European Court of Justice rules on tax form 720, declares aspects illegal

Raymundo Larraín Nesbitt, February, 1. 2022

Lawyer Raymundo Larrain does a brief rundown on the ECJ’s landmark ruling from 28-01-2022 on tax form Modelo 720 (Worldwide Asset Declaration for Spanish residents).

Marbella-based Larraín Nesbitt Abogados (LNA) has over 19 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 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 © 2022 Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
21st of February 2022

Introduction

It was long time coming, the writing was on the wall.

Through the dogged perseverance of one Spanish lawyer, Mr. Alejandro del Campo, we now have this ruling. We should all be grateful to him (and our EU Overlords).

Finally, after years of anxious wait, the European Court of Justice (ECJ, for short) delivered a landmark ruling on Spain’s unfamous 720 tax form. We had published several articles on this topic leading up to this long-anticipated moment (i.e. European Court of Justice’s lead council states Spanish Tax Form 720 fines are disproportionate – 16th July 2021).

On Thursday 28th of January, the ECJ declared null and void several sections of the law related to tax form 720.

This was featured prominently all over the Spanish press and is now being misconstrued as the end of 720. But, is it really?

(Spoiler) No! Not by a long shot.

We keep receiving emails from clients telling us they no longer need to file 720 because it “has been abolished” etc.

In light of this, I’ve written this short article to shed some light on the matter and hopefully clarify the matter.

ECJ’s ruling

The ECJ’s ruling declared null and void a series of aspects that we had previously bitterly criticized in our articles and blog posts:

  1. The no imprescriptibly of the debt.
  2. The disproportionate fines of 150%.
  3. The disproportionate fines on not disclosing all the financial data or doing it wrong.

All three aspects above have been declared null and void by the ECJ in yesterday’s ruling.

I really don’t want to go into this in detail, but as an example, only crimes of genocide in our legal system have no imprescriptibility. And quite frankly, you honestly cannot compare a heinous act such as genocide (a crime against Humanity) with not disclosing your estranged rich uncle left you 60k in some fancy Swiss bank. I mean honestly.

In short, the above points are an affront to core tenets enshrined and upheld by the community of nations known to us as the European Union i.e. freedom of movement of capital. As a result, they are null and void as they are deemed incompatible with core principles of our Union (UK not included).

Does that spell the end of the dreaded Modelo 720?

Again, for the avoidance of doubt, no.

720 remains, and will very much remain, a tax form that all tax residents in Spain will need to abide.

If you meet the 720 criteria, you must file a 720 tax form on or before the 31st of March of every year. It’s only for reporting purposes, no tax is paid and in principle, you only need to do it as a one-off, not every year.

So, what’s changed then?

The three points I collate above.

The Spanish Tax Office will waste no time (understatement) in working on this and tweak the penalties associated to 720 over the next weeks so they are fully compliant with the ECJ’s ruling on the 720 and with the EU’s founding principles that pervade all our legal system.

I bet my bottom dollar that they’ll sort it out before the end of February 2022. When it comes to these matters, that is to demand taxes from us poor buggers, our tax office moves so fast it would even make a cheetah blush in shame. Eat your heart out Mr. Bolt Usain, you’re no match for our tax office.

Going forward

Going forward, as mentioned, any resident taxpayer that meets the criteria of 720 needs to submit it, so no changes there.

The only difference is that the associated penalties on non-compliance, or presumably on making any mistakes (knowingly, or not), will be far more lenient and fall in line with other tax forms.

What about fines? What happens to all those that were fined in the past?

The Spanish Tax Office racked up an estimated 230 million euros in fines since the inception of 720 in 2012.

As a result of yesterday’s landmark ruling, all those taxpayers that were (heavily) fined now have the door ajar to apply for a tax rebate on the amount fined, plus legal interests on top.

We advise taxpayers, that find themselves in such a predicament, to contact our law firm so we study their case and assist them in recovering their money.

Conclusion on the ECJ ruling on the Modelo 720 Spanish tax form (Worldwide Asset Declaration)

Once more, the ECJ, the highest court in the land, proves its mettle and draws the line on abuse. The voracity of the Spanish Tax Office knows no bounds and it is up to law courts and impartial judges and magistrates to defend us from this abuse.

Ideally, and it pains me to write it, it should really be Spain’s Supreme Court that should be doing this job and holding the line. But I guess they are far too busy still trying to rule – twelve years on – such cases like the one on abortion. I kid you not. A slooow justice indeed, no cheetah fast-pace here.

Once more, I must commend our EU Overlords for delivering impartial justice and setting the record straight. Thank you.

Rant over.

For the broader market (read real estate & foreign investments), the implication of this ruling is that resident taxpayers should no longer hold back submitting this tax form as the fines that will now be levied by the Spanish Tax Office (still to be disclosed) will be very reasonable and should no longer be feared.

Bottom line, the ECJ’s key ruling is (most) positive, and it is much appreciated by us punters, kudos!

Justice delayed is justice denied.” – legal maxim

 

Larraín Nesbitt Lawyer’s taxation service:

Tax form 720

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

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, 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 (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Related tax articles

 

Article originally published at Spanish Property Inisght:  European Court of Justice rules on tax form 720 – 21st February 2022

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. No taxman or politician was harmed on writing this article. Voluntas omnia vincit.

2.022 © Raymundo Larraín Nesbitt. All Rights Reserved.

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Andalusia’s new tax changes for 2022

Raymundo Larraín Nesbitt, January, 21. 2022

Lawyer Raymundo Larraín briefs us on the new tax changes in force in Andalusia as from 2022. The landmark tax reduction is so significant that it has ushered in a new era in wealth-planning.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 19 years’ taxation & conveyancing experience at your service. We offer a wide range of over 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record of successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2022. Plagiarism will be criminally prosecuted.

