Community of Owners in Spain

Raymundo Larraín Nesbitt, December, 3. 2019

Lawyer Raymundo Larraín explains to us the legal intricacies of community of owners, or comunidad de propietarios in Spanish. Makes for excellent bed reading!

Article dedicated with affection to my friends Ann and Andy H., from Wakefield, West Yorkshire, England.

Marbella-based Larrain Nesbitt Lawyers has over 16 year’s taxation & conveyancing experience at your service. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

Article copyrighted © 2.009, 2.012 and 2019. Plagiarism will be criminally prosecuted

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of December 2019

Introduction

Now that the season of General Assemblies is fast approaching for Q1 2020, I thought I’d revisit my 2009 article. The following is a revamped version of my decade-old article updating it in line with the new changes in legislation.

Community of Owners is an article which gist is to provide basic guidance on what becoming an owner in a community entails, with particular focus in Andalusia. It is not an in-depth treatise.

General Assemblies, held once or twice a year, are prone to bickering and backstabbing, where every neighbour it would seem has an axe to grind. You’d do well in acquaint yourself with your owner’s duties and rights to better protect your interests; which may not be aligned with others’.

Because this is just a ‘short’ article, I strongly recommend reading the law itself, as I have considerably abridged the sections pursuant to it, on reviewing them, giving only a general overview of its key sections and casting aside any pesky nuances which are only of interest to other lawyers.

This is a link to the Commonhold Act in English as amended by Law 8/99 & others, courtesy of Castillo Traductores. English version starts on page 4. You are welcome.

General Legal Framework

There is a general legal framework acting nationwide as backbone common to all communities in Spain, as set out by the Commonhold Act 49/60 (AKA Ley de Propiedad Horizontal, Horizontal Property Act, or Commonhold Act) and by the Spanish Civil Code (arts 396 et seq).

The 1960 Law on Horizontal Property was amended most significantly by Law 8/99, amongst others, to bring it line with social changes. It is now a 60-year-old law.

Community Statutes and Bylaws

In addition to the above general laws, the day-to-day running of each community is really determined by the Communities’ Statutes which are drafted at the time of lodging the Master Deed (aka Escritura de División Horizontal or Horizontal Deed). Unanimity is required to amend either the Master Deed or the Community Statutes (arts 5 and 17). So, in practice it’s quite a feat to change either of them. An exception to this unanimity, is a recent legal change on holiday rentals (see section further below).

That’s why a community may, at its own discretion, approve additionally its own Community Rules or Bylaws (in Spanish Normas de Regimen Interno or Normas de Funcionamiento de la Comunidad de Propietarios), which are not to be confused with the above Community Statutes. Community Rules (Bylaws) need only a simple majority vote to be approved and amended so as to waive the unanimity rule. They allow for great flexibility and will rule, for example, on communal services such as garbage collection or the use of communal facilities such as the swimming pool or lifts. They cannot rule on matters reserved only to Community Statutes.

Normally, on buying off-plan, there will be a clause whereby the purchaser allows the developer to draft and lodge the Master Deed as well as the Community Rules (Bylaws) at the Land Registry. Buyers may later on amend these, when they become owners, on complying with the strict majorities that are required by the Commonhold Act (unanimity).

This means that every development may enact their particular laws governing it but always subject to, and in compliance with, the general legal framework that must be respected and adhered to at all times. Bylaws will rule for example the Community’s governing bodies such as the need or not for the optional role of vice-president or how must the owners be notified in advance of an owner’s assembly i.e. think of non-residents being notified abroad of an upcoming General Assembly (AGM or EGM).

Bylaws stem from Spain’s Commonhold Act and adapt it to the requirements of each particular CO. That’s why each CO has its own unique Bylaws, tailored to suit their own individual needs.

Naturally, given the tight space constraints of such a short article (and frankly, not to bore gentle readers to tears), I can only offer a general overview of the shared legal framework and concepts which underpin all communities in Spain without focusing on any particular Bylaw, which are unique to each CO, as I write.

Commonhold Quota

On drawing up the Master Deed before a Notary, every property within a community is assigned a quota or percentage thereof. This quota is composed both of privative and communal elements which are assigned to each property. Storerooms and garage spaces are tallied as well for this purpose.

A commonhold quota is important twofold:

  1. The expenses of a community will be allocated apportioning them to your quota. So, the larger your quota, the more you will have to contribute towards expenses. These can be paid monthly, bi-monthly or even quarterly depending on the Community Rules.
  2. On voting at owners’ assemblies, the quotas need to be tallied for majority vote purposes. So, each owner does not equate to one vote. There may be a single owner, such as a developer or bank, holding a significant communal quota which translates into great voting power. The resolutions reached bind all units within, regardless of whether they cast an opposing vote as majority rules apply (see below).

Owners’ Duties

Section 9 rules them in detail. The main duty will be, of course, to contribute towards the maintenance and financial upkeep of the CO.

Falling in arrears with your community fees will eventually result in your CO placing a lien against your property and may even lead to selling it in a public auction. This legal procedure in Spain works surprisingly efficiently. You have been warned!

This important article mentions the endowment of a community’s mandatory reserve fund, in accordance to each owner’s commonhold quota. The percentage of this endowment has now been raised to 10% of the community’s ordinary budget (used to be 5%). The purpose of this fund is to create a safety net for a rainy day i.e. the maintenance and repair of a building such as lift repair work. This reserve fund shall be endowed with an amount not lower than ten percent of its last ordinary budget. Its funds will be used as well to pay for the building’s insurance cover.

It is also very important to find out – prior to buying a property in an urbanisation – what your contribution is to avoids nasty surprises. Some of those private gated communities that lure you with breath-taking views, 24/7 top-notch security, lush tropical gardens, private gym and dream-like infinity pools command (very) steep monthly fees. This is particularly true of well-off off plan developments (when the community is not up and running yet) where it is not uncommon that unscrupulous salespeople tell you the community fees are X/month and later on it becomes only too apparent they are in fact 3X/month!

Communities’ Governing Bodies

Art 13 establishes the governing bodies are the Owners’ General Assembly (ordinary or extraordinary), the President (vice-presidents are optional), the Secretary and the Administrator. Oftentimes, the role of Secretary is also taken by the community Administrator (paid role).

Presidents and vice-presidents must be appointed from among unit owners only. The roles of Secretary and Administrator can be held by unit owners, as well as by outsiders, providing the latter hold the necessary professional qualifications and are legally licensed to perform such roles.

The Statutes will be the ones which detail exactly what roles exist in each Community of Owners. Presidents, by law, alas do not receive any remuneration for this most ungrateful task.

Following the above, no one in their right mind wants to be President, much less be elected to the same role year after year. A well-known issue is that some community presidents (which officially hold an unpaid role) perpetuate themselves year after year abetted by their web of cronies and do in fact make a very tidy living running whole communities at the expense of pocketing fees from fellow owners on fudging the numbers (specifically fellow gullible non-resident expatriates, bless their warm hearts!). I tell you - by experience - that no one who has held the role of community President wishes to repeat from one year to the next as it is a very ungrateful task that’s almost like a second job. Be wary of community Presidents who hold their position indefinitely and fight tooth and nail to retain power and control. Only on changing administration does the corruption of the former management come into light.

Owners’ Assemblies (AGM’s and EGM’s)

At least once a year an Annual General Meeting (AGM) will be called to approve the community budget and accounts. An Extraordinary General Meeting (EGM) may additionally be called at any time, needing 25% of the unit owners’ quotas.

The notification must be given with a minimum of 3 days’ notice.

This creates serious practical problems to non-residents owning second homes in Spain i.e. you need to book a flight to Spain which may be very expensive with such short notice besides having to take time off your job. Therefore, communities with a high number of non-resident owners may include in their Bylaws more realistic notices of, say, 30 days and to be notified by e-mail in addition to placing it on the Community’s Notice Board. There’s freedom and flexibility to rule on this as each community deems fit in accordance to their own needs and circumstances. Logic should prevail, albeit it seldom does in practice.

Majority and Unanimity Votes

Section 17 deals with when unanimity votes are required. Basically, unanimity is necessary for modifying the rules contained, either within the Master Deed or in the Community’s Bylaws.

A majority vote (three fifths of the owners’ assessed quotas) is required for things such as the lift service, janitors, security services or any other common service or facility. This type of majority vote will be the one used to decide on the Community Rules. Proxy votes are also allowed. Only owners who are up-to-date with their community fees may vote at owners’ assemblies. You are allowed to settle your arrears even on the same day as the General Assembly is being held. However, there are new practical limitations in place to settle arrears in cash. In compliance with new national and EU Anti-Money Laundering Regulations in force, payments in cash in excess of 2,500 euros may be declined. So, if you plan to pop over to the meeting with a wad of banknotes, you may be turned down by the Secretary!

You may find that in new unsold off plan developments, a developer may hold the majority vote as he still holds a large stock of unsold units. Conversely, it can be its lender, if they have taken over the developer’s units (repossession). Either way, both are obliged to contribute to the communities’ upkeep, paying their communal fees in proportion to their communal quotas, just like everyone else.

General Assembly Resolutions

Section 19 deals with the recording of the resolutions reached. They will be recorded in a book of minutes, validated and stamped by the Land Registrar.

A copy of the meeting’s minutes will be sent to each owner with the adopted resolutions following the AGM or EGM. Ideally shortly after the assembly, not several months after when no one can remember what transpired at the meeting.

The Secretary will act as the custodian of the general meetings minutes book.

Any Other Business

If you want to put a concrete matter forward to the Assembly for consideration, you must do so well in advance of being notified by the General Assembly. You cannot simply turn up at the AGM or EGM and expect to nonchalantly raise new issues which were not previously included in the day’s agenda. The President and/or Secretary will simply disallow it and move on with the agenda’s points.

Challenging General Assembly’s Resolutions

Section 18 rules on how assembly resolutions can be challenged at court. I’ve written a specific article on the matter due to its complexity: Community of Owners in Spain: Challenging Assembly Resolutions – 21st October 2011.

This can be done on three accounts:

a) When resolutions are contrary to Law or the Community Statutes;

b) On them being seriously detrimental to the interests of the community and benefit one or several unit owners.

c) When they are seriously detrimental to some unit owner who has no legal obligation to sustain such detriment or when they have been adopted in abuse of power.

