties using a company. From an Inheritance Tax point of view the company may offer more opportunities to organise your estate planning, if we organise the shareholding efficiently or use international structures and trusts. Another advantage of using a company is that the company will be able to rent the properties and claim the original VAT paid if a proper trading activity is registered for tax purposes. Capital allowances or depreciation can be claimed as a deductible expense in yearly bases if the company files accounts statutorily, which will reduce the capital gains tax payable over time. Management expenses can be also offset against income and the directors can draw a salary too. It is always worth asking your adviser to outline the difference between company and private acquisition in your particular case, before starting a property investment portfolio.

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New year, new challenges, new norms.

Miguel Villalobos from www.konsilia.es inform us that the Spanish accounting system has changed  this January 1st 2008 to conform with the international accounting standards.

The companies are changing the financial statements to give professionals and clients more information and details in a consistent matter accross the world. These changes are very welcome by the profession and all of us in international advisory positions. 

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If the PSOE wins the elections the Prime Minister Mr Zapatero has promised to eliminate this tax and this is also the position of the PP leader Mr Rajoy.

Therefore it is quite likely that this 31st December 2007 the Spaniards and the Non Residents with property and assets in Spain be submitting their last wealth tax return.  This tax has been the largest obstacle for international people to establish a residence in Spain. Therefore we are very happy to see the tax going.

Please keep watching this space.

Adios Impuesto de Patrimonio in SPain.

March 9th, 2008 the day of the next Spanish general elections will mark the end of the  Spanish Wealth Tax.

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