 Inset photo: La Alhambra, Granada

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
21st of January 2022

I’m going to cut to the chase on this one because, in all honesty, it’s growing old reporting every month on the continued changes in taxation in Andalusia (lowering them one month after another). I will be focusing mainly on the tax changes dealing with buying & selling property, inheritance, and income tax. But the scope of these changes run broader and deeper.

Any reader who follows us regulalry, will have noticed the large influx of tax articles featuring Andalusia over the last three years. This is because Andalusia’s new regional government is hell-bent on lowering taxes across the board and we are immersed in what can only be described as a ‘tax revolution’.

After almost 40 years of high taxes under the previous Administration, the newly-appointed Authorities have reduced taxes as much as is legally possible – within the constraints of devolved competencies – and we are all very grateful for it.

Changes below are a recap from law 5/2021, which came into force as from the 1st of January 2022. Please note I will not mention any previous tax changes (such as the key suppression of inheritance tax in Andalusia approved in 2019) only new tax changes.

Wealth Tax (Patrimonio)

  • Tax-free allowance increased to €1,250,000 per taxpayer with a physical disability equal to or greater than 33% (was €700,000).
  • Tax-free allowance increased to €1,500,000 per taxpayer with a physical disability equal to or greater than 65% (was €700,000).
  • Improved wealth tax sliding scale:
Tax base

 

Euros

Quote

 

Euros

Remainder

 

Euros

Tax rate

 

%

0 0 167.150,00 0,20
167.150,00 334,30 167.100,00 0,30
334.250,00 835,60 334.250,00 0,50
668.500,00 2.506,85 668.500,00 0,90
1.337.000,00 8.523,35 1.337.000,00 1,30
2.674.000,00 25.904,35 2.674.000,00 1,70
5.348.000,00 71.362,35 5.348.000,00 2,10
10.696.000,00 183.670,35 Onwards 2,50

Personal Income Tax (IRPF)

  • Tax allowance on buying main home 5% for young people (under 35 y.o.)
  • Tax allowance on long-term rental 15% (capped at €600/year).
  • Improved regional sliding scale: *
Tax base

 

Euros

Quote

 

Euros

Remainder

 

Euros

Tax rate

 

%

0,00 0,00 12.450,00 9,50
12.450,00 1.182,75 7.750,00 12,00
20.200,00 2.112,75 15.000,00 15,00
35.200,00 4.362,75 24.800,00 18,50
60.000,00 8.950,75 onwards 22,50

*works in tandem with national scale

Inheritance Tax (ISD)

  • 99% tax reduction on acquiring a main home for Groups I and II (irrespective of value).
  • 99% tax reduction on acquiring business/company for Groups I, II, and III.
  • Tax allowance for Group III increased to €10,000 (was €8,000)
  • Additional tax allowance of €250,000 for inheritors with disability greater than 33%
  • Additional tax allowance of €500,000 for inheritors with disability greater than 65%
  • Group III: top marginal rate is reduced to 45% (was 70%, top rate applies only in the most extreme cases, when millions are inherited).

As a gentle reminder:

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.

Group III: Relatives in second and third degree: in-laws, brothers/sisters (siblings), nephews/nieces, aunts, and uncles.

Gift Tax (ISD)

  • 99% tax reduction on parents gifting money to children to buy a main home.
  • 99% tax reduction on parents gifting the main home to children.
  • 99% tax reduction on parents, or family members, gifting capital to set up a business (capped at €1,000,000).
  • 99% tax reduction on parents gifting money to children.

Property Transfer Tax (ITP)

  • 7% flat rate (irrespective of property value)
  • 5% for young families (under 35 y.o.) on buying a main home (capped at €150,000)
  • 6% on buying a main home (capped at €150,000)
  • 5% on buying a main home and with disability (capped at €250,000)
  • (long list of case-per-case reduced rates goes on and on) etc

Stamp Duty (AJD)

  • 1.2% flat rate on buying property (off-the-plan)
  • 1% on buying a main home (capped at €150,000)
  • 0.3% in rentals

Conclusion

These tax changes are as good as it gets, period.

Andalusia’s regional government continues with its unabated trend of lowering taxes across the board.

The tax improvements are so prominent, they have turned Andalusia into an ultra-low taxation area.  Andalusia and Madrid now have the lowest taxation in all of Spain.

The improvements foster foreign investments in Spain, and in particular in Andalusia.

These pivotal tax changes have not gone unnoticed by non-residents. In a 2021 survey, 12,000 expats from 174 countries, voted Malaga as the world’s second best place to work & live in.

If regional politicians continue doing such a stellar job, I won’t have anyone left to throw darts at, sigh.

 

At Larrain Nesbitt Abogados we can assist you buying & selling property in Spain and deal with its taxation. Ask us.

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

Larraín Nesbitt Lawyers is a law firm specialized in conveyance, taxation, inheritance, residency 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 to book an appointment.

Legal services available from Larraín Nesbitt Abogados:

Related articles

 

Originally published in Spanish Property Insight: Andalusia’s new tax changes for 2022

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. No politician was harmed on writing this article. VOV.

2022 © Raymundo Larraín Nesbitt. All Rights Reserved.

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Spain’s new Entrepreneur Law

Raymundo Larraín Nesbitt, January, 8. 2022

Lawyer Raymundo Larraín briefs us on the new Entrepreneur law which aims to assist and incentivize new businesses in Spain.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 19 years’ taxation & conveyancing experience at your service. We offer a wide range of over 50 legal and corporate services. Our team of native English-speaking lawyers and economists has a long track record of successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2022. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of January 2022

Introduction

Spain’s social-communist government enacted in December 2021 a new Entrepreneur law (Ley de Startups) whose aim is to incentivize startups. This new law introduces a plethora of (very) positive changes that will make the life of businesspeople much easier, removing red tape and foremost creating great tax incentives, both for workers and for investors (business angels).