There are four deadlines depending on the matter. The most important deadline is the 3-month-rule. Or else a year, if a resolution is against the Law or the Community Statutes. I would always advise challenging a resolution before the three-month deadline is up as a judge may not agree with you that the adopted resolution is against the law or community statutes, in which case you wouldn’t have a year to challenge it, only three months. Pro tip: don’t wait over 3 months to challenge them.

Only owners who are up-to-date with their community fees may challenge community resolutions before a court. Alternatively, they can lodge the owed amounts before a law court prior to litigating. You can only challenge approved assembly resolutions at court, through litigation; sending a strongly-worded letter or e-mail to the President, Secretary or Administrator stating you are in full disagreement with resolution X is a futile exercise. But if that indulges you…

Holiday Rentals

As we reported back in March (Spain's new rental laws in 2019), a new law was approved early on in 2019 which brought a raft of changes, specifically on holiday rentals. If you buy into a gated community or building, chances are high you will become part of what is known as a community of owners. New laws passed on March 2019 have empowered communities of owners across Spain to outright ban, or restrict, holiday rentals. You really do not want to invest several hundred thousand euros in a property only to find out later on you are banned by your community to offer it as holiday accommodation! All changes effective as from 6th of March 2019. General Assemblies (AGMs or EGMs) which adopt restrictive resolutions on holiday rentals should lodge them at their local Land Registry for them to be enforceable.

The main two changes are as follows:

   1. Community of owners may now ban holiday lettings outright

Spain’s Horizontal Act has now been amended allowing Community of Owners to vote by a simple majority of 3/5 (or 60%) to ban outright holiday rentals within a community.

I had already pointed out in a blog post in 2017 that this step was necessary, as the Horizontal Property Act at the time required unanimity to ban them, which logically was never going to happen because landlords would vote against it because of their vested interest.

This change has no retroactive effect. Meaning that if you attained a Tourist licence before your community banned holiday rentals, you can continue doing so. There is an ongoing debate on this point between lawyers, as it is a bit of a grey area until there are further like-minded rulings consolidating a jurisprudential trend settling the open controversy.

   2. Community of owners may now increase the community fees of all those owners who market their properties as holiday lets through holiday platforms

Spain’s Horizontal Act has been amended allowing Community of Owners to increase the communal quota assigned to a landlord of the overall community budget.

In plain English, communities of owners may now vote to increase the community quota of a property owner who uses his property/ies as a holiday home. The Community can vote to increase your quota by as much as 20%.

This change has no retroactive effect.

‘Inheriting’ communal debts

Unlike in other countries, in Spain community debts follow the property, not the owner. When you buy a property in Spain you may find yourself being liable for several thousand euros of unpaid community fees owed by the ex-owner. At times, sellers blissfully forget (God forbid) to mention any outstanding community fees pre-completion. When you buy a property in Spain you immediately take over all existing debts and the seller walks away scot free. A buyer is liable for the previous three years of community arrears plus the current one (total 4 years). More on this in our in-depth blog: Buying in a Community of Owners – Outstanding Debts!

Also, on buying a property, which is part of a Community of Owners, I strongly advise you to request the general assembly’s minutes of the previous 4 years (both AGM’s and EGM’s). The reason is that, unbeknown to you, the community may have voted on an item that requires you to fork out thousands of euros i.e. to repaint the whole flaking paint of the building’s façade. Seller’s at time surprisingly neglect to disclose such key points, I guess they are too busy booking flights to Bora Bora with the sales proceeds!

Which is why, under law, the signing of the deed of transfer of ownership requires a Communities’ certificate, signed by the President and the Secretary (normally the Administrator) stating that all communal fees are up-to-date for that unit. The purchaser can however waive this requirement voluntarily – unadvisable.

Property located in Andalusia

Following arts 7 & 9 of Decree 218/2005, off-plan vendors of property located within the autonomous region of Andalucía must hand over the DIA (Documento Informativo Abreviado) to purchasers. The DIA is the Spanish equivalent of the UK’s Home Purchase Information (HPI), or Seller’s pack. Both the Community’s Statutes and Community Rules must be included in the DIA pack.

Conclusion

There is a general legal backbone, common to all communities in Spain, which is embodied by both the Commonhold Act and the Spanish Civil Code. Besides this girder - which applies nationwide - each community of owners fleshes out its own set of Community Statutes and Bylaws adapted to its own idiosyncrasies; the latter are really the ones that rule on the day-to-day of each community and are unique i.e. no pets allowed in the pool. No two communities hold the same bylaws.

It is strongly advised that, prior to purchasing a property on a development, you request both a copy of the Community Statutes, known in Spanish as Estatutos de la Comunidad de Propietarios, as well as the Community Rules (Bylaws), known in Spanish as Normas de Regimen Interno, if at all existent. You may avoid unpleasant surprises, such as communities that ban pets or even piano players, gasp!

Communities of Owners should be run – in theory – like small, tidy democracies. Well, that’s the theory anyhow.

In practice, they resemble more dictatorships with full blown egos as many owners can vouch for. I would advise you bring your tin hat to owners’ assemblies and prepare for some serious and protracted trench warfare, whereby each owner will hold his own ground, yielding occasionally to fleeting interests.

Good luck; trust me, you’ll need it.

At Larrain Nesbitt Abogados, we can assist you twofold:

 

"Every pound is a prisoner.” Margaret Nesbitt

Margaret Nesbitt (nee Conway) 1917 – 2013. From a humble working-class background, she lost her husband at a very young age, and was forced to fend for herself, single-handedly raising her four young children. Assisted by a generous (unsecured) loan of St Aloysius churchgoers, she bought a guest house in Glasgow and set up a business all by herself, without formal education, which she would run until her mid-nineties. Within only the span of a few years, working hard, she managed to repay the kind private loan with interests on top. As is often the case in life, she placed great value in that which she had been deprived of in her youth, which was a formal higher education;  she went to great lengths to generously ensure all her children, grandchildren and even great grandchildren enjoyed the perks of a privileged higher education. A quiet, courageous woman with strong religious beliefs that always managed to hold a positive outlook towards life despite all the social and financial hardships she was forced to endure and overcome alone. In the wee hours of any morning at Aldara, you would find her guest house’s kitchen brimming with bobbies on the beat enjoying a short pause and savouring the lavish generosity for which she was much loved.

 

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, inheritance, taxation, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

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Article originally published at Spanish Property Insight: Community of Owners in Spain

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.009, 2.012 and 2.019 © Raymundo Larraín Nesbitt. All Rights Reserved

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8 Tips for Buy-To-Let Success

Raymundo Larraín Nesbitt, October, 21. 2019

Lawyer Raymundo Larraín spills the beans on how to become a successful Buy-To-Let landlord in Spain.

Marbella-based Larrain Nesbitt Lawyers has over 16 year’s taxation & conveyancing experience at your service. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

The following finance article has been summarised to avoid unnecessary tax technicalities. Before committing and making any type of investment, you should first seek professional tax & legal advice on your matter – see disclaimer below.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of November 2019

 

Introduction

We have closed in October the accounts for Q3 2019, and it has been yet again a record-breaking tax quarter. The cracking numbers we’ve seen from BTL landlords have prompted us to write a short finance article on the matter.

Several factors have contributed towards this ongoing Buy-To-Let boom, to name but a few:

  • Spain became in 2017 the world’s second tourist destination. Let those words sink in. This has created a huge demand for tourist accommodation to house the over 83 million tourists Spain receives every year (and growing). The hospitality market simply struggles to keep up with the strong demand.
  • Irruption in the market of new big players. AirBnb, HomeAway etc all these huge holiday platforms have created for the first time ever the opportunity to harness the huge tourist demand and widen the offer range at competitive prices. Effectively they have single-handedly moved the goals posts, allowing small-time investors to offer their Spanish properties to an unprecedented worldwide audience. For the first time ever, small investors may now give their properties great marketing exposure, in equal footing to large hotel groups.
  • A sluggish sales market has helped to steer investments towards the ever-growing, and far more profitable, buy-to-lets.
  • New gargantuan changes in tax laws. Several European Court of Justice key rulings have paved the way to huge tax savings for expat landlords. So much so, that non-resident landlords have seen their tax bills drop by an average of 70%, or more, which directly impacts the bottom line making their real estate investment far more rewarding. This is unprecedented, as before non-residents were barred from deducting any expenses, taxes and fees.
  • New changes in long term rental laws. Spain clumsily approved in April 2019 new rental laws which have given huge entitlements to long term tenants, among many other changes detrimental to landlords. As a result of these sloppy measures, landlords have pulled out en masse from long term lets, offering instead their properties as short-term holiday accommodation which are decidedly more lucrative and have far less associated legal restrictions.
  • Political instability in competing tourist destinations. This translates into tourists looking for safe havens, like Spain, to spend their holidays in.
  • Rental yields have soared by two digits year-on-year over the last three years. As a result of the imbalance in supply, landlords find themselves in a privileged position being able to command higher rental yields year on year to meet an ever-growing demand.
  • Climate change. The global warming has caused the tourist rental season to draw out to months which were previously unsuitable for short term accommodation, allowing overall more rental days with good weather.

 

When you factor in all the above, you come to realize why the tourist rental industry is booming in Spain. This short article goes on to explain how you too can profit and ride the tourist rental wave.

