The REAL DECRETO-LEY 2/2008, of 21st April, containing several initiatives to improve the economic environment in Spain was passed by the Government last week. Unfortunately the regulations regarding Wealth Tax abolition is not yet included. Keep watching this space
Friday 18th April 2008 will be remembered as the day when the Spanish Wealth Tax (Impuesto de Patrimonio) was suppressed by the Counsel of Ministers.
The abolition will be effective for this tax year, i.e. 31st December 2008.
How will this change affect High Net Worth Individuals living or wanting to move to Spain?
This change will make possible for many individuals to stop worrying about paying taxes on worldwide assets and start paying a flat 18% Income Tax in Spain, if their income is coming from investments, dividends or capital gains. Compared with the hectic 43% suffered by most taxpayers, this is an interesting incentive to consider relocation to Spain.
We shall keep informing on the legislative development and regulations on these great news.
Last 9th of March, the Spanish general elections gave Prime Minister Zapatero a great opportunity to show what he can do for the Spanish Real Estate market. Can the property market be influenced by a wise tax policy? I believe so.
During Zapatero's campaign there was a commitment to abolish some taxes, i.e. wealth and Inheritance which may have historically prevented people to relocate to Spain. There were often press releases regarding tax breaks and incentives for the developers, buy to let allowances, etc...
The government will be formed in April and we shall see the legal instruments to implement the tax changes, which we will continue monitoring.
In Costa del Sol during the last decades we have seen the rise of the residential property market and the influx of hundreds of thousand British and Irish property buyers. Originally many people came to retire to this part of the world, a trend that is still true today. During the last decade, however, a large wave of investors came, fueled by a buoyant market at home, specially in the UK and Ireland. The off-plan investment opportunities were promoted by 3-4 large real estate companies, which made very popular to invest in Spain.
Now, in 2008, the market is very different. It would be fair to say that the international demand is still high for residential properties in Costa del Sol, as well as a large offer of such properties, with may have been temperated by a bear sentimento in the international investment market.
Continue Reading...A serious analysis of the Spanish Economy and social progress during the last 33 years, this book from William Chislett, a journalist of the FT, brings a clear picture of the Spanish Economy and generates confidence in a country with great potential and a stable economy.
This work provides an objective view of the Spanish economy, which has been used as a political argument in the recent elections.
Thirty three years of improvement, progress and innovation as well as profound changes that has placed Spain in the forefront of sustainable economic and social progress in Europe.
The book can be downloaded in PDF at Real Instituto Elcano at Spain going places. Economic, Political and Social progress, 1975-2008
Raul Villanueva, from Konsilia at www.konsilia.es, has informed that Spanish taxpayers may request from last week their draft income tax return for the Spanish tax year ended 31st December 2007.
The application deadline is offered by the AEAT, the Spanish Tax Revenue Agency, at www.aeat.es, to facilitate the process of return submission due by June 2008
After receiving the draft, taxpayers should review, amend or confirm and will be able to submit it from the 1st of April until 30th June
Pension plan contributions are tax efficient for the contributor if he receive employment or similar taxable income, however very few people consider the tax efficiency for the heirs or inheritors.
It is important to emphasize that pension funds are taxable on death when received by inheritance, according to the rules of Inheritance and Income Tax, one or the other tax will be applicable depending on the heirs position for Spanish Income Tax purposes.
Continue Reading...This morning I was reviewing the current status of Inheritance Tax in Spain, in light of the recent news regarding the abolition of the Wealth Tax after the general elections.The Wealth Tax is administered by the regional entities, Comunidades Autonomas, but legislated nationally by the national government.
This is also the case with the Inheritance Tax. What we have seen however is that the move on this tax has started by the regions by improving the position or even technically abolishing the tax itself. In this case, they did not wait for the central government to act.
Ten regions have already abolished this tax in the context of family inheritance. The regions are Madrid, La Rioja, Murcia, Castilla y León, Comunidad Valenciana, Baleares y Cantabria, in a first move and Canarias, Aragón y Castilla La Mancha in a second move. Andalucia is considering this move too, and again, that will depend on the regional elections this year.
We welcome the move toward abolition of the Inheritance Tax and the Wealth Tax in a system overload with income, indirect duties and VAT.
On January 22nd 2008 the General Directorate of the Spanish Tax Office (Direccion General de la AEAT) published a Resolution with the areas of focus for the tax inspectors in 2008.
The Tax Office publishes every year this Resolution, stating the areas of tax investigation focus for the tax year. This is a statutory obligation of the Tax Office according to Spanish Tax Law (Ley General Tributaria 58/2003, section 116).
During the last years we have seen an increased focus on non resident individuals with properties and operations in Spain.
The main areas of focus we have identified in this document are:
In the Anglo Spanish tax and legal world, the position of Gibraltar, both for proximity and for the uniqueness of its legal and tax regime is fascinating. A very good place to get some professional information about Gibraltar is the Grant Thornton site.
From the years of the Utrecht Treaty in the 18th Century, times have changed substantially . Today Gibraltar, a territory of the United Kingdom, has developed an unique position in the European Union and in the global financial markets.
Culturally, Gibraltar reflects the influence and coexistence of Britons and Spaniards with a clear Mediterranean flavor.
Continue Reading...
Madrid has captured the advantages of globalisation by becoming a metropolitan region of 6 million people, which attracts foreign workers and firms.
There is also a good tax environment for international executives to relocate to Spain as we have discussed in these pages. See the article published in Tax Journal UK on this topic España Mañana.
The capital region has experienced impressive dynamic economic growth in recent years, making the best of the positive business cycle in Spain. It absorbs more than half of Spain’s total foreign direct investment (FDI) and has extended its economic relations with Latin American countries.
Growth has occurred largely in the service sector (financial, banking, business services) as well as in logistics (Madrid Barajas Airport is the largest employer in the region).
Please read the full article OECD territorial article on Madrid
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.
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.
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.
Continue Reading...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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