Slew of tax & admin novelties

 

I’m going to list them as bullet points for ease of comprehension.

  • Dramatically reduce the number of admin steps to incorporate a new company. In effect, deregulation.
  • Foster state investment in startups. Last year over three billion euros were devoted to this end.
  • Reduction of non-resident income tax from 25% down to only 15% over a 4-year tax period (providing the company turnover is positive).
  • Tax exemption retribution through stock options (capped at 50k/year).
  • The first 100,000 euros will be tax-free
  • Incorporation of companies is greatly reduced to one electronic document. In effect, deregulation.
  • Tax deferral from 6 to 12 months (without delay interests or penalties), allowing more time to settle the tax.
  • Removal of fractioned tax payment within the first two years with positive turnover.
  • Removal of NIE number requirement for foreign investors, requiring only a tax number.
  • In the event of failure (something natural in startups), winding up the company is greatly simplified
  • The government wishes to attract foreign talent. To this end, it will introduce a digital nomad 5-year residency permit for non-residents that will significantly cut through all the red tape and which also has associated (very) attractive tax perks.
  • Business angels may now apply for tax exemptions of 100,000 euros a year (up from the previous 60k threshold).
  • Business angels tax deductions are expanded upon to 50% (was 30%).
  • Business angels are exempt from paying tax on profit if they reinvest the sale proceeds in another startup.
  • Suppression of double contribution to the Social Security for a three-year period in the event a worker is employed by multiple companies.
  • Startup category increased from 3 to 5 years in general, and to 7 years for companies operating within certain key sectors the government wishes to incentivize (biotechnology, industrial energies and other strategic sectors).

 

Conclusion

This is a commendable initiative from our social-communist government; quite the capitalist move If I may (cheekily) say so.

Any law that contributes to deregulation (removal of unnecessary admin red tape) and lowering taxes is always greatly welcomed by the economy and society at large.

I will say it time and time again, if Spain only lowered its taxes – in line with fellow European countries – and also deregulated heavily, it would foster a huge boom in the economy, creating millions of jobs in its wake. This in turn would (paradoxically) greatly increase the tax office's revenue, reducing Spain's overreliance on public indebtment,  following the Laffer Curve economic theory.

Sounds fancy? Not at all. This is not science fiction, we are already witnessing this at play in both Andalusia and Madrid, two regions in Spain which have deregulated heavily and which have also dramatically lowered their taxation becoming de facto ultra-low taxation regions. As a result of pursuing liberal fiscal policies, they have attracted huge foreign investments (only Madrid attracts over 80% of foreign investments in Spain in 2021). Madrid has raked in billions in additional tax revenue and Andalusia borders over one billion euros. But most fundamentally, adopting liberal tax policies and deregulating has created thousands of new (well paid) jobs bolstering the middle class, the backbone of any strong western democracy.

In fact, the changes in Andalusia are deemed by non-residents so positive that in a 2021 survey, 12,000 expats, from 174 countries, voted Malaga as the world's second best place to work & live in. Make no mistake, high taxes only benefit politicians and their cronies.

Just give entrepreneurs the right tools in life and they will handle the rest. It will spur them on to fight & win, creating wealth and jobs benefitting society at large.


Hay personas que se convierten en leyenda y que hacen grande a un país. Manolo Santana ha sido y será siempre una de ellas.” – Casa de S.M. el Rey

Loosely translated as: “There are people who become legends and make a country great. Manolo Santana was, and will always be, one of them.” – Spanish King Felipe VI

Manuel Santana Martínez (1938 – 2021). From a humble social Madrid background, Manolo would rise to become a world-class tennis champion, contributing to make it a popular sport all over Spain, not just a sport for the social elite. He’s credited as the Father of modern Spanish tennis. He won the Grand Slam in 1961 and 1964, the US Open in 1965, and Wimbledon in 1966. He married four times, from his first wife he had three children. Santana settled down in Marbella and, as an entrepreneur, founded and co-managed the Manolo Santana Racquets Club with his loving third wife Otti, a glamorous and kind Swedish model. The Manolo Santana Club initiative has created thousands of jobs over the years. Simply put, Manolo is the best Spanish tennis player in history (well, until Rafa came along, but he’s on a league of his own). In his own words: “I am an example of humility in an elitist world.”

 

At Larrain Nesbitt Abogados we can assist you buying & selling property in Spain and deal with its taxation. Ask us.

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

Larraín Nesbitt Lawyers is a law firm specialized in conveyance, taxation, inheritance, residency, 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 to book an appointment.

ver worked a day in his life in the private sector, devoting all his professional career to the public sector, paid for with our taxes.

Legal services available from Larraín Nesbitt Abogados:

 

Related articles

 

Also published in Spanish Property Insight: Spain’s new Entrepreneur Law  – 8th January 2022

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. No politician was harmed on writing this article. VOV.

2022 © Raymundo Larraín Nesbitt. All Rights Reserved.

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Spanish Income & Wealth tax reminder

Raymundo Larraín Nesbitt, June, 2. 2021

Lawyer Raymundo Larraín gives us a gentle reminder on the tax obligations that residents in Spain must face (and in some cases, even non-residents).

Marbella-based Larraín Nesbitt Abogados (LNA) has over 18 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 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 © 2021. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of June 2021

I have written this short article as a gentle reminder for all taxpayers resident in Spain.

 

1. IRPF or personal income tax

 

Tax residents need to file income tax (IRPF, in Spanish) before the end of this month on their worldwide income & assets.

You are deemed tax resident in Spain if you meet one, or more, of the following points:

  • You spend more than 183 days in a calendar year in Spanish territory.
  • Your centre of financial interests is located in Spain.
  • Your spouse and/or underage children live in Spain.

