Blog / News

Reuters: Spanish property is booming

Raymundo Larraín Nesbitt, October, 21. 2021

Reuters news agency reports in an article below how Spanish property is booming:

 

"Spanish real estate not just recovering but booming, data shows

MADRID, June 8 (Reuters) - Spanish house sales in April surpassed 2019 levels, official data showed on Tuesday, a sign the property market is not just recovering from last year’s slump but is hotter than before COVID-19 struck.

Data from Spain’s College of Registrars, who underwrite real estate transactions, showed that April’s house sales were 3.1% higher than in 2019, and 91% higher than in the same period last year, a near-doubling of activity from Spain’s first full month under lockdown.

The number of mortgages taken out on homes shot up by 31.5% over the year as buyers sought to change homes or refinance to make the most of unusually low interest rates. Compared with April 2019, residential mortgages were up 8.8%, the data showed.

Spain has sought to reopen itself to both business and travel in recent weeks, emboldened by its accelerating vaccination campaign and ebbing coronavirus infections, with policies allowing pent-up investor demand to find an outlet.

Overall real estate transactions - rather than just residential sales - grew 9.3% compared to April 2019, the registrar data showed.

Intensifying economic activity and high demand for bigger, brighter and greener homes appears to have pushed prices up too, with property surveyors Tinsa reporting a 1.3% rise in house prices in May year-on-year.

Spain’s islands and Mediterranean coast experienced the sharpest price rises, Tinsa said. (Reporting by Clara-Laeila Laudette; Editing by Nathan Allen and David Gregorio)"

Source: Reuters

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Andalusia slashes inheritance tax for relatives in third degree (Group III: brothers, nephews, uncles, etc)

Raymundo Larraín Nesbitt, October, 11. 2021

Marbella-based Larraín Nesbitt Abogados (LNA) has over 18 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 © 2021. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Lawyer - Abogado
11th of October 2021

Following on the trend to lower taxes, Andalusia’s regional government announced last week that it would be drastically reducing IHT for relatives in third degree:

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

As we’ve reported several times, relatives in first and second degree do not pay inheritance tax for estates under 1mn euros. Over and above 1mn eruos, they have a tax allowance of 99% in Andalusia. In other words, almost no one pays inheritance tax within these two family groups:

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.

The new change we report on today translates into these allowances being broadened to include (for the first time) the third group of relatives. For family members in Group III, the top marginal rate in IHT is reduced from 70% down to only 45% (in the most extreme cases, when millions are inherited).

Despite drastically reducing inheritance tax in Andalusia, the regional government has earned an extra 600mn euros in taxes. This is known as the Laffer Curve which we’ve explained in detail in previous articles. Basically, it means that when you lower taxes, paradoxically, the tax revenue increases (at least until a marginal point is reached) because more taxpayers comply. As Andalusia came from a point of high taxes, the Laffer Curve effect is quite noticeable in the public coffers. This positive effect (increase of taxe revenue despite lowering tax rates) is also taking place in the autonomous region of Madrid, which also keeps lowering its taxes relentlessly.

This new change for family members in a third degree will come into effect as from January 2022.

Following this welcome tax change, Andalusia will have as from 2022 the most tax-efficient inheritance tax laws out of all the autonomous communities in Spain. This, once more, proves the unwavering commitment of our regional government to lower taxes where possible and reduce admin red tape.

These are the sort of tax measures that I keep pointing out help to attract foreign investments and foster a dynamic economy that creates jobs. Kudos to our politicians.

 

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.

 

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.

2.021 © Raymundo Larraín Nesbitt. All rights reserved.

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Reminder - Q3 2021 Non-Resident Income Tax filing

Raymundo Larraín Nesbitt, October, 1. 2021

Marbella-based Larraín Nesbitt Lawyers has over 18 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 successfully assisting expats all over Spain. You can review here our client’s testimonials.

Copyrighted © 2021. Plagiarism will be criminally prosecuted.

 

Just a gentle reminder to all non-residents, who own property in Spain and rent it out (whether long or short-term i.e. holiday home); you must file your Q3 2021 quarterly tax return now in October. You are being taxed on your rental income for the previous three months: July, August, and September.

For 2021, the non-resident tax calendar is as follows:

  • Q1 January – March. Filed on the first 15 days of April
  • Q2 April – June. Filed on the first 15 days of July
  • Q3 July – September. Filed on the first 15 days of October
  • Q4 October – December. Filed on the first 15 days of January 2022

 

Our cut-off date to accept filing Q3 2021 non-resident tax returns is Friday the 15th of October 2021.

