Blog / News

The fact that a house appears in a nota simple DOES NOT make it legal

Raymundo Larraín Nesbitt, April, 21. 2023

Marbella-based Larraín Nesbitt Lawyers has over 20 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.

A common mistake buyers, estate agents (and even some lawyers) make is that they take for granted that a rustic villa that appears at the land registry is fully legal, when it is simply not the case.

It is important to note the Spanish land registry does not carry out any planning controls on a property – that is not their job. What the land registry does is lodge the content of a deed witnessed by a notary public, that is all. The notary also does not carry our any planning control whatsoever on a property - it is also not their job.

So frequently, people who own rustic plots, build a house on it illegally. To give it semblance of legality, they involve a notary and the land registry. The notary witnesses a new build deed, which is then lodged at the land registry to update the property description. When one applies for a property report, the property does in fact give an appearance of legality. But it is only that, an appearance, enough to fool most people, except a lawyer that digs deeper.

Only a lawyer knows how to verify a property is in fact legal.

This is not an example, this is a true case that happened to us a few months back. On running a due diligence on a rustic title, we verified the lavish villa that had been built breached local and regional planning laws and was in fact illegal. Moreover, there was a ruling to demolish it. The seller was pushing the property at a huge discount for 'health reasons'. Whoever becomes the new owner ‘inherits’ the planning illegalities. Had our client bought it, she would now face a demolition order- at her own expense - besides losing hundreds of thousands of euros in her failed investment. But it doesn’t end there, she would also have had to face criminal action on the planning breach, as she would now be the new owner taking on the mantle of legal responsibility.

The Spanish Land Registry (and notaries) have their own limitations; they are not lawyers and at no time one should (mistakenly) assume they do a lawyer's job. This is when a seasoned conveyance lawyer steps in, saving the day. We saved our client from making a very costly mistake and even facing criminal charges (on owning an illegal construction in protected land).

Don’t take chances with your life savings, hire a lawyer on buying or selling property in Spain.

Lawyer’s fees are 100% tax-deductible anyway.

At Larrain Nesbitt Abogados we have over 20 years’ experience buying, selling, and renting properties. We are also specialized in immigration & residency visas. 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.

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

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.

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Random controls on applying for a Tourism Licence in Andalusia!

Raymundo Larraín Nesbitt, April, 17. 2023

Copyrighted © 2023. Plagiarism will be criminally prosecuted.

The Andalusian Tourism Registration Authority has changed its modus operandi, and are now carrying out random controls upon registration. Whereas before some properties would be subject to random controls several months after attaining a tourism licence, they have now brought this control forward.

Meaning shortly after registering successfully for a TL you may find they land you with a legal notice requesting a series of additional documents from you (i.e. a Licence of First Occupation) justifying what you have just claimed. The significance of this is that failure to comply within 10 days will automatically land you with a huge fine (in the thousands of euros). Non-payment will lead them to place a legal charge against your property. You need a digital certificate to reply in due form and time to this legal notice.

That is why we strongly advise you to hire a law firm like ours to register you and avoid you humongous fines for non-compliance. We also register holding companies.

We offer this service: Registration of Holiday Homes (only Andalusia)

We register your holiday accommodation and attain a Tourist Licence in 24 working hours (a specific POA is required).

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

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Reminder - Q1 2023 Non-Resident Income Tax filing (NRIT)

Raymundo Larraín Nesbitt, April, 1. 2023

Marbella-based Larraín Nesbitt Lawyers has over 20 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.

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 Q1 2023 quarterly tax return now in April 2023. You are being taxed on your rental income for the previous three months: January, February, and March.

For 2023, 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 2024

Our cut-off date to accept filing Q1 2023 non-resident tax returns is Friday the 14th of April 2023.

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:

EU resident: 125 euros*
Non-EU resident: 75 euros*

*_{The quoted fee is plus vat, 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.

