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Posts Tagged ‘UK Tax’

ZAPATERO AND THE INTERNATIONAL PROPERTY BUYER IN COSTA DEL SOL

Saturday, March 29th, 2008

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.

The urban plans are not coming to terms with environmental concerns and the construction in Costa del Sol has slowed down too. A natural correction of the frenetic rhythm of construction of the last decades.

In our professional practice at Konsilia we are observing a clear trend in the last year, which involves international executives in their 40-50s with their families, moving to Spain primarily for lifestyle reasons. In Costa del Sol, primarily from Marbella to Sotogrande, they find a place to live with English professional services, several international schools and plenty of international flights from Malaga, Gibraltar, Jerez or Sevilla airports to the main international destinations.

These clients want to be genuinely residents in Spain. As a tax adviser I like to think that there are some tax elements in this move:

The new Spanish expatriate regime allowing international executives to move to Spain with a 24% flat tax rate, excluding international income and wealth from been taxed in Spain during the five years following the move. Please see our article on this topic published in the Tax Journal (UK)
The beneficial Spanish tax treatment of investment income, including interest, dividends and capital gains at 18% rate, which makes Spain a great place to come to live out of the hard made money.
The promises of the Spanish government to abolish Wealth Tax, and possibly Inheritance Tax, at least to reduce the pressure of this last one for residents. Regarding Inheritance Tax we have seen some moves on some regions like Illes Balears, where Palma de Mallorca is located, and its government has reduced the charge for donations made to buy the first residential property (L 6/2007 27 December)
The UK changes on non-dom rules, which is a very suggestive way for some British Tax non-dom to make a move to warmer lands.

Of course there are many other elements to support the continuation of this trend in Costa del Sol. It is true that the Spanish Economy , considering the many challenges in and outside Spain, continues performing at a good rate.

Another interesting data, this one from the Property Consultants CB Richard Ellis , is the investment opportunities arising from commercial property in Costa del Sol, a market that is reflecting the increase of businesses in the area.

Summarizing, we believe that these times of stabilization of the residential market in Costa del Sol are a mild correction in a sector reaching now maturity. The future of Costa del Sol, far away from what has been said by many tabloids, is still bright and we are confident that the Spanish government can influence it positively with some tax reforms, as the ones mentioned in this post.

Tags: Domicile, Double Tax Treaty, Spanish Tax, UK Tax
Posted in Domicile, Spanish Tax residence and nationality | No Comments »

ANOTHER HAPPY BUDGET FOR SOME UK NON-DOM?

Wednesday, March 12th, 2008

The Chancellor’s announcement in today’s budget regarding non-doms will only please two categories of UK non-dom tax payers.

1.- Any non-dom making under £36k taxable in the UK and over £75k outside the UK (non remmitted income). I believe they will be delighted to pay the flat tax of £30k per year and still keep their tax payable under the 40% income tax rate. For the group of people making over £167k outside the UK and not remmitting that income, the glorious UK will still remain as one of the lower tax jurisdictions in the EU, under OECD accepted standards.

2.- The non dom tax payers who have been in the UK for only seven years will get one extra year’s grace prior to pay the £30,000 tax charge. Today’s budget suggests that the residency test before the charge will be extended to eight out of eleven years, rather than eight out of ten.

Regarding the 90 days-a-year residence rule, a day is now only counted from arrival in the UK at midnight. The general rule is that If a UK resident goes abroad permanently, he will be treated as remaining resident and ordinarily resident if his visits to the UK average 91 days or more a year.

Over the last budgets the announcements from the Chancellor are targeting the extended non-dom population in the UK and those emigrating from the UK. The question for me is how succesful has been the HMRC in terms of financial succes for the Treasure versus the havoc that is creating among the many non doms and expats that have been and still are contributing to the UK in terms of business and financial acccumen and intellectual capital. I invite comments on this one.

As the Financial Times published today, Deepak Malhotra, who advises South Asian clients for Grant Thornton said important concessions had been made on rules for remaining non-resident, as well as the non-dom tax regime.

“Non-dom clients will be more positive about things than before,” he said. “But it would have been better to consult first, rather than issue draconian proposals that upset a lot of people.”

Mr Malhotra thought the final proposals might help lift the uncertainty that has hung over non-dom taxation for many years, with proposals repeatedly aired and then shelved. “The promise of no further change in this parliament or the next should reassure businesses and individuals.”

Please see full article at FT web page

Tags: Domicile, Double Tax Treaty, UK Tax
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BRITISH TAX AUTHORITIES PAYS FOR BRITON´S BANK DETAILS

Sunday, February 24th, 2008

Today in the BBC it was revealed that the HMRC, the UK’s tax authority has confirmed that it has paid an informant for data regarding British citizens who have accounts in tax haven Liechtenstein.

HM Revenue and Customs (HMRC) confirmed the move after a Sunday Times report, but would not say how much it had paid the informant. Read the article here

The suspected whistle blower, accused of stealing data from the bank, LGT, was sacked and convicted of fraud.Mike Warburton, a partner at Grant Thornton at www.grantthornton.com said: It is shocking that the Revenue has started buying information from dubious sources to help its investigations.

I have discussed this issue in this morning post OECD, Liechtenstein and Germany. Is there a place for a synthetic approach? and will welcome people’s views.

Tags: UK Tax
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TAX FREEDOM DAY IN THE UK WAS 1ST OF JUNE

Friday, February 22nd, 2008

Tax Freedom Day shows just how long the UK taxpayers spend working for the UK Treasury, rather than themselves.