 

8 tips to rent like a pro

 

  1. Location, location, location. Any article on real estate worth its salt usually starts with this timeless saying. A worn out trope no doubt, but that doesn’t make it any less true and it is hands down the first tip that is often forgotten or neglected by most. Property prices can increase or decrease, but nothing impacts more on them than location. A great location helps you to cap off the storm greatly cutting down on your losses in a cycle downturn. Conversely, in a property boom, well-located real estate greatly capitalizes from it, soaring at a much higher rate than the average. When you invest in BTL, you need to choose a location which has a great touristic affluence. You simply can’t go wrong with international household names such as Madrid, Marbella, Mallorca, and Barcelona.
  2. Inland vs coastal. Both are on high demand but for very different reasons. The discerning city crowd, with refined tastes, are after the glitz and bling of a cosmopolitan lifestyle and are drawn to museums, restaurants, cultural events and all the flashy spoils a big city has to offer. On the other hand, the beach crowd is after raw fun, sun & beach, mojitos and disconnecting for a while. You must decide which group you want to appeal to and hone your marketing towards it. Both are proving to be great business options. Inland property (large cities aside) tend to fall more on the rural wayside. Whereas coastal resorts (and large cities) are clearly aligned with urban properties. To sum it up, in general, flat out you should choose urban over rural for buy-to-lets in my humble opinion. That said, if you have a strong predisposition towards nature and wildlife preservation and want to offer this healthy experience to your guests, then by all means go rural (inland). Spain has thousands of unspoilt scenery waiting for you, and your guests, to discover and get lost in their beauty.
  3. Affordability vs maintenance. Budgeting carefully is a key element of any successful conveyance procedure. Yes, you may afford to buy a swanky property in a great location, but can you afford its steep maintenance? Only buy a property you are absolutely confident you can afford to maintain over the mid to long run. Buy-to-let properties intrinsically should not be very expensive. I advise the property you acquire should be centric, small, with good communications, within walking distance of all amenities and the sea (on coastal resorts). If you do your research properly, you can even use at times the rental income generated to repay the mortgage and any additional expenses.
  4. Tourist Licence. Several regions in Spain have devolved competencies on this matter, passing their own regional laws (holiday rental licences in Spain, region-by-region). Some of these laws are very stringent i.e. Balearic Islands. Spain’s Supreme Court has recently ratified and defined the scope of regional competencies on holiday rentals. You would do well to acquaint yourself with the regional regulation where you plan to buy a property in. You must comply with all the requirements set out in the regional law and attain a Tourist Licence, where necessary. You really do not want to invest several hundred thousand euros in a property only to find out you are banned by your local town hall from offering it as holiday accommodation!
  5. Licence of First Occupation. A staple requirement to apply for a Tourist Licence throughout every region in Spain is to have attained what is known as a Licence of First Occupation. This is an unconditional requirement which marks the difference between being able to let your property legally, or not. Humongous fines are levied on landlords who fail to prove their property has attained a LFO from their town hall.
  6. Community of owner’s bylaws. If you buy into a gated community or building, chances are high you will become part of what is known as a community of owners. New laws passed on March 2019 have empowered communities of owners across Spain to outright ban, or restrict, holiday rentals. You really do not want to invest several hundred thousand euros in a property only to find out later on you are banned by your community to offer it as holiday accommodation!
  7. Rental management companies. This is a make or break. Some shoddy companies and individuals, that fly under the tax radar, refuse to hand over VAT invoices for any of their services (for which they charge thousands!). This translates into their clients unbeknownly picking up huge tax bills. Other more professionally-run rental management companies have no qualms to supply clients with proper VAT invoices, so that the landlord’s lawyers may deduct them, dramatically reducing a landlord’s tax bill (on average by 70%, or more). Make no mistake, landlords end up picking the tax bill of those suppliers who refuse point blank to declare and pay VAT. Bottom line, go legal and demand VAT invoices from suppliers; you will be able to offset huge amounts of expenses from your landlord tax bill. Don’t subsidize tax dodgers out of your own pocket!
  8. Taxation - Lawyers. A competent company, like Larrain Nesbitt Lawyers with over 16 years’ experience, will be able to legally knock off 70%, or more, from your landlord tax bill. Our company does this routinely for all our tax clients. Did you know there is a huge list of property-related expenses, taxes, fees etc which are all tax-deductible and can vastly mitigate your landlord tax bill? Not to mention that lawyer’s fees can also be offset from any tax you need to pay on renting out... Ask us for our holiday rental accounting service (HRAS).

 

Conclusion

In Spain, the average annual rental yield equates to 5% of a property’s value. Given how rental yields have soared year-on-year by two digits across the board over the past 3 years, this is quite substantial. The afore does not even factor in capital appreciation, which has increased in general by one digit and by two digits in large cities. When you combine both the power of soaring rental yields and capital appreciation, you conclude that real estate is a safe investment that is yielding a two-digit return per annum YOY, with little to no risk. BTL is ideal as a safe retirement plan, as opposed to investing your hard-earned pension with legions of mainstream overrated ‘professional’ hedge fund managers, who rake in millions a year, and return between 36p and 83p for every £1 invested by their customers.

At a time of historic ultra-low interest rates (which, incidentally, is a wondrous opportunity to request a buy-to-let mortgage) this is simply smashing; it doesn’t take a MBA to profit from it, only a level-headed investor that puts some work and time into lettings.

Buy-To-Let is akin to running your own business. If you want to succeed, you must learn to delegate. When you examine some of the world’s most successful CEO’s, it dawns on you that the key to success is finding the right people for the right roles and delegating on them. You cannot hope to do everything yourself or you will be driven insane.

Instruct a seasoned lawyer (conveyancing & taxation), hire a competent rental management agency, and market your property using a renowned property portal. All three working in tandem with you will drive your rental business to success. And profit from it all as millions of landlords already do!

 

 

"If you pick the right people and give them the opportunity to spread their wings and put compensation as a carrier behind it you almost don't have to manage them.” Jack Welch

 

John Francis "Jack" Welch Jr. (1935). From a humble background of deeply religious Irish immigrants, he made money as a youth working as a newspaper delivery boy and shoe salesman. He captained his high school hockey team and would go on to study chemical engineering. He would rise to become a legendary US business executive, author of several best-selling books on management, and ex-CEO of General Electric (at the time, the world's largest and most powerful company). Through a series of clever acquisitions in emerging markets, and by (polemically) streamlining the company, Mr Welch multiplied GE’s market cap by a stunning 38. Over the course of two decades, under his competent stewardship, he steadily grew the company from $12bn to a whopping 450 billion dollars of capitalization. Upon retirement, he received the largest severance payment in recorded history ($417mn). He is now retired with an estimated personal fortune of $1bn and never misses mass on Sunday's. He married a lawyer; nobody's perfect.

 

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, taxation, inheritance and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on 952 19 22 88 or by completing our contact form to book an appointment.

 

Tax & legal services available from Larraín Nesbitt Lawyers

 

Holiday rental-related articles

 

Article also published at Spanish Property Insight8 Tips for Buy-To-Let Success in Spain

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal or finance advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.019 © Raymundo Larraín Nesbitt. All Rights Reserved.

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Golden Visa Spain: 10 frequently asked questions

Raymundo Larraín Nesbitt, October, 2. 2019

Lawyer Raymundo Larraín gives us an overview of the advantages offered by Spain’s Golden Visa application.

Marbella-based Larraín Nesbitt Lawyers has over 16 years’ taxation & conveyancing experience at your service. We offer a wide range of 40 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

Article copyrighted © 2.013, 2.017, 2.018 and 2.019. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th October 2019

Introduction

The Spanish Golden Visa is a success story.

It has become the gateway to Europe for thousands of applicants pursuing the European dream. They have collectively invested over 2 billion euros since its inception in 2013. Although Spain’s visa programme was a flop initially, as it fell well below expectations and was marred with teething issues, an ambitious overhaul in 2015 made it extremely competitive compared with similar schemes offered by fellow EU countries. So much so, that this massive tweak enabled Spain to confidently overtake Portugal in 2017, becoming Europe’s leading Golden Visa supplier. This is unsurprising, given how Spain overtook the US as the world’s second biggest tourist destination. Spain has become one of the most attractive countries in the world to live and work in.

Although this procedure was originally tailored to cater to well-off Chinese and Russian nationals, many other nationalities have taken advantage of it. British nationals should consider looking into it with renewed interest in a post-Brexit era. The reason is because this scheme would allow British nationals – that lack a EU passport – to travel across Europe skipping pesky passport controls on equal footing to EU nationals. Much like before the UK voted to break away from the Union. You really do not want to be stuck over 3 hours at Heathrow every time, trust me.

Spain’s Golden Visa programme allows affluent non-EU applicants, and their dependants, unfettered access across Europe´s Schengen Area. Travel unmolested through all of Europe.

A Golden Visa enables you, and your family, to live and work in Spain (Europe). This visa guarantees Spanish residency, which eventually leads to Spanish citizenship (optional). Live the dream, apply now!

If you fancy an in-depth take into this subject and read all the advantages a GV has to offer you and your family, please browse our articles listed at the end of this page. Or simply pick up the phone and talk with one of our friendly in-house residency experts.

Apply today for your Golden Visa through Larraín Nesbitt Lawyers: Golden Visa Service. Your family’s success is only one call away: (+34) 952 19 22 88.

Thousands of non-EU nationals have already secured their families’ future and well-being on benefiting from this special arrangement that rolls out the red carpet cutting through all the red tape. Spain’s Golden Visa is a success story, be a part of it!

Why haven’t YOU invested in your family’s future?

 

shutterstock-417631294

Inset photo: Tafelberg, Suid-Afrika

 

10 frequently asked questions

 

  1. Can I request a mortgage on investing €500,000 in Spanish real estate?

Only on the excess above €500,000. The law only requires that the first €500,000 is unencumbered – meaning the equity threshold must be free. The excess can indeed be financed through a mortgage loan if necessary.

  1. I have read that I need to spend over six months in Spain to qualify for residency. Is this true?

No, it is unnecessary. A GV overrides this requirement. This law specifically targets affluent individuals who will normally be residing and working elsewhere. That doesn’t preclude the investor’s spouse and children from living and studying (or even working) in Spain (Europe).

  1. Can I obtain permanent residency or even Spanish citizenship through this law?

Yes eventually, assisted by lawyers specialising in residency. Larraín Nesbitt assigns you an in-house residency specialist to handhold you during the whole visa procedure.

  1. How long does it take to attain a GV application?

On average, it takes under 2 months.

  1. Can I work in Spain?

Yes. Following a change in the GV law, the main applicant may now work in Spain.

  1. Can I make use of the public healthcare system?

No. This blue-ribbon visa targets wealthy non-residents who must hire their own private insurance.

  1. Does the GV also include the investor’s family?

Yes, of course. A married couple and their children under 18 are included under the same application as a family unit. Same-sex partners qualify as a married couple. In some cases, children over 18 y.o. are also included. The term family must be understood broadly.

  1. How long does the Golden Visa last for?

Two years, and you may renew it for a further 5 years.

  1. Do holders of the so-called Golden Visa have unrestricted access to move within the European Union?

In a nutshell, yes. Holders of a Spanish Golden Visa do not require a visa to enter Europe’s Schengen Area. They can transit and enjoy free movement within the Schengen Area for a maximum period of three months (90 days) in every rolling six-month period from the date of first entry. You will have unfettered access to move within the EU.