Please do not wait until the last moment to submit your quarterly tax return. We file this tax online all over Spain within 24 working hours.

We can offer you this tax service for a very competitive fee: 125 euros plus 21% VAT.

The quoted fee is per property and per tax quarter, it includes up to two joint owners i.e. husband & wife.

Our fees are 100% tax-deductible from the tax to pay.

The main highlight of our tax service is that we reduce your income tax by 70%, or more, on applying for lenient landlord tax relief on all your property-related expenses.

Contact us and pay less tax. If you overpay taxes in Spain, it is only because you want to.

 

Q3 2021 tax submission period

From the 1st to the 20th of October.

Related tax service

Holiday Rental Accounting Service (HRAS)

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.

2.021 © Raymundo Larraín Nesbitt. All rights reserved.

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Spain records highest number of property sales since 2008

Raymundo Larraín Nesbitt, September, 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 of 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
Lawyer - abogado
1st of September 2021

As Spain’s leading property portal IDEALISTA reports in its article of August 2021, property sales over the last six months are at levels unseen since 2008. Spain’s National Bureau of Statistics (INE) reports 267,700 properties sold during the first 6 months of this year. We need to look back 13 years, all the way back to Spain’s property boom heyday, to see such healthy sale figures.

You can see the graphics here: House sales in Spain in 2021 (first six months of 2021)

In June alone, over 48,000 properties were sold, which is an 73.5% interannual increase. This is hands down the best performing June in real estate history. This confirms the unabated trend that we are witnessing the best sale figures in over 13 years. The property market has been nothing short of spectacular from March of this year.

There are several underlying factors that help to explain this spectacular property rebound which we’ve been collating in several articles:

 

The main one - at least in the region of Andalusia - has been a drastic reduction in taxes on buying property; both offplan and resale which we also reported at the time:

 

On offplan property, this change translates into tax savings of 20% in Stamp Duty.

On resale property, the reduction follows a sliding scale depending on the sale price. Starting at a 12.5% reduction on lower-end property and rising to over 30% for high-end villas. Meaning, the higher the sale price, the more taxes a buyer stands to save! This factor, all by itself, greatly explains the surge in villas sales we have been reporting over the last six months.

The ongoing global pandemic, which has modified consumer behaviour making buyers seek villas with spacious gardens in prime locations, coupled with a drastic tax slash has fostered a property boom that has been going strong since March 2021.

At last, we have Spain’s INE's hard data which serves as official confirmation to back up what we had been reporting over the last six months anecdotally.

 

At LNA we can assist you buying, selling or renting out your property in Spain. We have 18 years’ experience in conveyance & tax. We are also specialized in Immigration & Residency permits.

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

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

Related services:

 

 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.

2021 © Raymundo Larraín Nesbitt. All Rights Reserved.

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I want a Spanish visa, but I don’t want to pay any taxes in Spain

Raymundo Larraín Nesbitt, August, 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 has 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
1st of August 2021

More and more UK nationals are enquiring on the different types of visa available to circumvent the pesky 90/180-day rule that aggravates us post-Brexit.

A question we get, almost on a daily basis, is as follows: “I want a Spanish visa, but I don’t want to pay any taxes in Spain, I don’t want to become tax resident in Spain. I want to continue to pay taxes in the UK.”

This is a bit like saying you want to get married but want none of the fights and obligations that go with it, you just want the good stuff. As its own name implies, attaining residency in Spain means you are applying for an admin permit to live all year round in Spain (to bypass the 90/180-day rule). However, the tax implication of this is that indirectly it may trigger tax residency in Spain should you remain more than 183 days a year in Spain within a tax calendar.

The fact is that visa renewals are tied to proving you live in Spain long term, which indirectly triggers tax residency in Spain. If you are unable to prove you are in fact living in Spain long term, your visa renewal will simply be turned down by Immigration Authorities. So, it’s a catch-22.

But is it really closed to debate? No, there is a loophole.

The only exception to this general visa rule is the investor visa, popularly dubbed as the ‘Golden Visa’ (GV). The reason being is that renewals of a GV are not tied to proving you live in Spain long term, unlike every other visa, but rather on proving you keep the investment that made it possible to attain in the first place. This is a very important nuance.