 

If you meet any of the above criteria, you should be filing taxes in Spain.

Scores of expatriates have filed for Spanish residency over the last two years, and now need to meet their newly-acquired tax obligations derived from their new tax status.

Deadline to file this tax is end of June 2021.

 

2. Wealth tax

 

In addition to the above tax obligation, affluent residents may need to file as well for wealth tax in Spain. As there is devolved competencies on this matter, I won’t go into details as each region is empowered to enact their own laws on this – please seek tax advice from us if it affects you.

Additionally, even if you are non-resident in Spain, but happen to hold a sizeable estate in Spain, you must file wealth tax in Spain.

In other words, and for the avoidance of doubt, wealth tax is paid by both residents and non-residents alike. The difference are the tax allowances at play.

The deadline to submit this tax is also by the end of June 2021.

 

“The income tax has made liars out of more Americans than golf.” Will Rogers

William Penn Adair Rogers (1879 – 1935). Was an American stage and film actor, vaudeville performer, entertainer, cowboy, humorist, newspaper columnist, and social commentator from Oklahoma. He was a Cherokee citizen born in the Cherokee Nation, Indian Territory.

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

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, residency, 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.

Taxation services available from LNA

 

Related tax articles

 

Article originally published at Spanish Property Insight: Spanish Income & Wealth tax reminder

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.

2.021 © Raymundo Larraín Nesbitt. All Rights Reserved.

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Modelo 720 – Tax form 720

Raymundo Larraín Nesbitt, January, 1. 2021

Marbella-based Larraín Nesbitt Abogados (LNA) has over 18 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 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 © 2020, 2021 Plagiarism will be criminally prosecuted.

Inset photo: courtesy of Self Bank

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of January 2021

In 2013 the Spanish Tax Office implemented a new tax obligation whereby all tax residents in Spain, who hold over €50,000 in assets abroad, need to complete this tax return before end of March 2021 deadline.

By 2018, over 5,000 taxpayers had already been (heavily) fined on failing to disclose they held substantial assets abroad. This figure continues to increase year on year. We stress the fines for non-compliance are the steepest we’ve ever seen. In fact, so much so, they have been challenged at Brussels. The infamous modelo 720, despite being the object of heated controversy, remains very much an active tax obligation with which taxpayers must contend with. If you fall within its scope, I strongly advise you to comply or else face the risk of stiff fines.

It should be stated this tax form is only for reporting purposes; you do NOT pay any tax on submitting it. Resident taxpayers already pay income tax on submitting their annual I.R.P.F. tax returns once a year.

You also have Mark’s pungent article explaining it which, unlike mine, doesn’t pull any punches.

I have structured my article as a FAQ for ease of comprehension.

Who needs to declare?

All Spanish tax residents who own assets overseas on or over €50,000.

Again, and for the avoidance of doubt, if you are non-resident in Spain you do NOT need to submit this tax return; it is only for residents.

Who is considered tax resident in Spain?

The Spanish Tax Office applies – amongst many others – the following broad criteria:

  • You spend more than 183 days within a calendar year in Spanish territory.
  • Your centre of financial interests is located in Spain.
  • Your spouse and/or underage children live in Spain.

Reporting categories

There are three reporting categories: bank accounts, investments and immovable property.

Obligation to report

You must report all assets in a particular category if the value of your total assets within it exceeds €50,000.

2021 tax submission period

From the 1st of January until the 31st of March 2021.

Can I file it after the submission period?

Yes, but hefty penalties apply. Ask us.

If you have already filed tax form 720 in the past

You only need to file it again if:

  • The value of an existing asset grew by more than €20,000, or
  • You sold an asset, or
  • You obtained a new asset.

Penalties for non-compliance

The disproportionate fines levied are (very) stiff.

  • Failing to file 720 or filing it incorrectly: €5,000 per infraction.
  • Minimum fine of €10,000 for each group of assets.
  • Penalty of 150% on unpaid income tax.

The Common Reporting Standard and you

Please take good note that with the advent of the Common Reporting Standard (CRS), signed by over 100 countries to combat tax evasion, as from the 1st of January 2018, the Spanish Tax Office is being spoon-fed fiscal information by your home tax office.

For example, both HM Revenue & Customs and Ireland’s Revenue Commissioners are busy supplying the Spanish Tax Office with detailed information (and vice versa) on all your overseas assets and reported income derived abroad as from the 1st of January 2018.

In plain English, your home country’s tax office will likely have already informed the Spanish Tax Office of the assets you hold abroad. It is in your best interests to be pro-active and come clean before you are served with a legal notice imposing humongous fines on you; as it’s happened already to over 6,000 unsuspecting taxpayers. The tax office likes waiting till the last moment before imposing fines to rake in as much interests as is legally admissible before the statute of limitations kicks in. Fines on non-compliance start at five figures and often are six-figures, or higher.

Brexit and attaining Spanish residency

Scores of UK nationals applied for a Spanish residency permit in the run up to Brexit. Unbeknownst to them, many will be now regarded as tax residents in Spain. Any UK national who is tax resident, and holds over 50,000 euros in assets abroad, must file tax form 720.

If you want peace of mind, you should sort out your tax affairs and submit this tax return to avoid humongous fines.

The last word

We strongly advise you to submit tax form 720 if you are (tax) resident in Spain to avoid steep penalties. If you plan to submit it, please contact us well ahead of the submission deadline (31st of March 2021) as it takes days to prepare and process. If you are unsure if you qualify for it, just give us a buzz and one of our friendly staff will answer your queries to allay your fears.

Si vis pacem, para bellum.” Vegetius

Loosely translated as: “If you want peace, prepare for war.”