Related tax service

Holiday Rental Accounting Service (HRAS)

Related taxation articles

Holiday Rental Laws in Spain – 8th of March 2015
Non-Resident Taxes in Spain – 8th December 2015
Holiday Rental Laws in Andalusia (Decree 28/2016) – 8th of February 2016
Renting in Spain - Landlord´s Taxation – 8th of January 2017
Holiday Home Taxation in Spain – 8th of July 2017
Holiday Rentals in Andalusia Made Easy – 3^rd July 2017
Non-Resident Income Tax – 8^th December 2017
Holiday Rental Accounting Service (HRAS) – 16^th January 2018
Holiday Rental Taxation in Spain – 8th July 2018
Renting in Spain: are you still overpaying income tax every quarter? – 16^th October 2018
You are taxed at source on renting out in Spain – 30^th November 2018
Did you get an email from AirBnb over your Spanish tax details? – 21st December 2018
Important information from the Spanish Ministry of Finance – 7^th January 2019
Property portals and rental platforms to pass on landlord details to the Spanish Tax Authorities. Are you prepared? - 12th January 2019
Holiday lettings: VAT invoice dissected – 11th February 2019
Requerimiento - Spanish tax agency's summons – 7th March 2019
Save 70% on your landlord tax bill – 8th March 2019
Spain's new rental law in 2019 – 8^th March 2019
8 Tips for Buy-To-Let Success in Spain – 21^st October 2019
Rentals climb for the fifth consecutive year in Spain! – 12^th February 2020
Spanish Government caps rent hikes to 2% in 2022 – 1^st April 2022
Spanish Government extends the 2% rental cap a further 3 months – 21^st June 2022

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Portugal to scrap Golden Visa permits and ban holiday rentals

Raymundo Larraín Nesbitt, March, 23. 2023

Copyrighted © 2023. Plagiarism will be criminally prosecuted.

For years, I have praised and commended in my articles the economic policies adopted by Portuguese Socialist politicians. These economic and housing measures have greatly contributed to attract vast foreign investments (over 6 billion euros in Golden Visas alone), have created thousands of well-paid jobs, improved the country’s overall business reputation, and in effect boosted Portugal’s GDP. Portugal was the leader, the example to follow by other countries, including Spain.

Alas, times move on, and the winds of change blow. A majority left-wing is now in power, and they wish to change things. Their majority will confidently allow them to pass new radical laws in parliament more in line with their electorate. A draft bill has been submitted to parliament that would in effect break the existing status quo in Portugal on foreign investments and visas introducing major changes I collate below (source):

Scrap Golden Visa permits, following a budding trend in other EU countries i.e. Ireland
Ban outright new holiday rentals
Not renew existing holiday rental permits when they expire
State-imposed, planned rental prices (no longer determined by private individuals/landlords), on rental agreements. This means rental prices will be capped and determined by the government
Increase the duration of rental agreements to a mandatory 5 years
Town halls will be empowered to seize empty homes (defined as unoccupied for over 100 days) and offer them as ‘social housing’ to the locals
Local Authorities will be able to request property owners to contribute towards (imposed) property improvements
Etc.

You don’t need a degree in economics to realize how bad the new proposed measures are for Portugal, the economy, and ultimately for its society in general. These new measures are what communist elements in the Spanish government (Podemos) have wet dreams of doing in Spain.

It’s a real shame what the Portuguese government is bound to approve and, in my humble opinion, I think it will greatly deter and discourage foreign investments in Portugal. I foresee a sharp drop in pastéis de nata consumption and a spike on gazpacho demand.

However, as the saying goes, one man’s meat is another man’s poison. The silver lining is that these foreign investors will look elsewhere and may be attracted by Spain’s free market low taxation areas, such as Madrid and Andalucia. These two regions in Spain have suppressed Wealth Tax and Inheritance Tax (besides tweaking a myriad of other taxes, including personal income tax, toning them down; some even go as far as speaking of ‘Spanish tax havens’). Not to mention that Golden Visa residency permits are more than welcome by the Spanish Government, which rolls a red carpet for them. Perhaps I should apologize for my schadenfreude. I make a mental note to add it to my to-do list.