In plain English, a GV neatly bypasses the requirement to live in Spain all year round, which triggers tax residency. With a GV you can in fact spend as much or as little time as you fancy in Spain. So long as you do not spend more than 183 days a year in Spanish territory within a calendar year, you will not be regarded as tax resident in Spain (it should be noted other criteria may also apply to determine a taxpayer’s tax residency).

This is precisely what makes a Golden Visa the most coveted visa available in Spain, because of its unique ability to override (within the law) the 90/180-day rule and not trigger tax residency in Spain. This distinctive ability, not found in any other visa, makes it hands down the most sought-after visa in all of Spain.

Bottom line, if you want to apply for Spanish residency, but do not want to become tax resident in Spain, your only (legal) option is a Golden Visa, period. Every other visa type hinge on you categorically proving you live in Spain long term, which will trigger tax residency eventually.

LNA has a 100% track record attaining Spanish residency

 

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

At Larrain Nesbitt Abogados, we have assisted hundreds of EU and non-EU nationals to successfully attain a Spanish residency permit.

Interested? Come and speak to Larraín Nesbitt Abogados’ friendly staff who will be pleased to guide you through the different residency options, choosing the one that appeals to you most. Your family’s success is only one call away: (+34) 952 19 22 88.

Residency services available from LNA:

 

Related visa 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. No delusional separatist politician was harmed on writing this article. VOV.

2.021 © Raymundo Larraín Nesbitt. All Rights Reserved.

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European Court of Justice’s lead council states Spanish Tax Form 720 fines are disproportionate

Raymundo Larraín Nesbitt, July, 21. 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 of 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
Lawyer – abogado
16th of July 2021

Tax form 720, only mentioning it brings cold shivers to most taxpayers. It is single-handedly responsible for a mass exodus of thousands of expats since its inception and has acted as a firm deterrent of thousands more who refused to become tax residents in Spain to avoid it.

The disproportionate fines of this tax form had been challenged at Brussels and we were expecting a ruling on this matter last autumn, but I guess the emergence of the virus impacted on everything pushing it back.

The ECJ’s General Advocate, Mr. Henrik Saugmandsgaard, in a press release of yesterday concluded that Spain’s unfamous tax from 720 had implemented a system of disproportionate fines that go against the spirit of the Union.

Quoting the text: “M. Saugmandsgaard observe que ces amendes forfaitaires sont 15, 50 et 66 fois plus élevées que celles appliquées dans des situations internes.“ The fines are 15, 50, and 66 times higher than those applied in internal situations.

He continues: “Même  en  tenant  compte  de  la marge  d’appréciation dont  disposent  les États membres afin  d’établir  les  sanctions  appropriées, ces amendes  sont  tellement  élevées qu’elles paraissent disproportionnées, sans qu’il soit nécessaire de faire ici la distinction entre les différentes catégories de biens.“ Even if Member states have the power to modulate the appropriate fines, these fines are disproportionate without even needing to go into the different types of assets.

The gist of his report is that, as we had cared to point out repeatedly over the years, the fines levied by the Spanish Tax Office are completely disproportionate by rapport to other cases; they simply jump off the scale for no apparent reason.

He concludes: “L’avocat général propose donc à la Cour de déclarer que l’Espagne a manqué aux obligations qui lui incombent de garantir la liberté consacrée à l’article 63 TFUE (capitaux) ainsi que la liberté correspondante prévue  à  l’accord sur  l’EEE…“ The General Advocate proposes the ECJ to declare Spain in breach of the freedom of movement of capital enshrined in art. 63 of the TFEU. In other words, and in plain English, with this tax regulation Spain is breaching the core covenant of the foundational European treaty of Rome which sets out a series of freedoms as the guiding spirit of our Union.

What significance does his report hold?

None, all.

None, because it’s just a non-binding report. The report has only a purpose of guidance, but it is ultimately non-binding and not enforceable in any way.

All, because in 80% of the cases the ECJ follows the meticulous criteria laid out by its General Advocate. This is the first step of two required to overrule these lopsided penalties imposed by Spain.

The ECJ’s ruling

In a few months’ time (likely by the fall of ‘21) the ECJ will give it’s final ruling on tax form 720. In line with what we were long expecting, it will declare the overblown fines as null and void.