  1. Where do I apply for a Golden Visa?

Through our law firm. We have 16 years of experience at your service.

Interested? Come and speak to Larraín Nesbitt Lawyers’ friendly staff who will be pleased to guide you through Spain’s Golden Visa programme. Your family’s success in Europe is only one call away: (+34) 952 19 22 88.

 

"The predecessors plant trees [and] the next generation cools off in the shade." – Ancient Chinese proverb.

Golden Visa Service

 Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, inheritance, taxation and litigation. You can contact us by e-mail at info@larrainnesbitt.com, by completing our contact form or by telephone on (+34) 952 19 22 88.

Article originally published at Spanish Property Insight: Golden Visa Spain: 10 frequently asked questions

Legal services available from Larraín Nesbitt Lawyers:

 

Golden Visa related articles:

 

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.013, 2.017, 2.018 and 2.019 © Raymundo Larraín Nesbitt. All rights reserved.

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Inheritance tax in Spain: regional tax reliefs to benefit ALL non-residents in the future (even outwith EU/EEA)

Raymundo Larraín Nesbitt, August, 26. 2019

Marbella-based lawyer Raymundo Larraín keeps us abreast of the sweeping changes in Inheritance & Gift tax law in Spain.

Marbella-based Larraín Nesbitt Lawyers has over 16 years' taxation & conveyancing experience at your service. We offer a wide range of 40 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

The following taxation article has been summarised to avoid unnecessary tax technicalities. The information and tax rates supplied are in line with current tax laws in Spain, which are subject to change. Seek professional tax & legal advice on your matter – see disclaimer below.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
26th of August 2019

On Thursday last week a new binding consultation from the Spanish Tax Office was released. Binding consultations are queries raised by taxpayers to the tax office and its reply binds its performance on a given matter. It is now the third one of its kind, and this one in particular is very well argued. With three like-minded binding consultations marking a new ground-breaking trend, I am forced to write a tax article on the matter.

Leaving aside any esoterics, what these consultations imply is that the due to the landmark ruling of the European Court of Justice of 3rd September 2014, ALL non-residents, including those with residence outside the European Union and the EEA, are entitled to lenient regional tax reliefs in equal footing as residents. As explained in previous taxation articles on inheritance law, regional tax reliefs in Spain for the most part suppress or even negate inheritance tax (as opposed to the national tax reliefs which do not and are found wanting).

Before anyone cracks open the champagne, I need to throw in a damper. For this change to operate affecting ALL non-residents (the world over), Spain’s Inheritance Act from 1987 must first be amended. And in so far it has not. So right now, you need to be resident in the EU or in the EEA to benefit from regional tax reliefs on inheriting or being awarded a gift in Spain.

No one should realistically expect these changes within the short-term; they will likely take several years. This is because EU non-residents cannot vote, the tax office will push back on losing a lucrative source of taxation and a hard-left wing government is not ideologically aligned to implement tax reliefs which would almost completely negate inheritance tax. With the new change in government in Spain, this will be done presumably at some point in the future. But I stress right now it is not the law.

I had previously foreshadowed in our article of last 4th of July these changes in progress (Andalusia, now a tier 1 region for low taxation in Spain): “for full disclosure, there are some interesting recent tax developments on the works, but we won’t go into detail on them as it exceeds the purpose of this short post.”

Meaning, for example, a Canadian resident would in the future be able to inherit real estate located in Andalusia from his mother, benefitting from Andalusia’s 99% tax relief, paying almost no IHT, or even none at all.

I do not have to explain just how incredibly positive this news is for taxpayers in general. The fact that ANYONE stands to benefit from incredibly lenient regional tax reliefs (in the future) paying little to no inheritance & gift tax is something I thought I would never see during my lifetime. But here we are.

The legalities

Spain’s current tax laws must be construed as breaching article 63 of Europe’s Foundational Treaty (freedom of movement of capital) which not only affects EU non-residents but also non-residents of third countries. So says the ECJ in its landmark ruling of 3rd September 2014 as covered in detailed in previous tax articles (Changes to Spain’s Inheritance and Gift Tax Law – 21st February 2015).

As this is one of the Union’s core tenets, any regulation of a member state that breaches it must be revoked. As a result, Spain is forced to amend its tax laws in the future, particularly its Inheritance Act from 1987, so it is in line with the ECJs views; this would translate into  regional tax reliefs being applied unfettered to ALL non-residents, benefitting everyone, including those  residing outside the sphere of the Union and the EEA.

Spain’s Supreme Court, which hierarchically is under the ECJ, is bound by it and forced to uphold its rulings. It has in fact done so on three separate matters, within the last year, which clearly reflect the ECJ’s 2014 criteria: STS 550/2018, STS 1098/2018 and 1099/2018.

The risk-takers

Because binding consultations are precisely that – binding – some lawyers take the view that all these changes could be applied as of right now; even with retroactive effects as from the 1st of January 2015, when tax laws were first amended in Spain to fall in line with the ECJ’s key ruling of 3rd September 2014.

Personally, I find this a very risky and bold approach given how the Spanish Authorities have had 5 years to change the laws and have been reluctant to do so (on this concrete point). And that was with a centre right-wing government in power, which ideologically is pro-low taxation (well, at least so goes the theory). A left-wing government is far less inclined to adopt such tax changes, as it clashes frontally with its self-imposed ideology.

All these Supreme Court rulings and binding consultations pile a lot of pressure on lawmakers to amend exiting tax laws. But until this is done, in my personal view alone and take it with a pinch of salt, I think trying to exercise these tax reliefs is a bit of a gamble. It may pay off in some cases but in others it will backfire.

To quash the legal uncertainty, all that needs to be done is to amend Spain’s Inheritance Act and draft it in line with the ECJ’s ruling, allowing everyone to benefit from regional tax reliefs, resident or not.

Conclusion

These changes are a work in progress, not to be expected any time soon (years); but undeniably they mark a future trend that lawmakers can no longer ignore.

Spain’s lawmakers have no option other than to embrace and uphold in the future the ECJ’s key ruling of 3rd September 2014 and implement all its conclusions, amending national tax laws where necessary (they had already done so in several other aspects but have remained reluctant to also implement this change holding back for several years now); Spain’s Supreme Court recent three like-minded rulings – all within the last year – coupled with the three binding consultations from the Spanish Tax Office  – also from within the last year – all call for this change in line with the ECJ’s views on non-tax discrimination towards non-residents.

Exactly when this will take place is anybody’s guess.

In the meantime, to benefit in Spain from the ultra-high regional tax reliefs on inheritance & gift tax, you must be EU or EEA resident as this is what our laws demand, at present.

For those affected by Brexit, these changes will not come in time. Brexit will be long done and dusted by the time lawmakers amend existing tax laws to adapt them to this key ECJ ruling. It is strongly advised UK residents inheriting in Spain pre-empt Brexit as explained in our taxation article: Brexit and Inheritance & Gift tax in Andalusia.

At some point in the future, ALL non-residents, including those from outside the EU, will benefit from these generous regional tax reliefs, such as those offered by Andalusia of 99% that suppress inheritance tax.

When the time comes, in all but in name, Inheritance & Gift tax will be truly abolished throughout Spain, for everyone (in Groups I & II); rich, poor, resident or non-resident.

 

 "As men, we are all equal in the presence of death.”Publilius Syrus

 

Publilius Syrus (85–43 BC). Born into slavitude, he would be freed and formally educated by his master due to his outlandish wit and innate talent. He would become renowned in his time for his Sententiae, or moral maxims. He was awarded by Julius Caesar himself a prize in a contest where he outwitted all his competitors.

 

Loosely translated as: “Three amended words from lawmakers turn into dust whole legal libraries.”

Article originally published in Spanish Property Insight: Inheritance tax in Spain: regional tax reliefs to benefit ALL non-residents in the future (even outwith EU/EEA)

Tax & legal services available from Larraín Nesbitt Lawyers

 

Inheritance-related tax articles

 

Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.019 © Raymundo Larraín Nesbitt. All rights reserved.

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Brexit and Inheritance & Gift tax in Andalusia

Raymundo Larraín Nesbitt, July, 26. 2019

Marbella-based lawyer Raymundo Larraín keeps us abreast of the sweeping changes in Inheritance & Gift tax law in Andalusia. The following taxation article is intended only for UK residents beneficiaries of an inheritance or gift in the region of Andalusia.

Marbella-based Larraín Nesbitt Lawyers has over 16 years' taxation & conveyancing experience at your service. We offer a wide range of 40 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

 

The following taxation article has been summarised to avoid unnecessary tax technicalities. The information and tax rates supplied are in line with current tax laws in Spain, which are subject to change. Seek professional tax & legal advice on your matter – see disclaimer below.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of August 2019

We published an article earlier on this month (Andalusia, now a tier 1 region for low taxation in Spain) where we gave a brief overview on the sweeping changes in Andalusia in 2019 on Inheritance and Gift tax. The tax changes from April 2019, coupled with those from January 2018, are so eventful they have ushered in a new era of wealth planning in Andalusia.

One of the main requirements to benefit from the regional ultra-high tax relief of 99% is that the giftees or beneficiaries of an inheritance in Andalusia need to be resident in the European Union. Please note that I’m not talking about your nationality, I’m discussing tax residence. For example, a Canadian national, who is resident in the EU, could benefit from this ultra-low regional tax. Conversely, a German national who is resident in Singapore may not benefit from it. Bottom line, what matters is your tax residency, not your nationality (which is irrelevant) to take advantage of Andalusia’s new Inheritance & Gift tax laws.

This begs the question on how Brexit will impact these heirs and giftees. The goal of this article is to highlight a limited window of opportunity available to some UK taxpayers who can take advantage of it if they are pro-active before Brexit closes in on us.

All comments made below only have in mind specifically the region of Andalusia and as beneficiaries the following groups of family members, for tax purposes:

Group I: Natural and adopted children under 21.
Group II: Natural and adopted children over 21, spouse, registered civil partnerships, parents, adoptive parents, grandparents and great-grandparents.