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

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Happy St. Patrick's Day!

Raymundo Larraín Nesbitt, March, 17. 2023

Ní neart go cur le chéile.

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Madrid, passion for life

Raymundo Larraín Nesbitt, March, 10. 2023

Inset photo: Debod temple at dusk. It’s a two-thousand-year-old Egyptian temple gifted to Spain at the time of building the Aswan Dam in the 60’s. It can be found close to Plaza de España, Madrid.

By Raymundo Larrain Nesbitt

21^st March 2023

Today I continue with my running series on top places to buy and live in Spain. I need to preface this article by admitting I have a soft spot for Madrid, having studied and worked there for almost decade. Madrid is like a second home to me, along with Marbella and Edinburgh.

Introduction

The earliest historical record we have was that it was founded by Arabs as early as 865 A.D. The Emir Muhammad I of Cordoba commanded a citadel to be built in the village of Mayrit (which means abundance of water in Arabic), next to the Manzanares river. The grounds of the current Royal Palace are built upon this citadel which gave birth to the city as we know it.

Over time Madrid would grow in size and importance, favoured by its central position in the Iberian Peninsula. In 1561, King Philip II would name Madrid as the capital city of the burgeoning Kingdom of Spain. Madrid would go on to rule the Spanish Empire (1500 - 1800), and most of the known world, over the next two and a half centuries, finally yielding its power to the British Empire.

Madrid, a city that never sleeps

During daytime you will see its inhabitants rushing to work in the wee hours of the morning, with its roads and avenues brimming with busy traffic listening to prime talk radio hosts rambling on politics and football. At dusk, it springs to life with a nightlife second to none. Madrid epitomizes the best of Spanish culture and spirit. Very few people can actually claim to trace back their ancestors to Madrid natives, but most newcomers quickly fall in line (and in love) with the city’s unique spirit becoming Madrileños, which is a lifestyle.

Madrid blends like no other city a discipline for hard work and a passion to live life at its fullest. It’s hard to befriend a madrileño, but if you manage it, they become friends for life.

Madrid will leave an indelible mark upon you.

Madrid’s districts

Madrid de los Austrias: This is an old quarter that now houses countless bars and restaurants. The city majors have wisely turned into a pedestrian walk – mostly – making it highly accessible. A nice selection of Irish pubs can be found there.
Paseo de la Castellana: This wide avenue sports Madrid’s most important and prestigious companies and multinationals.
Gran Vía: I have a soft spot for it as I lived nearby for almost 10 years. It is an avenue which houses all theatres, cinemas, and Broadway shows. It’s a perfect place to dot around if you crave culture.
Velázquez, Serrano, and Claudio Coello: Similar to Milan’s Quadrilatero d’Oro, these three adjacent streets are ideal for luxury shopping lovers, housing the finest household names in fashion, très chic!
Plaza de Colón: this great plaza has three giant stone sculptures which represent the three caravels (La Pinta, La Niña, and the Santa Maria) commissioned by the Catholic Kings. It commemorates the discovery of the New World by Cristopher Columbus in 1492.
El Retiro: an assorted lush park with centuries-old trees, which seeds were brought by sailors from the far reaches of the Spanish Empire, which happens to have one of the few sculptures in the world dedicated to the fallen angel of Morningstar, Lucifer.
Puerta de Alcalá: a landmark in Madrid.

Must-see places for art-lovers

In Madrid, you will be spoilt for choice.

Museo del Prado

Harbors what is likely Spain’s most important pictoric collection, treasuring countless masterpieces from renowned artist from all over the world (Goya, Velázquez, El Greco, Rubens, Tiziano, Tintoretto, etc). The main highlight is Las Meninas, by Velázquez.

Thyssen-Bornemisza National Museum

Named after its founder, a shrewd German businessman, it is located near the Prado Museum, It is known as part of the “Golden Triangle of Art”. It completes and complements the art collections of both El Prado and the Reina Sofia.