Publius Flavius Vegetius Renatus (4th Century A.D.). Writer of the Later Roman Empire. Nothing is known of his life or station beyond what is contained in his two surviving works: Epitoma rei militaris (also referred to as De re militari), and the lesser-known Digesta Artis Mulomedicinae, a guide to veterinary medicine. The quote comes from his military tract. It mainly focuses on military organization (legion) and how to react to certain occasions in war.

Larraín Nesbitt Lawyer’s taxation service:

Tax form 720

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

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, 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 (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Related tax articles

 

Article also published at Spanish Property Insight:  Modelo 720 Tax form 720

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.

2.018, 2.019, 2.020, and 2.021 © Raymundo Larraín Nesbitt. All Rights Reserved.

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Dissolution of Joint Property Ownership in Spain

Raymundo Larraín Nesbitt, May, 22. 2020

Are you fed up with your partner? Did you know there is a special procedure in Spain to terminate property co-ownership which saves you up to 86% in taxes? Solicitor Raymundo Larraín explains to us how to re-arrange asset holdings in Spain between family and friends without attracting a great deal of taxes. Interested? Read on.

Marbella-based Larraín Nesbitt Lawyers has over 17 years' taxation & conveyancing experience at your service. We offer a wide range of 50 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 © 2007, 2010, 2011 and 2020. Plagiarism will be criminally prosecuted.

Original article from 14th of November 2.007

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of June 2020

 

Introduction

Covid-19 has brought in its wake a host of nasty effects, both direct and indirectly.

Directly, by infecting and killing hundreds of thousands of vulnerable people the world over, from all ages.

Indirectly, by drastically changing our lifestyles as we struggle to cope and adjust to our new reality. Governments, in order to protect the most vulnerable elements of our society, are forced to curtail our fundamental rights and limit our ability to move freely, even forcing non-essential businesses to shut down. But more fundamentally, it has forced people into a seemingly never-ending lockdown, trapped within the walls of their own homes. As a result of these necessary draconian government-imposed measures, it has led to Depression-era levels of unemployment and having developed economies in free fall.

We have gone from Greta’s ‘save the planet’ to save ourselves in the span of only two months.

And we thought Australia’s wildfires, from early on this year, which ravaged the land and devastated wildlife, destroying in its wake thousands of homes and taking the lives of hundreds was going to be the major highlight of 2020. How little did we know. Does anyone remember when this was a thing?

Amid this dire financial context of millions of workers being laid off, myriad companies filing for bankruptcy, property price drops of 40%, or more, stock markets plunging into the red wiping whole family’s life savings, couples are forced to live 24/7 under the same roof - with kids. Understandably, this sparks great tensions or even drives a rift, putting relationships under severe strain.

Not everyone has what it takes to come out on top. Escaping from this ordeal unscathed is proving quite the challenge for most couples and as a result we are sadly witnessing more and more couples filing for divorce.

In this article, we explain a special legal procedure that can be followed in Spain to re-arrange property holdings which saves buyers a considerable amount in taxes. On buying resale property in Spain, a buyer is normally subject to 8% Property Transfer Tax (ITP), or even more, on the sales proceeds. However, on following what is known as a ‘Dissolution of Joint Property Ownership’ (or DJPO, for short) a buyer attracts only 1.5% Stamp Duty.

In plain English, this procedure saves you 86% in tax, or more.

Interested? Read on.

Definition

A Dissolution of Joint Property Ownership allows joint owners to re-arrange their share on a property in a tax-efficient manner as it enables the outgoing joint owner to transfer his share to an existing co-owner legally waiving the extreme Property Transfer Tax and paying in lieu 1.5% Stamp Duty (or less).

DJPO requirements

  • Both buyer and seller must be pre-existing owners of a property i.e. a married couple who own a property under joint names.
  • One of them wishes to terminate the situation and sell his/her share to the other joint owner.
  • If there is an outstanding mortgage on the property, a lender’s permission may be required to release the outgoing borrower/owner from his commitments.

Applicable cases

A DJPO is suitable in a number of cases involving joint property ownership:

1.- In a divorce or separation. Couples owning property jointly may decide to split up. Taking for granted they own a property in equal shares, one of them decides to sell their 50% to his ex-partner. The ex-partner will pay him/her his quota and this transaction.
2.- Re-arranging inheritances. Beneficiaries of an inheritance transferring their quota on a property to a fellow heir. E.g. Sisters who inherit property transfer a share between them.
3.- Re-arranging property holdings between family and friends. Stakeholders such as family, friends or investors co-owning a property may decide to re-arrange their holdings.

Associated taxes & expenses

Both buyer and seller are subject to pay taxes on transferring ownership of the asset.

Buyer:

  • Pays 1.5% Stamp Duty on the outgoing share.*
  • Lawyer’s fees
  • Notary fees
  • Land Registry fees
  • Pays the % of the property’s value

 

*In some regions of Spain, due to devolved competencies, it is in fact well-below this quoted tax rate.

Seller:

  • Pays Capital Gains Tax on the outgoing share.
  • If the seller is non-resident, a 3% retention may be practiced on the outgoing share.

 

Forced Dissolution of Joint Property Ownership

What happens if one of the co-owners refuses to sell? This is when a contentious DJPO comes into play. It involves litigation.

There may be cases in which one of the joint owners may wish to terminate the joint ownership for good and sell the property. Fellow co-owners, for whatever reason, may turn down the proposal to sell the property as a whole and likewise may refuse to buy him out. This will result in a bitter gridlock that will erode personal relations.

To bypass the deadlock, any joint owner is entitled to force a DJPO through a competent law court (Arts 406 and 1062 of the Spanish Civil Code). The court’s ruling will overrule any dissent and the asset will be disposed of regardless of opposition from fellow co-owners. The property will then be auctioned off publicly to the highest bidder.