To close my introduction, I'd like to point out that although the scope of this tax article deals specifically with Andalusia, the same pervading idea would apply throughout the rest of Spain. Meaning, for example, a British owner of a property located in Madrid, which has an incredibly lenient regional inheritance law, could - and should - take advantage of generous regional inheritance & gift laws pre-empting Brexit before time runs out. Post-Brexit, this Madrid expat owner will likely no longer be able to benefit from the generous ultra-high regional tax reliefs and will only be able to resort to the national tax relief scale which is nothing short of appalling (compared on how good the regional ones are that almost suppress or negate IHT completely). Our law firm can act for you nationwide.

I’m British, how does Brexit affect my rights to inherit in Andalusia?

Brexit casts a long shadow of uncertainty over everything, specifically on tax matters. Regardless on which side of the fence you are on, leaver or remainer, the fact is that Brexit will have a serious impact in our life’s.

Although no one knows for sure what will happen on Halloween’s eve in 2019, the fact is that if everything goes according to plan, the United Kingdom will break away from the Union this fall. One of the main requirements of Andalusia’s 99% tax relief on succession is that the beneficiary must be resident in the European Union (i.e. United Kingdom) or in the European Economic Area (EEA) compromised additionally by Iceland, Liechtenstein and Norway.

Although at this point in time we cannot rule out completely that post-Brexit UK tax residents will be able to take advantage from Andalusia’s lenient tax relief, it is within reason to think they will not; unless something specific is agreed which seems most unlikely. Meaning that in all likelihood after Brexit is triggered on the eve of the 31st October, UK tax residents will no longer be able to benefit from regional tax reliefs such as those generously offered by Andalusia. This would translate into UK beneficiaries of an inheritance, or gift, in Andalusia paying a punitive tax bill post-Brexit.

This is because as the UK would no longer be a member state of the Union, lenient regional tax reliefs, such as those offered by Andalusia, would no longer apply. Only the national tax relief scale would apply which, as I’ve often criticized over the years, is found wanting. You can find a full list of national tax relief here:

 

Succession planning is key for UK nationals pre-Brexit

 

The whole point of this taxation article is to garner attention on the limited window of opportunity open to some UK tax residents allowing them to pay no tax, or almost no tax, before Brexit is triggered. Take heed of our advice, the difference in tax to pay post-Brexit is nothing short of brutal.

I. INHERITANCE

As we have no control over who lives or dies before Brexit, it really makes no sense to publish a chart on inheritance tax. However, for completion’s sake, I will include it. The following chart is for a deceased that lived in the UK, beneficiaries of his estate are UK resident and are included in Groups I and II. Inherited estate is located in Andalusia.

In the third example below, inheriting €3mn, a UK heir will pay 146 times more tax in a post-Brexit world. That’s a 14,600% increase in tax to pay!

 

Inherited

Tax to pay

 

Pre-Brexit

Post-Brexit

€500,000

€0

   €106,000

€1,000,000

€0

€262,600

€3,000,000

€6,460

  €942,600

 

II. GIFT

However, we can exert control over gifting assets during our lifetime to our spouse and/or children. The following chart illustrates just how little Gift tax a beneficiary (or giftee) needs to pay in Andalusia before Brexit is activated. It also shows us the humongous difference in tax to pay in a post-Brexit world.

To focus on the second example, on gifting one million euros now to your spouse or children (giftees) they would pay almost no Gift tax whatsoever (under three thousand euros). If the giftor decides instead to wait until after Brexit, his child (or wife) would have to pay over a quarter of a million euros! In other words, if the giftor acts now pre-empting the tax change he would save his children or spouse from paying 96 times more tax. That is a 9,600% difference in tax to pay!

The following chart applies to gifting next-of-kin or spouse (subject to a pre-existing net wealth). The gifted money, or assets, must have been located in Andalusia over the previous 5 years.

Gifted amount

Tax to pay pre-Brexit

Tax to pay post-Brexit

 

 

 

€500,000

€1,100

€110,768

€1,000,000

€2,800

€268,122

€3,000,000

€10,100

€948,122

Example one: gifting real estate. Mrs Blackwood wants to gift her son and daughter (both UK residents) in equal shares her Andalusian villa worth 2 million euros; meaning they would be gifted one million euros each. Her two children (giftees) would be liable to pay Gift tax in Andalusia. As they are both UK tax residents, they qualify to benefit from Andalusia’s ultra-high tax relief and would each pay €2,800 in Gift tax (nada). Mrs Blackwood would be liable for both CGT and plusvalia tax (which can be greatly mitigated, or even negated, as explained below in the next section).

Example two: gifting money. Mr Waller, who works in Andalusia, gifts his loving wife Eleanor (who is UK tax resident) 3 million euros. Eleanor would only pay slightly over €10,000 euros in Spain. Mr Waller would pay no tax.

Applicable taxes on gifting assets

Depending on whether money or real estate is gifted, different taxes apply.

  • When you gift money, only the giftee pays Gift tax, which is currently negligible in Andalusia. Giftor is not liable for any tax.
  • When you gift real estate, a giftor is liable for both capital gains tax and plusvalia tax. Giftee is liable for gift tax, which is almost negligible in Andalusia.

 

Regarding the second bullet point, a giftor can apply and benefit from all the tax reliefs available to greatly mitigate or completely negate his CGT liability on gifting (or selling) real estate. More on this in our taxation article: Capital gains tax mitigation on selling (or gifting) your property – 8th May 2019.

 

The following chart (attempts to) summarise it:

 

Giftee

Giftor

Gift

Gift tax

CGT

Plusvalia tax

 Money

X

Real estate

X

X

X

Double taxation treaties on Inheritance & Gift tax

Unfortunately, Spain has only signed such treaties with three countries: France, Greece and Sweden.

There is no treaty in place between Spain and the United Kingdom. Meaning that although you would pay no tax, or almost no tax, in Spain you may be liable to pay some tax in the United Kingdom. Traditionally the HMRC gives tax breaks on paying tax in Spain.

How can Larraín Nesbitt Lawyers assist you?

We can offer you a Spanish Inheritance Tax Assessment Report (SITAR). The SITAR is a tax report written in plain English tailored for each taxpayer that clearly lays out the taxes you would be liable for in a pre and post-Brexit world. As every matter will be different, it requires we study it case-by-case. We can offer you this tax service for a very competitive fee: Spanish Inheritance Tax Assessment Report (SITAR)

If you decide to go ahead gifting money, or an asset, to your spouse or children located in Andalusia we can arrange drafting and signing a Gift deed that needs to be witnessed by a Spanish Notary Public.

We will also calculate and submit the associated taxes (even if there is no tax to pay, it must still be done). And finally, we change over at the Land Registry the ownership of the assets over to the new beneficiary. If you are simply gifting money, you can skip the Land Registrar phase altogether.

Conclusion

You will often hear tax advisors stating that planning ahead on tax matters is crucial. This has never been truer than now. Pre-empting Brexit will allow some shrewd taxpayers to legally avoid their loved ones paying huge tax bills, walking away scot-free.

The following four months may offer some privileged UK taxpayers a once-in-a-lifetime opportunity to vastly reduce their inheritance and gift tax bill in Andalusia, even paying no tax at all in Spain. A lot of money will be at stake for many people, which is why we urge you to plan ahead and take legal advice on your tax matters. In the unlikely event Brexit is called off, this generous tax relief of 99% on Inheritance & Gift tax will be available permanently for UK residents.

Post-Brexit all these ultra-generous regional tax reliefs will disappear overnight for non-EU residents which is why we advise UK residents do not sleep on this and be pro-active, seizing the opportunity while it is available to them. It is a certainty they can benefit from it now; it is uncertain they will be able to benefit from it post-Brexit.

We've had to wait over 40 years in Andalusia to have such great inheritance and gift tax reliefs. Can you afford to wait so long? Talk to us, we will be delighted to review your tax matter and offer you a cross-border solution, assisted by our UK partners, which gives you peace of mind and works best for you and your family in both countries.

There is no better place for money to be in than in a taxpayer’s pocket.

 

 “If you fail to plan, you plan to fail.” – Benjamin Franklin.

Founding Father of the United States of America. Exceptionally gifted scientist, inventor, diplomat, writer, printer, postmaster and political theorist. Even politician in his spare time; nobody’s perfect.

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, inheritance, taxation and litigation. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Article originally published in Spanish Property Insight: Brexit and Inheritance & Gift tax in Andalusia

 

Tax & legal services available from Larraín Nesbitt Lawyers

 

Inheritance-related tax articles

 

Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.019 © Raymundo Larraín Nesbitt. All rights reserved.

 

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How to mitigate your inheritance tax bill in Spain

Raymundo Larraín Nesbitt, July, 10. 2019

Lawyer Miguel Ángel Vázquez-González gives us an overview of the national tax allowances applied to inheritance tax, which rule all over Spain.

Marbella-based Larraín Nesbitt Lawyers has over 16 years' taxation & conveyancing experience at your service. We offer a wide range of 40 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

By Miguel Ángel Vázquez-González
Associate at Larraín Nesbitt Lawyers
8th of July 2019

 

In today’s article we are going to focus on the national tax allowances, applied nationwide, for Spanish Inheritance Tax. I will not be mentioning regional tax allowances, which further expand and improve upon national ones. It is important to take note that, depending on which of the 17 autonomous regions in Spain inheritance tax is due, the results and conclusions reached will vary significantly in favour of taxpayers.

 

1.- Dispelling false myths

Multiple people claim that as they have a nationality other than Spanish, they are under no obligation to submit this tax. This is a mistake that can only lead to steep fines being levied and even assets being impounded as a result of non-payment. The general rule is to take the habitual residency in Spain into account to calculate this tax; however, also those taxpayers with habitual residency in third countries, other than Spain, who inherit rights or assets located within Spanish territory must pay inheritance tax in Spain.

2.- If you do not request it, you lose it

Spain’s Tax Office is not as lenient as Mahatma Gandhi, in fact, it is a minefield, specifically devised so that multiple requisites are missing and may not be claimed upon to take advantage of them. Tax procedures in Spain remind me of the famous Asterix comic by renown Belgians Goscinny & Uderzo, “The 12 tasks of Asterix”, where our heroes are subjected to run around in circles in a Roman burocratic labyrinthian nightmare that sees no end in pursuit of getting tax form A-38 rubber-stamped. The golden rule is that each taxpayer must expressly request the application of the tax allowances that apply to his case, as the Administration will never apply them by default. Self-complacency, on not claiming the allowances, may result in taxpayers overpaying taxes, and potentially losing thousands of euros in their tax bill. Hence the importance of good and professional advice on Spanish tax matters.