Museo Nacional Centro de Arte Reina Sofía

Aptly named after Spain’s honorary Queen, it houses modern art collections. The main highlights are works by Salvador Dali and Pablo Picasso including the world-famous Guernica painting (which depicts the horrors of war).

Must-see places for history buffs

Museo Arqueológico Nacional

It has a live-size reproduction of the famous Altamira cave paintings (Santander) discovered by an illustrious ancestor of the Botín banking family saga. It has an impressive collection of antiquities that span multiple time periods and civilizations.

Museo del Ejército

It houses Spain’s military memorabilia, spanning millennia, from Roman times, through the Spanish Empire (where the sun never set), to modern times. In it you will find El Cid’s famous sword, La Tizona.

Madrid’s architecture

To name my personal top tier:

Torres Kio: These have now become a landmark of Madrid’s landscape, epitomising a modern and enterprising Madrid.
Palacio Real: The Royal palace and its adjacent gardens (Jardines del Campo del Moro) are a sight to behold.
Banco de España: a beautiful modernist building.
Palacio de Cibeles: another modernist building.

Top English schools in Madrid

As the capital city, Madrid boasts some of the finest schools and universities in all of Spain. I collate below the best schools – in no particular order – for those pursuing a bilingual education in English for their children.

Runnymede College: Founded by Mr. Arthur Powell (OBE) and his wife Julia in the 60’s, it regularly places its students in top UK and US Ivy League universities. It follows the English national curriculum. Very demanding and academic.
Colegio San Patricio, Madrid. Founded by Irish nuns, it consistently ranks every year as the best-performing school in all of Spain (El Mundo). Its installations are second to none. Its privileged graduates attend the finest universities all over the world. It follows both the Spanish system and the International Baccalaureate. Strong emphasis on academics.
British Council School of Madrid. Is the dean of all British schools in Spain, founded in 1940, shortly after the end of Spain’s fratricidal Civil War. It follows both the English syllabus and the International Baccalaureate. Run by the British Council, it adheres to British standards.
Numont School: founded by Ms. Margaret Ann Swanson in the 60’s, it’s a primary school that offers an excellent education in English. The size of its classes has remained small over time, allowing its pupils to swiftly pick up a proficient education in English. They follow the English syllabus (English national curriculum). All teachers are native English-speakers. Its pupils then go on to join secondary in the other schools mentioned in this list above.

Conclusion

In the dark times that besiege Spain, Madrid acts as a shining beacon of freedom and hope for us all.

Madrid exemplifies what Spain could aspire to as a whole; a successful and well-run country that attracts billions of euros in foreign investments and creates thousands of high-paid jobs in its wake. A perfect place to live or work in, alas no beach – you can’t have it all!

“Madrid, si no es libre, no es Madrid.” – Isabel Díaz Ayuso

Loosely translated as: “Madrid, if it’s not free, is not Madrid.”

Isabel Natividad Díaz Ayuso (1978). Is a Spanish stateswoman and journalist serving as the president of the Community of Madrid since 2019. She is the president of the People’s Party of Madrid. She rose to prominence during the Covid-19 state-imposed confinement defending the rights of small business owners to open, which saved thousands of jobs and SME’s from the brink during the lockdown. She anticipated the gravity of the Covid-19 pandemic - unlike the Spanish government - building a state-of-the art hospital in record time (Isabel Zendal) to treat Covid patients, saving thousands of seniors' lives through her quick wit and resolute decision-making. In time, through her steadfast actions, she would rise to become the de facto leader of Spain’s opposition in all but in name. With a fiery untamed spirit, and an unbridled penchant for freedom, she is on course to become Spain’s first female president – on her own merits – without resorting to any gender-imposed quotas.

Isabel is a politician in her spare time, nobody is perfect.

Other entries in this running series:

Costa del Sol: your dream home in paradise – 8^th April 2022
Sotogrande, the pearl of Cadiz – 3^rd June 2022
Barcelona, the beautiful – 8^th November 2022
Madrid, passion for life – 21^st March 2023

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. Ní neart go cur le chéile. VOV.

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Spain’s rental prices increased on average by 10%!