The concept was developed by the Adam Smith Institute in the UK at http://www.adamsmith.org and shows that the UK residents work 5 months out of 12 for the Government.The Institute says that overall, the government takes more than 40% of national income in the UK. This amount is significantly lower that the EU average. In the USA, however, the government excises are lower, and this may be understandable historically by the strong opposition to governmental pressure.

The reality is that most UK residents have to work a full five months of the year solely to pay that tax bill. In 2006, that meant working from 1 January to 1 June – just to pay taxes! And the March 2007 budget did nothing to change that. Tax Freedom Day 2007 once again falls on 1 June. What will happen in 2008? I can not foresee taxation going any lower, and you?

For much of the last few years, however, Tax Freedom Day has been coming later and later. In fact, it falls a full week later now than it did back in 2002. That is an extra week of working for the Chancellor. At this rate, it will not be long until we spend longer working for the government than we do working for ourselves, which brings to the table some interesting historical reflections.

An interesting Book “Coffee planters, workers and wives: class conflict and gender relations on Sao Paulo plantations, 1850-1980″ Macmillan Press, 1988, the evolution from slavery (room and board) toward share croppers concepts (50:50 after expenses) is discussed. An interesting reflection on tax and slavery is available at http://www.press.uchicago.edu/Misc/Chicago/194876.html

Tax Freedom Day is calculated by taking the UK’s net national income and calculating how much of that is taken away in taxes. These taxes include not just income tax, but VAT, inheritance tax, stamp duty, car and fuel taxes, excise taxes on alcohol and cigarettes, taxes on companies and employment, and many more. For technical stuff about how Tax Freedom Day is calculated, click here. Tax Freedom Day varies around the country for a description of why and how much, click here.

The Adam Smith Institute has been calculating Tax Freedom Day since 1991 and has figures for it going back to 1963 – when Tax Freedom Day was more than a whole month earlier, falling on 24 April. There are also some international comparisons.

I do not endorse this approach to taxation as a political weapon, however it is an interesting tool to be able to reflect and discuss how much we contribute to the government and how they are using our funds.

The information posted here was taken from the Adam Smith Institute at http://www.adamsmith.org/tax-freedom-day/

Tags: UK Tax
Posted in Domicile, UK Tax | No Comments »

OFFSHORE COMPANIES OWNING PROPERTY IN SPAIN 2008

Saturday, February 9th, 2008

UK residents, domiciled and non domiciled, owning property in Spain using an offshore or trust structure will need to look very carefully to the new domicile and residence changes in UK expected for April 2008.

As in previous years, we are expecting changes to the proposed legislation before final enactment and there may be some other issues arising, which we will try to address in our blog.

What is clear now is that anyone on that category will need to pose how those changes may affect his or her position and try to plan prior to 6 April 2008 an efficient course of action.

Some of the changes will affect the selling of property in Spain by the offshore company or trust structure if owned by UK residents and this is something to consider seriously with your UK tax adviser.

Tags: Domicile, UK Tax
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DOMICILE AND RESIDENCE POTENTIAL CHANGES IN THE UK

Saturday, February 9th, 2008

HM Revenue & Customs published PBRN 18 and as whe have seen in previous years when the domicile or residence rules are threatened by the HMRC, a significant ammount of noise is generated in the accounting profession.

Some of my UK non resident clients living in Spain raised their concerns with this legislation. A very good discussion can be found in Lisa Spearman’s Tax plus blog

The main discussion is who is likely to be affected?

The answer is, UK residents paying tax on the remittance basis and non-resident individuals who spend a significant amount of time in the UK.

General description of the measure

Legislation will be introduced in Finance Bill 2008 to:

• Introduce an additional tax charge for individuals using the remittance basis of taxation;
• End the automatic entitlement to certain personal allowances for individuals resident in the UK who are using the remittance basis;
• Ensure that when determining if an individual is resident in the UK in any year, days of arrival and departure are counted; and
• Address a range of anomalies in the remittance basis.

The remittance basis of taxation can apply to those UK residents who are not domiciled in the UK or who are not ordinarily resident in the UK. The remittance basis provides that such residents will be taxed on foreign income and gains only when they are remitted to the UK.
Operative date

All these changes will apply on or after 6 April 2008.

H. Owens – May 2, 2008 1:17 AM

Good news. Came looking for this as I realised that counting both arrival and departure would put me one day over for the past 4 years.

Was therefore wondering if the proposal was to count departure and arrival days for previous years. Reading the pdf linked, it’s clear that the new rule (count no of midnights) will apply to days counted starting 2008-2009 anyway. Also good.

Still wondering: is there anything to prevent a sudden change in these rules that applies retrospectively?

Tags: Domicile, UK Tax
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GIBRALTAR, PART OF THE EUROPEAN UNION

Saturday, February 9th, 2008

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.

Politically Gibraltar has become a unique jurisdiction in the European Union territory. Gibraltar. Whilst Gibraltar under Article 227(4) of the EEC Treaty is within the European Union by virtue of being a European territory for whose external relations Britain is responsible, Article 28 of the 1971 UK Assession Treaty relieves Gibraltar from the common customs tariff, the common agricultural policy and the harmonisation of turnover taxes, in particular VAT.

The relationship between the three governments of Spain, UK and Gibraltar is progressing in the context of the Tripartite agreement signed in Cordoba in 2004 provides a route plan to continue improving this cooperation.It is a robust jurisdiction claiming its place in the global economy and the issue of decolonization and independence from the United Kingdom and Spain is under review in the United Nations

Over the years Gibraltar has positioned itself as a great place to do business internationally and all the Financial and Tax Directives are applicable. Anti Money Laundering provisions and Know Your Client protocols in Gibraltar are applied with strict adherence to EU and OECD protocols.

Tags: Domicile, Double Tax Treaty, Holding Companies, UK Tax
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