This may lead to some cheeky taxpayers ticking off ALL tax allowances and let the Administration do the work, sorting out which ones apply or not. Needless to say, this only leads to hefty fines. Some criteria are subjective and open to discussion. Yet in other cases it is black or white i.e. you cannot apply a tax allowance as if you had inherited from your father when you are in fact inheriting from a friend.

Unfortunately, the Administration has a criteria very close to its own interests (read to maximize revenues as much as possible) and law courts may have a different take (leaning closer to the taxpayer); in such cases it must be determined if the amount to save in taxes warrants a fight between David and Goliath.

3.- Reduction types

It is normal that non-specialized lawyers are unaware of the myriad requirements, for there are many and varied, both legal and jurisprudencial. Which is why it is very important to instruct a specialized lawyer who keeps abreast of the ever-changing legal requirements.  

3.1.- Reduction as next-of-kin

Depending on their age and kinship with the deceased a beneficiary may enjoy a tax allowance ranging from €0 (i.e. you inherit from a neighbour with no family ties) up to a maximum of €47.858,59 for a toddler.

3.2.- Physical and mental disabilities, or legally incapacitated

The disability must be equal to or over 33%, it is also necessary that at the time of the death there is an administrative resolution not subject of appeal acknowledging the degree of disability. The allowances for this concept range from €47.858,59 to €150.253,03.

3.3.- Mortis causa (death) estate transmissions

If within a period of 10 years the same assets are bequeathed in favour of descendants, in a second transmission the taxpayer can deduct the inheritance tax already paid on the first transmission. E.g. Mr Smith aged 95 years old passes away bequeathing to his eldest son a garage space in Marbella. If his son should die within the next 9 years and he in turn bequeaths it to his own children, the grandsons of Mr Smith can reduce their inheritance tax bill in the same amount already paid by their late father.

3.4.- Acquisition of family company

This reduction is feared by the Spanish Tax Office, as it allows the taxpayer to reduce by as much as 95% of the taxable base. In other words, the tax office could only tax you on the 5% of the company assets. Only this single allowance is so extraordinarily complex and varied, that it would allow me to write hundreds of pages on this topic alone. E.g. a son inheriting a restaurant, hotel or estate agency. EDIT: Miguel specializes in this type of family company taxation.

It is absolutely necessary to study, prepare and revise that every year the requirements are met as the tax Administration will do its utmost to challenge and disprove its application, going out of its way in every step. 

We can apply this incredible tax allowance as long as the beneficiary is the spouse, descendant (or adopted), they must be assets necessary for the business activity. It is also possible to apply for this tax reduction if you are a stakeholder as long as the finality is not to own assets as a holding company but rather to develop a business activity.

E.g. Mrs. Sweeney is the owner of the shares of a company that exploits three restaurants on the Costa del Sol, her two children are also stakeholders of said company. The value of the total assets amounts to €1.500.000. We can study her case so that her two sons inherit their late mother’s company shares benefitting from a tax reduction of 95%. They would only pay tax on the remaining 5%.

3.5.- Acquisition of main home

This applies to the spouse, ascendants, descendants or even collaterals (the latter to an extent). As a general rule the property must be kept (without being sold) for a minimum number of years. The allowance is capped at €122.606,47, per inheritor.

3.6.- Rural exploitations and assets belonging to historic heritage

As these are only applied residually, I will only mention them not going into any detail.

 

Conclusion.- Plan ahead for your demise, don’t wait until it is too late

Some of the above-mentioned allowances are not flexible and cannot be graduated. But have you considered gifting some assets to your children during your lifetime (please read our new tax article Andalusia, now a tier one region for low taxation in Spain)? Are you aware that making some minor changes to the Company Statutes is all the difference it takes between being able to benefit from the lenient 95% tax allowance for family companies or not? Only this tiny difference translates into having to pay several million euros extra to the taxman that you could have saved your beneficiaries from paying on inheriting the family company had you taken proper legal counsel, planning ahead.

 Forward tax-planning is key and fundamental; this is likely the best advice we can give you. As there are multiple parameters at play, that give way to tax savings of thousands of euros, planning ahead ensures you optimize your tax bill.

Remember, the tax office has no qualms and will go out of its way, so taxpayers pay as much as possible. Do not grow complacent and make it easy on them to overtax your loved ones, make it difficult on them! Talk to us.

If you fail to plan, you plan to fail.” – Benjamin Franklin.

Founding Father of the United States of America. Exceptionally gifted scientist, inventor, diplomat, writer, printer, postmaster and political theorist. Even politician in his spare time; nobody’s perfect.

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, inheritance, taxation and litigation. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Article originally published in Spanish Property Insight: How to mitigate your inheritance tax bill in Spain

Tax & legal services available from Larraín Nesbitt Lawyers

 

Inheritance-related taxation articles

 

Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.019 © Raymundo Larraín Nesbitt. All rights reserved.

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Andalusia, now a tier 1 region for low taxation in Spain

Raymundo Larraín Nesbitt, July, 4. 2019

Marbella-based lawyer Raymundo Larraín keeps us abreast of the sweeping changes in Inheritance & Gift tax law in Andalusia.

Marbella-based Larraín Nesbitt Lawyers has over 16 years' taxation & conveyancing experience at your service. We offer a wide range of 40 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of July 2019

We had already covered in previous articles and blogs (Andalusia to abolish inheritance tax in 2019 and  Andalusia to slash Inheritance tax for inheritances under 1 million euros) the landmark tax changes set in motion in Andalusia as from the 11th of April 2019 as a result of political changes in the regional government (read pro-low taxation). These changes have effectively catapulted Andalusia in the span of a few months from the back of the band wagon to leading the pack, becoming the de facto most tax-friendly region in all of Spain; even surpassing liberal Madrid in multiple aspects in inheritance and gift matters.

In this post we want to focus specifically on the tax changes on Gift tax, which have gone completely unnoticed to most being largely outshone by those in inheritance tax. Or at least we have not read any taxation articles published on the matter. We will then close the post publishing the changes in inheritance tax as a gentle reminder.

The gist of these tax novelties is that to most people, but particularly for HNWI and UHNWI, they translate into paying significantly less taxes, whether inheritance or gift tax, or even no tax at all. These changes open the door to a new era of wealth tax planning for affluent taxpayers and normal people alike.

All comments below apply only to those beneficiaries classified in Groups I and II, for tax purposes:

Group I: Natural and adopted children under 21.
Group II: Natural and adopted children over 21, spouse, registered civil partnerships, parents, adoptive parents, grandparents and great-grandparents.

I. Gift tax

 

  • Giftee/taxpayer needs to be EEA/EU-resident.*

 

The taxable base benefits from a tax relief of 99%. This is more clearly understood with a table of practical examples before and after the tax changes of 11th April 2019 (all numbers rounded off).

Gifted amount tax to pay pre-April tax to pay post-April
€500,000 €112,800 €1,100
€1,000,000 €281,160 €2,800
€3,000,000 €1,001,000 €10,100

 

E.g. Swedish father (giftor) living in Andalusia gifts a 2mn euro villa to his daughter, who is resident in Malmö (Sweden). The giftee (daughter) is the taxpayer of Gift tax, as she is EU-resident, she can take advantage of this new regional tax law paying a very low tax.

To focus on the third example set above, before these landmark changes, a grandmother gifting 3mn euros to her grandson would have resulted in a whopping tax bill of over 1 million euros for the giftee! Which is why lawyers generally did not recommend gifting assets to next-of-kin in Andalusia over a certain amount. This has now changed, opening up new tax-mitigation venues.

Post-April, the grandson only stands to pay slightly over 10,000 euros! In other words, her grandson will now pay 100 times less tax on being gifted 3 million euros. If paying 10,000% less tax is not a game-changer, then frankly, I don’t know what is.

To benefit from this lenient regional gift taxation, you must contact a law firm, such as us, too arrange both drafting a Gift deed witnessed by a Spanish Notary Public as well as submitting a Gift tax return. If a lawyer is not instructed to follow the correct procedure, very steep taxes are to be expected of up to 88% and the tax benefit sought will be negated. Bottom line, to pay less tax (or almost no tax) you must contact a lawyer to arrange the signing of a Gift deed before a Spanish Notary Public.

II. Inheritance tax

 

In a nutshell, inheritance tax is as follows in Andalusia:

Requirements to benefit from this tax allowance

  • Inheritor/estate beneficiary/taxpayer needs to be EEA/EU-resident.*

 Inheritance Tax in Andalusia

  • Pre-existing wealth nil-rate band raised to €1,000,000 (per inheritor).
  • Estates equal to or below €1,000,000 will go untaxed (per inheritor).
  • Estates over €1,000,000 will benefit from a 99% tax relief (per inheritor). Meaning you only pay 1% over what exceeds the 1mn threshold.

 

*for full disclosure, there are some interesting recent tax developments on the works, but we won’t go into detail on them as it exceeds the purpose of this short post.

The following chart is an example of a 25 year old beneficiary (taxpayer) who inherits from his father and is resident in the European Union/European Economic Area.

Inherited amount tax to pay pre-April** tax to pay post-April
€500,000 €0 €0
€1,000,000 €0 €0
€3,000,000 €646,160 €6,460

 

**There was a significant tax change back in January 2018 that slashed inheritances under 1 million euros. More on this here: Andalusia to slash Inheritance tax for inheritances under 1 million euros – 21st September 2017. The new tax change from April 2019 now also affects inheritances over 1 million euros, slashing succession tax altogether in Andalusia.

As we can see from the above chart, if the son inherits one million euros, or less, he would pay no inheritance tax whatsoever. If he inherited 3 million euros, he would only pay slightly over six thousand euros, which is negligible compared with how it was before.

To benefit from this lenient regional inheritance taxation, you must contact a law firm, such as us, to both arrange drafting an Acceptance of Heirs deed witnessed by a Spanish Notary Public as well as submitting an Inheritance tax return (even if there is no tax to pay). If a lawyer is not instructed to follow the correct procedure, very steep taxes are to be expected of up to 88% and the tax benefit sought will be negated. Bottom line, to pay less tax (or no tax) you must contact a lawyer to arrange the signing of an inheritance tax deed before a Spanish Notary Public.