However, a forced dissolution through a law court is only advisable as last resort wherein the disagreement is serious resulting in a protracted stalemate. The reason is that all joint owners stand to lose significantly on following it. Sadly, at times, this may be the only legal solution to bring an end to an ongoing co-ownership quarrel.

In conclusion

A Dissolution of Joint Property Ownership is optimal to mitigate a buyer’s tax burden. In fact, you save 86% in taxes, or more, in a legal manner.

However, a DJPO may not apply in all cases. Seek legal advice on the matter.

A non-contentious DJPO works almost like a conveyance and can be arranged within a few days providing both parties agree to it. It can be arranged without any need to fly over to Spain by way of granting your appointed Spanish lawyer a specific Power of Attorney. The new re-arranged ownership will then be lodged at the Land Registry after the associated taxes are settled.

A DJPO neatly puts to rest the financial side of couples’ ongoing marital disputes, legally saving them a great deal in taxes. It’s a win-win.

At LNA we can represent you following a DJPO for a very competitive fee, regardless of the property’s location in Spain. We act nationwide. Ask us free of compromise.

 

"Toute nation a le gouvernement qu'elle mérite." – Joseph de Maistre

Joseph-Marie, comte de Maistre (1753 - 1821). Was a Savoyard lawyer, diplomat, writer, and philosopher. Together with the Anglo-Irish statesman and philosopher Edmund Burke, Maistre is commonly regarded as one of the founders of European conservatism.

 

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.

 

Legal service Larraín Nesbitt Abogados (LNA) offer you:

 

Related DJPO articles

 

Article originally published in Spanish Property Insight: Dissolution of Joint Property Ownership 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.

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Tax form 720 – Modelo 720

Raymundo Larraín Nesbitt, February, 5. 2020

Lawyer Raymundo Larraín gently reminds us of the tax obligation to submit tax form 720 (modelo 720, in Spanish) over the next weeks if you qualify. Last day for submission is the 31st of March 2020.

The following tax 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.

Copyrighted © 2018, 2019 and 2020. Plagiarism will be criminally prosecuted.

Photo credit: courtesy of Self Bank

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
21st of February 2020

 

In 2013 the Spanish Tax Office implemented a new tax obligation whereby all tax residents in Spain, who hold over €50,000 in assets abroad, need to complete this tax return before end of March 2020 deadline.

By 2018, over 5,000 taxpayers had already been (heavily) fined on failing to disclose they held substantial assets abroad. This figure continues to increase year on year. We stress the fines for non-compliance are the steepest we’ve ever seen. In fact, so much so, they have been challenged at Brussels. The infamous modelo 720, despite being the object of heated controversy, remains very much an active tax obligation with which taxpayers must contend with. If you fall within its scope, I strongly advise you to comply or else face the risk of stiff fines.

It should be stated this tax form is only for reporting purposes; you do NOT pay any tax on submitting it. Resident taxpayers already pay income tax on submitting their annual I.R.P.F. tax returns once a year.

You also have Mark Stucklin's pungent article explaining it which - unlike mine - doesn’t pull any punches.

I have structured my article as a FAQ for ease of comprehension.

Brexit and the new wave of British residents in Spain

Unless you have been living under a rock for the previous four years, you will know the UK vowed to leave the EU by the 31/01/2020. As a consequence, thousands of non-registered expats (who were effectively living in Spain under the radar, whether purposely or not) have now stepped forward into the limelight and rushed to apply for Spanish residency over the last year.

Applying for Spanish residency is a self-admission that you are in fact tax resident in Spain; the residency procedure is monitored continuously by the Authorities to ensure you retain your resident status (i.e. so they can turn down renewals when the applicant no longer complies with the residency requirements).

As scores of new residents will be entirely oblivious of their new tax obligations, i.e. submitting tax return 720, it has prompted me to write this short article to shed some light on the matter and act as a gentle reminder on their newly-acquired tax obligations with the taxman.

Who needs to declare?

All Spanish tax residents who own assets overseas on or over €50,000.

E.g. Mr. and Mrs. Smith live all year round in Mijas Costa, Spain. They own two houses in Berwickshire, England, have open bank accounts in the UK and receive UK-based pensions.

Mr. and Mrs. Smith are in fact tax resident in Spain and they both need to submit tax form 720.

Again, and for the avoidance of doubt, if you are non-resident in Spain you do NOT need to submit this tax return; it is only for residents.

Who is considered tax resident in Spain?

The Spanish Tax Office applies - amongst many others - the following broad criteria:

  • You spend more than 183 days within a calendar year in Spanish territory.
  • Your centre of financial interests is located in Spain.
  • Your spouse and/or underage children live in Spain.

 

Reporting categories

There are three reporting categories: bank accounts, investments and immovable property.

Obligation to report

You must report all assets in a particular category if the value of your total assets within it exceeds €50,000.

2020 tax submission period

From the 1st of January until the 31st of March 2020.

Can I file it after the submission period?

Yes, but hefty penalties apply. Ask us.

If you have already filed tax form 720 in the past

You only need to file it again if:

  • The value of an existing asset grew by more than €20,000, or
  • You sold an asset, or
  • You obtained a new asset.

 

Penalties for non-compliance

The disproportionate fines levied are (very) stiff.

  • Failing to file 720 or filing it incorrectly: €5,000 per infraction.
  • Minimum fine of €10,000 for each group of assets.
  • Penalty of 150% on unpaid income tax.

 

The Common Reporting Standard and you

Please take good note that with the advent of the Common Reporting Standard (CRS), signed by over 100 countries to combat tax evasion, as from the 1st of January 2018, the Spanish Tax Office is being spoon-fed fiscal information by your home tax office.

For example, both HM Revenue & Customs and Ireland’s Revenue Commissioners are busy supplying the Spanish Tax Office with detailed information (and vice versa) on all your overseas assets and reported income derived abroad as from the 1st of January 2018.