Conclusion

Kudos to our EU Overlords on this, they are right on track to rein in the Spanish Tax Office’s fiscal voracity.

Spain is the fifth country in the whole OECD (38 countries) with the highest fiscal pressure. Notable exceptions within Spain are the autonomous regions of Andalusia and Madrid (because of devolved competencies on tax matters).

If anything, Spain needs to urgently lower its taxes to become more competitive, attract foreign investments, and foster commercial activity on a large scale. Spain’s taxes are far too high as they stand right now. Also, I may add on a personal note, its bloated public sector needs to be trimmed down significantly to more manageable levels in line with fellow EU Member states.

 

L’art de l’imposition consiste à plumer l’oie pour obtenir le plus possible de plumes avec le moins possible de cris.” – Jean Baptiste Colbert.

French economist and Finance Minister under King Louis XIV.

Translated as: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

At LNA we can assist you buying, selling or renting out your property in Spain. We have 18 years’ experience in conveyance & tax. We are also specialized in Immigration & Residency permits.

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

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

Related services:

Tax form 720

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.

2021 © Raymundo Larraín Nesbitt. All Rights Reserved.

Blog post first published on SPI: European Court of Justice’s lead council states Spanish Tax Form 720 fines are disproportionate

 

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Villa property boom: 573 selling a day in Spain!

Raymundo Larraín Nesbitt, July, 12. 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 of 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
Lawyer - abogado
11th of July 2021

As we've been reporting over the last months (since March 2021) the property market is undergoing a sale frenzy in Marbella, and Costa del Sol, specifically the higher-end over 1mn.

We have reviewed in detail the reasons behind this (for reference our Idealista article: Marbella’s high-end market is booming!). 

But this phenomenon is not exclusive to Marbella by any means. It can be predicated of other parts in Spain, such as the Balearics.

As El Mundo newspaper reported last week, over 573 villas are being sold every day in Spain following data from Spain's Land Registry Association. We need to go back 14 years, to 2007, to witness such a frantic property sale frenzy. These are sale figures unseen since Spain's last property boom.

In the particular case of Andalusia, the huge tax cut in taxes on buying property has prompted a huge leap on house sales. As a personal anecdote, I had to stand up the other day at a notary in a house sale for three hours straight because all available seats were taken! I hadn't experienced this since 2007, during the last property boom, which started in 1997 and went on until 2007 (ten years).

Tha property market's changed in Andalusia (high-end) over the last five months, since the drastic tax cuts of 28th April 2021. We are now in a seller's market!

It has now become apparent to all as we had continuously highlighted and defended in all our articles and blog posts that property buyers are highly sensitive to tax changes. The fact that a foreign investor can now buy a villa in a prime location in Marbella and pay 30% less tax, or even less, has certainly had an impact on the real estate market. These are the type of tax incentives politicians should be working on to foster foreign investments in Spain, which in turn help to create jobs and wealth.

Grateful voters remember these things, just sayin'...

 

Im nin'alu daltei n'divim daltei marom lo nin'alu.

Even if the gates of the rich are closed, the gates of heaven will never be closed.

At LNA we can assist you buying, selling or renting out your property in Spain. We have 18 years’ experience in conveyance & tax. We are also specialized in Immigration & Residency permits.

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

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

Related services:

 

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.

2021 © Raymundo Larraín Nesbitt. All Rights Reserved.

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Reminder - Q2 2021 Non-Resident Income Tax filing

Raymundo Larraín Nesbitt, July, 1. 2021

Marbella-based Larraín Nesbitt Lawyers 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.

Copyrighted © 2021. Plagiarism will be criminally prosecuted.

 

Just a gentle reminder to all non-residents, who own property in Spain and rent it out (whether long or short-term i.e. holiday home); you must file your Q2 2021 quarterly tax return now in July. You are being taxed on your rental income for the previous three months: April, May, and June.

For 2021, the non-resident tax calendar is as follows:

  • Q1 January – March. Filed on the first 15 days of April
  • Q2 April – June. Filed on the first 15 days of July
  • Q3 July – September. Filed on the first 15 days of October
  • Q4 October – December. Filed on the first 15 days of January 2022

 

Our cut-off date to accept filing Q2 2021 non-resident tax returns is Thursday the 15th of July 2021.

Please do not wait until the last moment to submit your quarterly tax return. We file this tax online all over Spain within 24 working hours.

We can offer you this tax service for a very competitive fee: 125 euros plus 21% VAT.