Raymundo Larraín Nesbitt, March, 1. 2023

One more year, the increase of rental prices has pulverised all previous records! Rental prices have soared by two digits over the last year on average in large cities and coastal areas. This consolidates a long standing trend that goes all the way back to 2016. Granted, inflation has played a large role on this steep increase, but even so this sharp increase is truly impressive!

As we published back in February 2021 (8 Tips to rent like a pro (Buy-to-Let)), Buy-To-Let in Spain has proven a very successful investment for savvy investors. Scores of landlords make large amounts of rental income every tax quarter. You can realistically expect to rent out nine months a year in Spain as a holiday rental.

In addition, Spain’s taxation on rentals award huge tax breaks to EU-resident landlords. Landlords can expect tax breaks of 70%, or more, on (rental) income tax. We’ve published several taxation articles on the lenient tax relief landlords can apply for: Buy-to-let in Spain: landlord tax reliefs - 23rd May 2019

The rental money can be used to offset overheads and maintenance expenses, including servicing mortgage repayments. No other investment is giving a consistent 5% net yield/year safely! By comparison, bank deposits in Spain give 0%.

But that’s not all, it only gets better!

Besides soaring rental yields, you also need to factor in the property’s capital appreciation (the increase in value of real estate over time). Properties in Spain have seen their value increase over the previous five years at an average rate of 5% pa. In large cities, this has even surpassed two digits i.e. Madrid.

Pro-tip: When you combine both soaring rental yields and capital appreciation, you reach the conclusion that Spanish real estate is giving a safe two-digit return year-on-year.

In plain English, that's over a 10% yield every year safely! This is ideal for retirees who are afraid of sharp stock market fluctuations, roller coaster cryptocurrencies, and seek a safe and consistent return on their investment year on year to build up their pension pot.

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

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Spain’s two trillion euro public debt is a ticking time bomb…

Raymundo Larraín Nesbitt, February, 21. 2023

21^st February 2023

I sincerely apologize in advance to our gentle readers for banging on this topic again, but I find it most necessary to be addressed.

Last November I published a scathing article on Spain’s second wealth tax. In this article I digressed to cover the matter of Spain’s ballooning public debt. At the time, I quoted the official figure of 1.5 trillion euros, which we now know to be incorrect. In January 2023 it was made public that there was an additional (hidden) 500 billion euro debt held between Spain’s 17 regions. For technical reasons, that I will not go into, this debt is not tallied in the overall public debt. But to all intents and purposes, it is obviously a part of it. So the real public debt of Spain now stands at 2 trillion euros. Let that sink in.

'Officially' our debt to GDP ratio stands at 113%, which doesn't look all that bad. However, when we tally the 'hidden' debt from Spain's 17 regions (the 500 billion euros), the truth is closer to 170% of GDP which starts to mark a point of no return. Every day over 300 million euros are piled onto this debt as rolled over interests. One third of Spain's national debt is held by the European Central Bank, Spanish banks hold a large percentage as well 'encouraged' by the government.

You can chek out Spain's public debt in real time here: Spain's debt clock

I stress again that inflation levels are here to stay for the long run, no matter what monetary authorities the world over claim (US Fed: “transitory inflation” yada yada). Fact is we are going to live through a decade of high inflation. Historically, the only way to combat a high inflation is by way of cooling the economy by raising the price of money (interest rates). You can go blue in the face arguing the contrary, but central banks will be raising interest rates over the next years no matter what.

Ok, now we have put that out of the way, let’s focus on Spain. As I’ve highlighted in multiple articles and blog posts over the years, Spain has a severe overreliance (read addiction) to public debt. Now while it's true that most western countries are heavily indebted, the prime example would be the US with a 33 trillion debt (bonkers), Spain has serious structural issues it needs to address.

In a context of soaring inflation (in Spain officially standing at 6% YOY as of January 2023, unofficially its well over 20%), holding a huge public debt is in effect a time bomb. If interest rates continue to rise sharply, in a trend that shows no signs of abating, Spain will have serious issues to face its interest repayment commitments, let alone the principal. Each 100 basic points in rise translates to approximately 14 additional billion euros in interest repayments alone (source). As a result, the overall debt increases with each new rise of interests, which in turn commands a higher interest rate going forward.