Conclusion

This is as positive as taxation news get. Inheritance and Gift taxation had traditionally been Andalusia’s Achille’s heel holding it back; no more. It now turns out it will become one of its main selling points!

Some holding structures incorporated with the sole purpose to mitigate or negate IHT liability will now become redundant in Andalusia following the approval of this change in regulation. You should request specialized tax advice from us before you do anything rash like setting up a trust or holding company to include your Spanish estate.

In my article of March 2016 (Spanish Inheritance Tax for Non-Residents (Part II)) I had classified the region of Andalusia as a tier two region, for tax purposes. With all the recent changes in taxation, specifically those in Inheritance and Gift tax law, I need to revise this and upgrade it now to a tier one tax-friendly region. Andalusia now stands at the forefront, leading other autonomous region in Spain, with great allowances and tax breaks on Inheritance and Gift tax law.

If you are a British national, and UK-tax resident, you may want to look into this before Brexit is triggered on Halloween’s eve. Post-Brexit, British nationals (acting either as giftees or as beneficiaries of a Spanish inheritance) will likely no longer qualify to take advantage of these exceptionally low tax rates in Andalusia, as they will no longer be members of the European Union (which is one of the main requirements to take advantage of the ultra-low regional taxation). Bottom line, don’t procrastinate and seek tax council from our law firm before this option ends October 2019. I stress UK nationals may have only a limited window of opportunity before this tax option precludes, plan ahead and act now before it is too late. More on this subject in our taxation article: Brexit and Inheritance & Gift tax in Andalusia.

Needless to say, the profound impact these tax novelties will have over the mid to long run, when word of mouth finally spreads, is that they will act as a beacon, strongly attracting affluent individuals who will flock from all over the world to the Costa del Sol and Sotogrande. With ever-changing tax laws, wealthy individuals are always on the prowl seeking low-taxation areas, ready to relocate and settle down with their families to preserve and increase their wealth.

There is no better place for money to be in than in a taxpayer’s pocket.

 

If you fail to plan, you plan to fail.” – Benjamin Franklin.

Founding Father of the United States of America. Exceptionally gifted scientist, inventor, diplomat, writer, printer, postmaster and political theorist. Even politician in his spare time; nobody’s perfect.

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, inheritance, taxation and litigation. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Article originally published in Spanish Property Insight: Andalusia, now a tier 1 region for low taxation in Spain

Tax & legal services available from Larraín Nesbitt Lawyers

 

Inheritance-related tax articles

 

Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.019 © Raymundo Larraín Nesbitt. All rights reserved.

 

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8 tips on buying a home in Spain

Raymundo Larraín Nesbitt, May, 21. 2019

Lawyer Raymundo Larraín gives us a few insider tips on buying your dream home in Spain.

Marbella-based Larraín Nesbitt Lawyers has over 16 years' taxation & conveyancing experience at your service. We offer a wide range of 40 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of June 2019

 

1. Location, location, location.

Undeniably a worn out trope, but that doesn’t make it any less true. You are better off buying the smallest house in the best neighbourhood than buying the fanciest house in a less reputed estate. In practical terms, this translates into capital appreciation over the long run as well as making it easy on yourself to sell on. A well-located property enables you to sell it in a few months, as opposed to a poor-chosen location which may leave you waiting for years on end. Seasoned estate agents are your best source of information on the ground when it comes to choosing the ‘right’ address, whether for investment purposes or for bragging rights. Some hallmark names, such as Marbella or Mallorca, are consolidated world-renowned household brands that greatly mitigate exposure to any market downturn, allowing you to buck the trend, as they are always highly sought-after locations.

2. Orientation

On buying property in Spain, we advise you procure yourself a south or south-east orientation due to the sun’s angle. This will ensure your property is drenched in sunlight all year round and will significantly contribute to reduce your heating bills (and electrical bills) in winter. Spain’s electricity is not exactly cheap. If you are in a coastal area, a southern orientation may also secure you nice sea views to boot.

3. Affordability vs maintenance

Budgeting carefully is a key element of any successful conveyance procedure. Yes, you may afford to buy a swanky property in a great location, but can you afford its steep maintenance? Much like some high-maintenance partners in real life, some properties’ upkeep are (very) demanding and you better have the deep pockets to keep up in the game. You really do not want to get involved with a property you cannot afford to maintain, as this will be a financial millstone that will drag your finances down and may even lead you to file for bankruptcy. Only buy a property you are absolutely confident you can afford to maintain over the mid to long run. Do not get carried away with wishful expectations on commanding high rental yields to offset mortgage repayments, as property bills pile up inexorably at the start of every month. If you are relying on rental income to service your mortgage instalments, flat out you shouldn’t buy.

4. Buy-to-let or buy-to-live

This is a fairly important point that is often overlooked by buyers. The characteristics you need to look for are very different depending on whether you are looking at buy-to-let or else with a view to live in. If you are looking at the former, the property must have attained a Licence of First Occupation, it should be smaller, with good communications, within walking distance of all amenities and the sea (on coastal resorts). If you are after the latter, the property should be larger, with nice views, and good schools and hospitals nearby.

5. Ground floor or penthouse?

We had already covered in-depth the pros and cons of each in our blog: ground floor vs penthouse, from a Spanish perspective. Take good note that in Spain both property types are perceived as the opposite from the United Kingdom; which in turn impacts on price, capital appreciation, maintenance and even security.

6. Be familiar with your community bylaws

Before you commit buying a property in a Community of Owners, you should ask for copies of the minutes of the previous General Assemblies, which will highlight any existing issues in your community. It is also of vital importance you fully understand the rules governing your community (i.e. Community of Owners may now outright ban holiday lettings). If you are looking to invest in a buy-to-let and only find out post-sale that your community forbids holiday homes, you have wasted your money. It is also important you fully realize how much money you need to pay every quarter, as some quarterly community fees are exorbitant, especially in exclusive gated communities dotting upmarket coastal areas. Another well-known issue is that some community presidents (which officially hold an unpaid role) perpetuate themselves year after year abetted by their cronies and do in fact make a very tidy living running whole communities at the expense of pocketing fees from fellow owners on fudging the numbers. I tell you - by experience - that no one who has held the role of community president wishes to repeat from one year to the next as it is a very ungrateful task. Be wary of community presidents who hold their position indefinitely and fight tooth and nail to retain power and control. Only on changing administration does the corruption of the former management come into light.

7. Urban vs rural

Unlike in the United Kingdom, rural property in Spain is marred with legal issues. In the region of Andalusia alone, there are over 200,000 illegal properties. Buying a property with issues could see your trapped for years on end without a chance of selling it on. Moreover, on buying an illegal property you take over the liability of any prior planning illegality; the previous owner gets to walk away scot free – with your money. On buying rural, hiring a competent conveyancing lawyer from the outset is a must to help you waddle through the admin minefield. I would advise a reputed surveyor is also instructed, preferably regulated by RICS and working to UK standards. That is not to say that urban property is all good and rosy, far from it. But no doubt urban property offers much less legal risks than its rural counterpart. If you are looking for a quiet rural life to commune with nature, the choice is obvious. If you are more the city type, that easily gets bored watching grass grow and sheep bleat, you may want to look at urban instead.

8. The lawyer

A necessary evil. You would never buy a property in the UK without instructing a solicitor or conveyancer, and yet a surprising number of people choose not to instruct a lawyer or legal representative when buying abroad. If anything, it is even more important to obtain good legal advice when buying overseas as it is highly likely that you will be unfamiliar with many of the key processes. Whilst it is possible to buy a property in some overseas jurisdictions, including Spain, without having to appoint a lawyer, it would be very unwise to do so. Buying a house is one of the biggest investments most people make in their lifetime. So why take the risk by not obtaining proper legal advice?

Choosing a reputable conveyance law firm will be your best line of defence against the stack of odds you will be facing. Make sure your lawyer is truly independent and is not affiliated with your chosen estate agency in any way, you would come to regret this. Having a seasoned lawyer on board is having half the fight already won. Your lawyer will be able to cut through the red tape seamlessly, enabling you a smooth and safe buying procedure. Three expenses on which you should never skimp are: doctors, lawyers and education. You would regret dearly ‘saving’ money on any of the three.

Our law firm has over 16 year’s conveyancing experience at your service. We are members of the British Chamber of Commerce, Spain, and regulated by the Spanish Law Society.

Because peace of mind is priceless.

Conclusion

But enough of platitudes. All that matters is that we are in a buyer’s market.

Do not be rushed into buying a property, you will be spoilt for choice.

If you have qualms over a property, or its area, why don’t you consider renting it for a while? You should ponder such factors as leasing it on or off-peak. You can always sign a rent-to-buy contract. If it is to your liking, then go ahead and buy it; you only live once.

 

We offer the most competitive fees in the market.

Conveyancing – Buying fees on application

We are specialized in conveyancing

 

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, inheritance, taxation and litigation. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Article also published in Spanish Property Insight: 8 tips on buying property in Spain

 

Audentis Fortuna iuvat.” – Aeneid, Virgil.

Loosely translated as “Fortune favours the bold.”

 

Legal services available from Larraín Nesbitt Lawyers

 

Conveyancing-related articles

Buying distressed property in Spain – 8th August 2011
Buying resale property in Spain – 21st February 2013
Buying off-plan property in Spain – 8th of June 2013
How to buy commercial property in Spain – 4th July 2014
How to buy rural property in Spain – 8th August 2014
How to Buy Property in Spain Safely – 10th October 2014
House Hunting in Spain – Interview with The New York Times. June 2015
Buying property in Spain from a private seller (Resale Property) – 21st of February 2017
Buying property in Spain from a developer (Off-Plan Property) – 8th March 2017
How to inspect an off-plan property overseas – Q&A with The Sunday Times. July 2017
Buying property in Spain – 10 reasons to hire a lawyer – 8th November 2016
8 Tips on Buying Off-Plan in Spain – 8th June 2018
Tax advantages on becoming resident in SpainThe Address magazine (pages 358 - 373). December 2018
Taxes on buying Spanish property – 8th December 2018
Do’s and don’ts on buying property in Spain – 8th April 2019
8 tips on buying a home in Spain – 8th June 2019

 

Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.019 © Raymundo Larraín Nesbitt. All rights reserved.