The quoted fee is per property and per tax quarter, it includes up to two joint owners i.e. husband & wife.

Our fees are 100% tax-deductible from the tax to pay.

The main highlight of our tax service is that we reduce your income tax by 70%, or more, on applying for lenient landlord tax relief on all your property-related expenses.

Contact us and pay less tax. If you overpay taxes in Spain, it is only because you want to.

 

Q2 2021 tax submission period

From the 1st to the 20th of July.

Related tax service

Holiday Rental Accounting Service (HRAS)

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.

2.021 © Raymundo Larraín Nesbitt. All rights reserved.

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Holidaymaker’s demand for holiday rentals outstrips hotels’ with Covid-19

Raymundo Larraín Nesbitt, June, 21. 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 has 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.

Holidaymaker’s demand for holiday rentals outstrips hotels’ with Covid-19

By Raymundo Larraín Nesbitt
Lawyer - Abogado
21st of June 2021

The overarching impact of Covid-19 in the real estate market cannot be understated enough. We’ve already glossed over in previous articles its huge impact on buying & selling homes. How buyers are now asking for secluded properties, with large gardens, open spaces, large terraces, from which to live and even work from. Marbella is regarded as a safe destination, far away from large city crowds.

Now with the holiday season upon us, we are witnessing again changes in consumer habits developing new trends. Whereas before over the last years demand was split evenly between hotels and rental accommodations, this year we have witnessed how demand on the latter has clearly outstripped that of hotels to the point it’s reportedly getting harder (and more expensive!) to find private rentals. Holidaymakers shun hotels to avoid large agglomerations of guests out of fear of the virus. They are instead looking to book small privately-run accommodations (holiday rentals). Particularly detached villas with spacious gardens and apartments with large open terraces.

For the first time ever, we’ve witnessed a new trend where holidaymaker’s demand for holiday rentals surpasses that of hotels’. 2020 and 2021 have been horrible years for the tourism industry, particularly hotels have suffered the brunt of the ongoing pandemic. And to make matters worse, the Spanish government has approved on the 1st of June a massive rise in the price of electricity (up to 50% more) which has translated on average for hotels to an increase of 10% on their fixed costs. Spain’s electricity is the most expensive in all of Europe with a whopping VAT of 21%; every other country in Europe applies a much lower VAT rate i.e. the UK's is 5% VAT.

I take the opportunity to gently remind non-resident landlords offering holiday rentals in Spain that they need to submit quarterly taxes on renting out.  Our company offers the following competitively-priced accounting service:  Holiday Rental Accounting Service (HRAS)

The main highlight of our tax service is that we reduce landlord’s tax bills by 70% (or more) on applying for tax relief. More on this explained in our taxation article:  Save 70% on your landlord tax bill – 8th March 2019. Even our fees to calculate and file these tax returns are 100% tax-deductible.

If you are planning to rent out in Spain, do it legally; contact us to greatly reduce your landlord tax bill.

 

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

 

Legal services available from Larraín Nesbitt Abogados

 

Related property 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.

2.021 © Raymundo Larraín Nesbitt. All Rights Reserved.

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Malaga, Europe's Southern California

Raymundo Larraín Nesbitt, June, 11. 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 has 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
Lawyer – Abogado
5th of June 2021

They called it the Californian miracle. Back in the early 80’s, nothing made anyone suspect that only two years later, in 1982, the US, and in particular California, was going to experiment an unprecedented economic boom, one of the of the strongest and most steady ones witnessed to date. The impending threat of an all-out nuclear war against the mighty U.S.S.R., the social fallout of losing Vietnam war, a heavy tax burden with top personal marginal income tax rates of 70%, huge unemployment rates all looked poised to drag down the country’s economy and lose the whole decade.