This is not science fiction.

Back in 2011 – 2013, Spain almost defaulted when credit rating agencies lambasted Spain’s borrowing ability. It’s ability to repay the loan interests on its multiple financial commitments almost failed and was on the verge of being bailed out by the IMF/EU. Had it not been for the decisive and resolute intervention of the ECB, Spain would have defaulted. Just for reference, our debt to GDP ratio was at the time sitting at 35% (2007). Now its at 170% GDP and mounting...

You’d think that after such a close call, our politicians would have learnt the lesson and would be weary of over indebting the country again – well, think again. The incumbent Spanish President has ballooned our public debt by well over 30% in the space of only a couple of years seeking short-term political gains. I just cannot begin to word how very irresponsible this is.

If the trend in rising interest rates continues unabated (fostered by soaring inflation, wars, and new Covid strains which disrupt the worldwide supply chain), as it is highly foreseeable, Spain will face severe challenges to honour its repayment commitments which may even lead to a default over the next years.

The fact is that the European Union has, for far too long, indulged in Spain’s reckless public credit addiction embodied by Mr Sanchez. This needs to be put to a stop, not only to save Spain, but the Union as a whole.

If Spain (and Italy, which doesn't fair much better) defaults, will Germany, the Netherlands and others rally to pay Spain's public debt? Really? This could seriously jeopardize and compromise the Union itself, as some countries would opt out (as they have no independent monetary policy to devalue their own currency).

Spain has the highest unemployment levels of any country in the OECD (38 countries). Officially its 13%, the truth being far more. Youth unemployment is well over 50%.

Spain also happens to have the highest fiscal pressure in all of Europe (highest taxes), on average 27% higher than its European peers.

I don’t know, I’m no economist, but you’d think someone would look into a correlation between high taxation and high levels of unemployment and draw meaningful conclusions, hmm? It doesn't take a nobel prize in Economy to realize that high taxation does not attract foreign investments, quite the opposite. It also does not create incentives fort businesspeople to start their own companies. High taxation kills the economy, and most fundamentally impoverishes the middle class which is the backbone of a healthy democracy.

In my humble view, Spain needs to urgently:

Lower taxes across the board (as is being done in Andalusia, Galicia, and Madrid to much success, creating thousands of new jobs on its wake). The misguided economic policies pursued by our social-communist government, driven by ideological reasons, only weakens the economy and creates unemployment. It’s the economy stupid!
Deregulation. Streamline and simplify admin procedures, reducing red tape. These changes would carry over to multiple aspects, getting rid of the deadwood in an oversized public sector, and making it leaner and more efficient.
Address once and for all high civil servants’ wages. Nobody wants to open this can of worms, albeit the country cannot afford to pay 14% of its GDP in public civil servants wages, its ridiculous. Civil servants, that have attained their station through hard exams, deserve every cent they earn, granted. However, the problem lies with the vast majority of civil servants who have taken no exam, are grossly overpaid (i.e. town halls), and in most cases have been assigned for their political affinity in lieu of their competency. In fact, public sector wages are on average 70% higher than their private sector counterparts. Spain can simply not afford it.
Reduce public expenditure. As an example, Spain has 22 ministries (again, crazy). Spain must drastically cut back on its wild public expenditure to create a lean, small, and agile public sector. As is stands now, we have a bloated public sector with over 5 million civil servants that don't even answer the phone (or email back) to take appointments. The system has collapsed.
Cut back on NGOs (chiringitos, in Spanish) which soak up billions of euros in grants, aids, subsidies and whatnot every year. It’s just paying back for political favours and serve no real purpose.
Centralize and restructure its regional bodies, cutting back on redundant political and outdated administrative structures that serve no practical purpose (other than to provide a golden highly-paid retirement nest to glorified ex-politicians).
Liberalize land. A huge culprit in the high prices of land are town halls themselves through their taxation which they use mostly to fund the super high wages of civil servants (which, in most cases, have passed no entry exams and are appointed for 'political affinity' btw). This would immediately impact on housing, by way of greatly reducing the raw material of development: the land. This would make housing more affordable across the board.
Pensions. It’s a volatile topic, granted, but Spain cannot realistically afford to pay the new over-the-top pensions. Spain’s Social Security is bankrupt, it keeps getting bailed out by our central government again and again, which in turn is bailed out by our (overgenerous) EU Overlords.
Spanish banks need to start paying interests on bank deposits to foster saving habits and protect wealth. Spain is the only country in the EU which banks are giving a 0% interest on bank deposits. Guess where all the pensioners and people who have savings are piling their debt into? Yes, that’s right, they are buying like there is no tomorrow Spanish public debt which gives them almost a 3% annual interest. Still well below inflation, but hey always better than nothing. The cynic in me cannot stop thinking this is being done on purpose by our government so our savers pile all their money into Spanish public debt, creating a pernicious debt spiral. God forbid!