In plain English, your home country’s tax office will likely have already informed the Spanish Tax Office of the assets you hold abroad. It is in your best interests to be pro-active and come clean before you are served with a legal notice imposing humongous fines on you; as it’s happened already to over 6,000 unsuspecting taxpayers. The tax office likes waiting till the last moment before imposing fines to rake in as much interests as is legally admissible before the statute of limitations kicks in. Fines on non-compliance start at five figures and often are six-figures, or higher.

The last word

We strongly advise you to submit tax form 720 if you are (tax) resident in Spain to avoid steep penalties. If you plan to submit it, please contact us well ahead of the submission deadline (31st of March 2020) as it takes days to prepare and process. If you are unsure if you qualify for it, just give us a buzz and one of our friendly staff will answer your queries to allay your fears.

 

Larraín Nesbitt Lawyers offers the following competitively-priced taxation service:

Tax form 720

 

"No one is too small to make a difference.” Greta Thunberg

Greta Thunberg (2003). Pronounced ‘tOOn-bairyeh.’ Swedish 16-year-old climate change activist. Known for her forward speaking manner which does not hold any punches addressing world leaders. She has successfully led an international campaign to fight climate change, galvanizing the interest of the young (and not so young!) which has garnered much media attention. She is the youngest person to date to hold the prestigious Time Person of the Year 2019, sorry Trump.

If only we had more Greta’s and less dumps, what a wonderful world this would be.

 

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

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, 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 (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Related tax articles

Tax form 720 – 20th April 2018
Tax form 720 – 21st March 2019
Spanish Tax Office to fine 5,000 taxpayers over tax form 720 – 1st September 2019

Tax form 720 – Modelo 720 – 21st of February 2020

 

Article originally published at Spanish Property Insight: Tax form 720 – Modelo 720

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. Voluntas omnia vincit.

2.018, 2.019 and 2.020 © 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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Save 70% on your landlord tax bill

Raymundo Larraín Nesbitt, February, 22. 2019

Lawyer Raymundo Larraín explains how to profit from knocking off 70%, or more, from your tax bill on renting out in Spain (applies to both holiday lettings and long-term rentals)

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 © 2017 and 2019. Plagiarism will be criminally prosecuted.

 

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

Introduction

Becoming a landlord in Spain has never been easier and more profitable than today:

  • Rental yields climbed steadily by two digits (14.5%) YOY for a third consecutive year. Source: Idealista.
  • Spain has broken its tourist record for its sixth year in a row! It has consolidated its hospitality status as the world’s second tourist destination, attracting almost 83 million visitors in 2018. Sources: BBC, El País and SPI.

 

Adding to all this good news, following new regulation, all non-resident EU/EEA property owners, who lease property in Spain, are entitled to deduct from their tax bill all property-related expenses. Iceland, Liechtenstein and Norway tax residents may also benefit from these generous tax deductions. Switzerland is excluded.

That is quite a lot of money you can offset every tax quarter, greatly mitigating your landlord tax bill on renting out. This new tax change translates into average tax savings of 70%, or more, for landlords. If you are not EU-resident, you cannot benefit from it.

This hinges on you receiving from your suppliers a VAT invoice. It must meet the following requirements.

Not submitting quarterly tax returns in Spain on your rental income is no longer an option, following new draconian tax laws that have turned all holiday platforms, and other intermediaries, into tax office whistleblowers retroactively as from the 1st of January 2018. All your rental income is now being reported to the Spanish taxman, unbeknownst to you. Fines for non-compliance are very steep. More on this here: Property portals and rental platforms to pass on landlord details to the Spanish Tax Authorities. Are you prepared? AirBnb, for example, explains its new tax 'sharing' data policy with the Spanish Tax Office on its website.

Landlord tax relief

 

You may claim as tax relief all the following property-related expenses:

  • Interests arising from a mortgage loan to buy the property (not a personal loan).
  • Local taxes and administrative charges and surcharges that impact on the rental income or else on the property itself (i.e. IBI tax, SUMA tax, refuse charge).
  • Expenses arising from formalising rental contracts such as lets or sublets (i.e. Notary and/or Land Registry fees); legal defence (i.e. hiring a lawyer for tenant eviction purposes).
  • Maintenance costs may be offset; refurbishment expenses (improvements) are excluded (however, you may offset them on selling on the property).
  • Community of owners’ fees: these receipts have no VAT, by law.
  • Home insurance premiums: fire, theft, civil liability etc.
  • Property repairs: plumbing, roof retiling, painting, pool pump etc.
  • Utility invoices: electricity, water, gas, internet, and landline.
  • Cleaning: cash payments are not tax-deductible, you need a VAT invoice.
  • Concierge, gardening, alarm & security services (i.e. gated communities).
  • Lawyer’s fees: are 100% tax-deductible! To calculate and submit you quarterly tax returns.
  • Property management fees: to manage your rentals.
  • Advertising expenses: online/offline.
  • Marketing expenses.
  • Home depreciation and amortization. The calculation is 3% on the highest value of the following two: sales price or cadastral value; the value of the land is excluded.

 

Requirements to benefit from these lenient tax allowances

 

  • You are tax resident in the Union or EEA (your nationality is irrelevant).
  • The expenses you claim are in direct relation towards the upkeep of the property i.e. claiming travelling expenses would be excluded.
  • You have VAT invoices to back up your tax relief claim.

 

- Is your tax advisor reducing your tax bills by 70%, no?

- Does he moan it is much too complicated, or make up excuses?

- Do you suspect he’s holding back on you?

Don’t put up with it! If you dislike time-wasters and overpaying taxes, come and speak to us. We will reduce your tax bill by 70%, on average. Call or email us to book an appointment. We will review your personal tax situation and advise accordingly. The procedure is fast and easy. We make life simple.