However, a new young administration stepped in, led by a not-so-young politician from Illinois who, to make matters worse, was an ex-actor of cheesy westerns. No one was expecting much, least of all his first ex-wife who famously said he would never achieve anything in life. Yet, he ploughed on and proved everyone wrong. He carried out a series of key changes within the country that would lay the framework to the economic boom that followed soon after and spill over into the next decade, all the while keeping a watchful eye on international affairs. Simplifying his reforms:

  • Deregulation.
  • Lowering taxes.
  • Reducing huge unemployment levels which translated into low wages
  • Incentivise new budding technologies & industries through the state-sponsored Strategic Defence Initiative (nicknamed the "Star Wars program")
  • End of Cold War, fall of the Iron Curtain

 

Having successfully averted nuclear armageddon (it was a close call), people were euphoric on having a new lease on life, and the stock markets climbed like there was no tomorrow. The real estate market followed suit with a massive boom across the board. Simply put, people wanted to live and enjoy life, spending money, big time. Unemployment levels dropped to an all-time low. People became spendthrift, (over)spending like there was no tomorrow, taking on cheap credit. There was a psychological component behind this spending mentality that can be explained after people are beset by a great pressure or threat (a nuclear one) and are in the need to find release by getting it out of their system (overspending). After all, being a capitalist society, what better way to prove you’re happy than spending, huh?

California in particular would greatly benefit from the changes brought about by the new administration. Huge unemployment levels, caused by former administrations, were channelled into new jobs in budding technological industries (computing), low wages, ultra-low taxation, booming real estate market, a huge budding technological demand instigated by the ambitious SDI initiative to thwart an ICBM threat all coalesced together creating the bedrock that would help to explain California’s 80’s economic miracle. Even by today’s standards, if California were an independent nation, it would stand on by itself as the 5th largest economy in the world.

And Málaga?

Ok, let’s fast-forward to our lovely virus-ridden world of 2021. So, how’s this history lesson relevant to Malaga you may be wondering? Well, you can draw some strong parallelisms to our current state of affairs, but you do need to pay close attention, reading between the lines to see the big picture, and not get lost in the nitty-gritty details, granted.

Spain, and in particular Malaga is marred by huge unemployment levels (the highest in all of Europe and out of any OECD country) as a result of the ongoing pandemic and its (short-sighted) overreliance in tourism, low wages in relation to European standards, high taxes at a national level, and a whole list of other woes. And to top it off a deadly virus, and all its mutant strains, impacts on Spain’s economy dragging it down. Could matters get any worse?

In view of all the above points, it doesn’t look at all like Malaga is anywhere near duplicating California’s 80’s miracle. Well, perhaps you’d be wrong, look closer:

  1. Ultra-low taxation. Spain is divided administratively into 17 autonomous regions with devolved competencies on tax matters, much like the states in the U.S. After almost 40 years of uninterrupted rule by one political party, 2019 saw a new administration taking office in Andalusia. This new regional government has vowed to bring down taxes. This low taxation trend started right off the bat only a few months in office when they spectacularly slashed inheritance tax (previously over 10,000 families in Andalusia had to renounce to their inheritance every year because they could not afford the ultra-high IHT tax rate set by the former incumbents) to the point they have completely negated it through successive tax reforms. Nowadays, only HNWI pay IHT, and it’s not much to be honest.

The new administration in Andalusia is resolute and has continued this trend unabated throughout 2021 slashing Property Transfer Tax and also Stamp Duty and now have their eyes set to lower Wealth tax, and fundamentally personal income tax (although its ability to tweak the latter is very limited as it’s a national tax). All these taxation changes I have been reporting in detail over the last three years are creating in Andalusia an area of ultra-low taxation that not only attracts individuals, which impacts on the real estate market through market acquisitions, but also, and most fundamentally, large companies (read below).