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Capital gains tax mitigation on selling (or gifting) property in Spain

Raymundo Larraín Nesbitt, April, 30. 2019

Are you selling (or gifting) property in Spain? In this taxation article we explain how our law firm can assist you bring down your seller’s taxes significantly, even negating them.

Marbella-based Larrain Nesbitt Lawyers has over 16 year’s taxation & conveyancing experience at your service. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

 

 

The following article has been summarised to avoid unnecessary tax technicalities. The quoted tax rates are subject to change from one year to the next. Seek professional legal advice on your matter – see disclaimer below.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of May 2019


Introduction

Congratulations, you have found a buyer for your Spanish property!

On selling property in Spain, you are liable for two taxes: plusvalia and capital gains tax (CGT, for short). For a more detailed take on both, please read our in-depth tax article: Taxes on Selling Spanish Property.

In this short article, we will focus on four strategies to mitigate a seller’s exposure to CGT; which range from completely negating it, to reducing it significantly.

 

4 strategies to mitigate a seller’s CGT liability

 

  1. Absolute relief

All tax residents over 65-years-old are exempt from paying CGT on selling their main abode (vivienda habitual, in Spanish legal jargon).

  1. Rollover relief

Any resident seller under 65-years-old is exempt from paying CGT on selling their main home providing the following conditions are met:

  • Seller is under sixty-five year-old.
  • Seller is (tax) resident in Spain.
  • Dwelling must be his main home (main abode and must have dwelled in it permanently for the 3 previous years). It may be less than three years under exceptional circumstances i.e. job change, marriage or separation.
  • Sales proceeds reinvested in a new main home (in Spain or in the Union, including the United Kingdom in a pre-Brexit world). Any sales proceeds not reinvested will be taxed on a pro rata.
  • 2 year deadline to reinvest the sales proceeds (on a new main home). 

 

  1. Pension annuities

This third tax relief is in addition to the above two main home tax reliefs. Applies to residents.

Any capital gains made by resident taxpayers over 65-years-old will go untaxed provided the following are met:

  • Sales proceeds reinvested in pension annuities.
  • Capped at €240,000.
  • Six-month deadline as from sale.

 

  1. Traditional method

Your lawyer can offset from your CGT liability on selling, all expenses that went towards buying the property plus any refurbishment costs, provided you have VAT invoices to back them up. Applies to both residents and non-residents.

  • Lawyer’s fees (on buying).
  • Notary fees (on buying).
  • Land Registry fees (on buying).
  • Taxes (on buying).
  • All property-related improvements (not maintenance costs) i.e. glass curtains, refitted kitchen, roof retiling, wood flooring, A/C installation, house alarm etc.
  • Estate agent's commission (on selling): VAT invoice.
  • Lawyer’s fees (on selling): VAT invoice.

 

We offer the most competitive fees in the market.

Conveyancing in Spain – Selling

We are specialized in conveyancing

 

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

Article originally published in Spanish Property Insight: Capital gains tax mitigation on selling property in Spain

 

Notre-Dame de Paris est en particulier un curieux échantillon de cette variété. Chaque face, chaque pierre du vénérable monument est une page non seulement de l’histoire du pays, mais encore de l’histoire de la science et de l’art.” Victor Hugo. Notre-Dame de Paris, livre troisième.

Vitor Marie Hugo (1802 – 1885). Was an outstanding French novelist, poet, and dramatist ascribed to the Romantic literary movement. He is widely regarded as one of the greatest French writers to date. Amongst his many famous novels are Les Misérables and The Hunchback of Notre-Dame (Notre-Dame de Paris).

 

Conveyancing-related articles

 

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.019 © Raymundo Larraín Nesbitt. All rights reserved.

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Do’s and don’ts on buying a home in Spain

Raymundo Larraín Nesbitt, March, 25. 2019

Marbella-based lawyer Raymundo Larraín gives us a few light-hearted tips on buying a home in Spain.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of April 2019

 

 

Springtime is upon us. It is again that bright season of the year where flowers bloom, bees dart around doing whatever it is they do, and real estate agents are busy dusting off glossy house brochures with a big smile on their face. Scores of buyers will now be booking flights to Spain with a view to acquire their dream house next to the sea.

With this in mind, I thought it would be a good idea to write this short amusing article to clue up buyers, so their dream does not turn sour on tripping themselves over in pursuit of their bolthole under the sun.

 

3 Do’s

 

  1. Hire a qualified registered lawyer (abogado)

I know, I know. I just had to add this shameless plug in the first place.

No, a Spanish Notary is not your personal lawyer and will not look after your interests. He’s there to ensure taxes are paid, period.

No, a lender does not susbstitute a lawyer and much less defends your legal interests on taking on a mortgage loan. No, they do not do a due diligence on the property title. A lender is there to give you a loan, period.

Beware of intruders who claim to be lawyers or law firms but are not registered to practice. Within the last year alone, I’ve come across three such interlopers. Unlike lawyers, they don’t have professional indemnity insurance and lack the legal qualifications to practice. I see plenty of such outfits advertising themselves regularly on popular expat magazines with glossy ads peddling their conveyance ‘services’. They will label themselves with all sort of fancy titles such as: consulting firm, legal consultant, iuris consultant, jurist, legal executive, legal advisor, legal assistant, paralegal etc.

In Spain it is very simple, you are either a lawyer (abogado) or you are not; there is no in-between. Always ask the person you are dealing with for their Law Society’s practising number and verify they are indeed registered to practice. Wrong assumptions lead to expensive mistakes.

  1. When in Rome, do as the Romans do

I know, we have all been there. You come to Spain and you think some things are stupid and you could do them much better in your own way. Perhaps, perhaps not. The point is that there are rules in place you ought to follow; if you skip them nonchalantly, you are only setting yourself up for a nasty fall.

  1. Follow the 3 L’s: Look, listen and liken

This is not your turf, it is a new world you’re braving. Take your time to look around where you picture yourself living. Visit the property during the week and over the weekend, by day and by night. Listen to what neighbours and natives have to say about the place. Compare the pad you fancy with other similar properties and areas. If all adds up, go for it. You only live once.

3 Don’ts

  1. Don’t pay any money in cash

Would you seriously pay in cash a home in your home country? So, why do it in Spain? This only benefits the person asking to be paid in cash, it does not benefit the buyer in any way. When you come to sell the property later on, you will be hit by a massive capital gains tax bill. Under-declaring is illegal, it is stupid; don’t be a muppet.

  1. Don’t be pressurized to sign

The never-ending sun, the sweltering heat, the cool sea breeze, the enticing beach sunset with a mojito and a saxo playing, all them nice piña coladas you drank late into the night, the soft-spoken agent gently cooing into your ear promises of wealth and capital appreciation; all these things play tricks on our minds and make us lose the plot when we get off a plane in Spain. Unlike timeshare, there is no cool-off period when you buy property in Spain. Holding deposits are normally non-refundable (unless your lawyer words it). If you wouldn’t rush ahead and sign on the dotted line in your home country, don’t do it in Spain. Focus, breath and take your time to commit before you sign any binding document giving away your life’s savings. Don’t let the big lights dazzle you, you will be spoilt for choice. It's a buyer's market.

  1. Don’t cut corners

“Jack knows how to cut through all this red tape.” Maybe he does, maybe he doesn’t. Don’t try to outsmart local procedures by cutting corners; it is a one-way ticket into a world of pain. If you would follow set procedures in your home country, why on earth are you trying to skip them in Spain?

 

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Conveyancing – Buying fees on application

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Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, inheritance, taxation and litigation. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

 

"Me ha bastado pensar que la naturaleza pertenece a los niños para reanudar mi batalla encaminada a la conservación de la fauna.” — Félix Rodríguez de la Fuente

“I need only remind myself that Nature belongs to our children’s morrow, to give me strength in the battles to come in defence of wildlife conservation.”

Félix Samuel Rodríguez de la Fuente (1928 – 1980). Decades before the BBC's brilliant Planet Earth, narrated by Sir David Attenborough, there existed Félix. He was a Spanish precursor of what is now branded as ‘ecologist.’ The son of a reputed Notary, he was expected to dutifully fall in line and follow on the wake of his father’s footsteps. But following social conventionalisms were not his cup of tea. After graduating in medicine, he heeded his calling and would go on to become a naturalist and broadcaster defending what he thought mattered most - Nature and the endangered wildlife. He would become world-renowned for his much-acclaimed tv series El Hombre y la Tierra (1975 – 1980). His calm, collected demeanour and rugged commanding voice, coupled with powerful images of an unleashed Nature the likes viewers had never witnessed, bewitched Spaniards and other nationalities, for decades to come. His enduring legacy would be to imbue and imprint on younger generations his indelible passion and love in defence of Mother Nature. This constitutes all unto itself a wondrous feat, given how Félix managed single-handedly to change the whole country's mindset, which was not particularly renowned for its love and protection of wildlife at the time (seventies). He had a soft spot for wolves, which had been driven by Authorities to the brink of total annihilation. Decades on after his death, young generations of Spanish ecologists and eco-activists, who grew up watching his show, took the torch and would follow on the path laid by him, steadily bringing back wolf packs into a land which was once their rightful domain. He would tragically meet an untimely death in a plane crash aged only 52. No accolade can honour enough what this man achieved in benefit of us all. Almost four decades on after his tragic death, he is still mourned and is credited as the father of Spanish environmentalism. There isn’t a single town in Spain who does not pride itself in having a street or plaza named after him. So much for adhering to social conventionalisms, eh?

 

Article also published in Spanish Property Insight: Do’s and don’ts on buying a house in Spain

Legal services available from Larraín Nesbitt Lawyers

 

Property-related articles

House Hunting in Spain – Interview with The New York Times. June 2015
Resurgent Spain: Málaga Sees Strong Sales – Interview with Mansion Global (The Wall Street Journal). December 2015
Buying Property in Spain from a Private Seller (Resale Property) – 21st of February 2017
Buying Property in Spain from a Developer (Off-Plan Property) – 8th March 2017
How to inspect an off-plan property overseas – Q&A with The Sunday Times. July 2017
Buying Property in Spain – 10 Reasons to Hire a Lawyer – 8th November 2016
Non-Resident Taxes in Spain – 8th December 2015
Non-Resident Income Tax – 8th December 2017

 

Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.019 © Raymundo Larraín Nesbitt. All rights reserved.

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