 

We offer the most competitive fees in the market.

Holiday Rental Accounting Service (HRAS) from only 125/tax quarter/property

We are specialized in taxation

 

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

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, 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 (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Article also published at Spanish Property Insight: Save 70% on your landlord tax bill.

 

*Second Referendum*

"Once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth." – Arthur Conan Doyle

Sir Arthur Ignatius Conan Doyle (1859 – 1930). Edinburgh-born, he was originally trained as a physician but would achieve world-renown as a writer of detective stories. He is universally known as the father of fictional character Sherlock Holmes. His fiction works are considered milestones in the crime fiction subgenre.

 

Tax & legal services available from Larraín Nesbitt Lawyers:

 

Holiday lettings-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.

2.017 and 2.019 © Raymundo Larraín Nesbitt. All rights reserved.

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Taxes on Buying Spanish Property

Raymundo Larraín Nesbitt, December, 10. 2018

Marbella-based Larraín Nesbitt Lawyers has over 16 year’s conveyancing & taxation experience at your service. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats acquiring property all over Spain, including Madrid and Barcelona.

Article copyrighted © 2015 and 2018. 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 December 2018

Introduction

The new Stamp Duty law brought about by the landmark ruling of Spain’s Supreme Court last October, calls for an updated version of this key taxation article.

The most notable change is that borrowers will no longer be paying Stamp Duty on applying for a mortgage loan in Spain. This translates into saving thousands of euros, on average.

As a rule of thumb, purchase costs add 10 – 13% over and above the purchase price. I collate below the taxes and associated fees on buying.

Be aware there are minor discrepancies from one region to the next, as Spain’s seventeen Autonomous Communities have competence, within limits, over some taxes i.e. Property Transfer Tax (ITP) and Stamp Duty (AJD). Each region is empowered to fix the tax rate, within a sliding scale, that varies between 6 to 11% for ITP and between 0.5 and 1.5% for AJD.

Buyers should be mindful of the Complementaria or ‘Bargain Hunter Tax’. It is a supplementary tax the seventeen regional Spanish Tax Offices levy on buying property as a result of today’s low real estate values post-crash (particularly for resales).

I will split my article distinguishing between two property types for taxation purposes:

I. New-build (or off-plan).
II. Resale.

The tables below are a simplified approximation.

I. New-Build or Off-Plan Property

 

You can read further in our articles 8 Tips on Buying Off-Plan in Spain and Buying Property in Spain from a Developer (Off-Plan Property).

Taxes & Fees Rate
VAT (IVA) 10 %
Stamp Duty (AJD) 0.5 – 1.5 %
Land Registry fees 0.1 – 2 %
Notary Public fees 0.1 – 2 %
Lawyer’s fees 1 %
Mortgage & Gestoría fees   few hundred €

 

II. Resale Property

 

You can read further in our articles Buying Property in Spain from a Private Seller (Resale Property) and How to Buy Rural Property in Spain.

Taxes & Fees Rate
Property Transfer Tax (ITP) 6 to 11 %
Land Registry fees 0.1 – 2 %
Notary Public fees 0.1 – 2 %
Lawyer’s fees 1%
Mortgage & Gestoría fees   few hundred €

 

Post-Completion Taxes and Maintenance Upkeep

I refer to our in-depth article Non-Resident Taxes in Spain.

Once you have purchased, you will face the associated running expenses. Make sure you have budgeted these expenses carefully so as to avoid unpleasant surprises! Some of the luxury gated communities with lush tropical gardens and beautiful infinity pools that dot the Spanish coastlines have pretty steep maintenance expenses (tallying several hundred euros a month!).

  1. IBI tax: 0.4 – 1.1% of cadastral value per annum (this is not the market value, it is well below it).
  2. Rubbish collection tax.
  3. Community fees (if you buy into a Community of Owners).
  4. Non-Resident Imputed Income Tax (NRIIT): 1.1% or 2% of a property’s cadastral value per annum.*

*Distinction is made between EU and non-EU/EEA-residents as well as revised/unrevised cadastral values on calculating Imputed Income Tax.

Conclusion

Take thorough legal advice to budget your purchase carefully before you commit. Request a full breakdown of taxes, fees and associated expenses. The initial reservation contracts, that strike the property off the market, are normally non-refundable. So, if finance fails the real estate agency and/or seller are entitled to withhold the initial reservation deposit unless specific wording is added to the reservation contract to safeguard against this event.

Attaining finance from a lender should not be taken for granted. Spanish lenders are risk-averse these days and expect a non-resident buyer to come up with a 30 to 40% deposit. That said, lenders are once again dipping their paws brazenly into the market, luring borrowers with enticing 100% mortgage loans.

We are in a buyer’s market. There is plenty of property to choose from, do not rush in or be pressurised to sign on the dotted line. Take your time to consider matters carefully and budget accordingly.

And to close, my shameless plug; hire an experienced conveyance law firm such as Larraín Nesbitt Lawyers.

We offer the most competitive fees in the market.

Conveyancing – Buying

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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: Taxes on Buying Spanish Property.

 

“The only advice anybody can give is, if you wanna be a writer, keep writing. And read all you can, read everything.” – Stan Lee

Stanley Martin Lieber (1922 – 2018). Exceptionally gifted Jewish American storyteller, comic book writer, editor, and publisher. This titan became Marvels’ Comics primary creative leader for several decades. In his teens, he won the New York Herald Tribune’s so-called “Biggest News of the Week Contest" prize for three straight weeks, goading the newspaper to write him and ask him to please let someone else win. Through his hard work and determination, he went on to inspire millions of children the world over for generations, of which some would even grow up to become lawyers and write articles of their own.

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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.

2.015 and 2.018 © Raymundo Larraín Nesbitt. All rights reserved.

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