  1. Deregulation. Andalusia’s new administration is going out of its way to greatly streamline and simplify admin procedures, reducing red tape. As a small example, take tourism licences. What in 2016 was a nightmarish convoluted system with seven different classifications has now been brought to heel with only two options in 2021, making the life of all those involved much easier to apply online. These changes are continuously carried over to multiple aspects, getting rid of the deadwood in an oversized public sector and making it leaner and more efficient. It’s not just idle banter or wishful thinking, the changes implemented are real for us that work with them.
  2. Technology. Malaga has an impressive technology hub in its PTA, which houses over 3,000 technological start-ups. Malaga’s university closely works hand-in-hand with the PTA to supply a steady stream of highly-qualified engineers, programmers, IT designers to these small caps. In fact, some of the companies are becoming so prominent, they have drawn the attention of foreign venture capitalists. For example, Swedish EQT group recently bought for 300mn euros a Malaga technological startup (Freepik) that had created all by itself a market of over 40mn consumers.
  3. Education & languages. Renowned international private schools that dot the Costa del Sol provide the basis of an excellent education in English, German, and several other international languages. Top graduates are regularly invited to join the world’s best universities as per Shanghai’s ranking of leading universities (Oxford, Cambridge, Edinburgh, LSE, Harvard, Yale, Princeton, Stanford, etc).
  4. Low wages. Although Spain’s government has recently enforced a series of improvements by way of raising the minimum wage, the truth of the matter is that Spanish wages, and particularly those in Andalusia, are far behind EU standards, on average 1/3 lower. This is particularly attractive to foreign investors and large companies who have a mind to set up shop in Malaga.
  5. Excellent communications. Airports, toll highways, ports, modern high-speed rail network, etc.
  6. Investors and large companies. All these factors, working together, are attracting the interest of large global corporations which seek to establish outposts in Europe. For example, last week we learnt that Vodafone chose Malaga to create its new Research & Development hub in Europe creating in its wake over 600 highly qualified jobs.
  7. Weather. And last but not least, is Malaga’s gorgeous weather. Malaga boasts 330 days of sunshine throughout the year coupled with great white sandy beaches, scores of which have been awarded coveted EU blue flags. More on this in my blog: 8 reasons to buy property on the Costa del Sol (Andalusia). It’s kind of bizarre, but on a personal note Malaga’s weather, and even its scenery, reminds me of LA’s and California.

Ultra-low taxation, deregulation, technological ingenuity, highly qualified English-speaking local workforce, low wages by rapport to European standards, private international schools (education & languages), great climate etc all help to boost and foster attracting large companies & venture capitalists to Malaga. Do you start to see now the parallelisms? Please let me go on, I’m not done yet.

We are still missing the key psychological component to bind it all together and kickstart it into drive, much like in the 80’s. Fortunately for us, the nuclear threat is all but gone, to a large extent. But we do have something similar nowadays to replace it, the Chinese virus Covid-19. The new vaccinations will see to it that this threat is under control over the next two years and becomes a distant bad dream. The end of the pandemic will translate into people regaining their freedom to live their lives intensely after being grounded for so long with non-stop lockdowns. Freedom to travel abroad unfettered, freedom to spend lavishly in holidays, restaurants, second residences, going to the cinema etc. People need and want freedom badly after feeling trapped for so long under the looming threat of a deadly virus that has kept them grounded too long. Much like the end of the USSR’s nuclear threat in the 80’s, the end of the virus will spell the dawn of a new lease on life for us all which will translate into a burning desire to live intensely and spend money, spend it big time like there is no tomorrow. Spending would be viewed as a necessary cathartic behaviour to restore a semblance of normality back into our lives by way of overcompensation (on the lost time).

You think this sounds daft or far-fetched? Maybe. Would you be surprised to learn that this conduct would in fact mirror the human behaviour which took place in the years that followed the end of the Spanish flu in 1918 that killed 20 to 50 million victims worldwide, which incidentally also originated in China, triggering the golden age known as the ‘roaring twenties’? The end of the deadly virus would again lead to a collective euphoria that would galvanize society globally, acting as a psychological release valve unleashing a spendthrift economy. After all, as classic Greeks liked to point out at every instance, history is cyclical because human nature never changes, and we have Shakespeare’s plays to prove their point.

All of these factors, working in tandem, may coalesce in Spain over the next years, and particularly in Malaga, enabling a new roaring twenties. Don’t get me wrong, frankly, I don’t expect Malaga to (ever) surpass California, or even get anywhere near it for that matter (40mn population vs. 1.6mn), that’s just crazy talk; but if Malaga and by extension Spain plays its cards right into the new decade, it could be well on its way to resemble something close to Europe’s Southern California.   

 

 

Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” – Ronald Reagan

Ronald Wilson Reagan (1911 – 2004). American 40th US President (1981 – 1989). He resolutely contributed to the Cold War victory which led to the fall of the Berlin Wall and the collapse of the communist U.S.S.R. Through cunning and resolute political plays, assisted unwaveringly by staunch political allies, such as Lady Margaret Thatcher, he ensured Western democratic values prevailed and flourished, likely averting World War III. Along with the U.S.S.R.’s greatest president, Mr. Mikhail Gorbachev, he signed the START treaty which would kickstart the denuclearization of the two world’s greatest superpowers avoiding a nuclear Armageddon. A mediocre actor of cheesy westerns turned into a great statesman. Through his steadfast ideals, which almost claimed his life in 1981, his undying legacy would be to ensure us all with freedom.

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

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