Bd-E-letras

Inset photo: Spanish savers frantically queuing up at Spain's Central Bank to buy Spanish public debt (gilts). As reported by Expansion in January 2023.

Spain had a tax surplus of over 130bn euros in the last tax year (because unlike other EU Member states, it did not deflate taxes in line with inflation), it has received over 37bn euros from a NextGen Funds aid packet of 130bn euros. You'd think that after this huge windfall Spain would be swimming in cash, yes? Wrong! After all this, it is still very much strapped for cash! Shouldn’t this unrelenting craving for public debt set alarms off, hello anyone?

I’m really sorry to bang again on this, but the EU must intervene and cut back on Spain’s unbridled craving for public debt. It is leading the country to a financial disaster, over indebting all future generations, and to top it off, it poses an existential threat to the European Union itself.

Spain's huge public debt is a major source of concern for us all, with independence of the reader's political affinity. It doesn't matter one iota what people's ideology is, the only thing that matters is what Spain is going to do to solve this, and more fundamentally, what the Union is going to do about it to avoid the ghost of a new Greek default that would shake the foundations of the Union to its very core. The only difference is that Spain's economy is far larger than that of Greece in 2015.

Ideally, the (huge) structural problems that Spain faces should be addresssed - voluntarily - by Spain itself, before it is too late.

Realistically, knowing all too well our political class, from all the political spectrum, they are simply not fit for the task and it will ultimately hinge on external players (the Union, the FMI, etc, creditors in effect) who will bear the onus to impose on Spain such structural changes.

Meanwhile, back in Spain, Podemos, the pro-Russian, hard-left (read communist) junior partner of the socialist government, relentlessly seeks to purposely overindebt the country further (besides attacking the Constitution of 1978 and the Monarchy), day in and day out, with stupid social and economic measures (e.g. universal rent of 1,400 euros, higher taxation levels, new taxes, higher public expenditure, increase the debt ceiling, etc) that will only lead to an unmitigated economic disaster that will threaten to break up Spain (separatists, nationalists, pro-terrorists, the governments political 'allies' would all jump at this golden opportunity). Hmm, I wonder who would stand to benefit from the ensuing economic chaos, the social upheaval, the political instability, the disunity?

The breaking up of Spain - as a unified political entity since 1492 - would create massive ripples that would lead to the weakening of core European Union pillars and institutions that act as guarantors of peace and stability throughout the continent. Such rash actions would only benefit bears' and dragons’ autocratic and expansive political agendas. European politicians, for the most part, play checkers whilst power-hungry players due east play chess, to win.

People, smell the coffee and get a grip!

“When you owe the bank one million, you have a problem.

When you owe the bank 100 million, the bank has a problem.” – Anonymous.

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Spain’s waning middle class

Raymundo Larraín Nesbitt, February, 12. 2023

Last weekend, a dear childhood friend confessed to me that although she was brought up in a middle class household, she had now fallen to working class. She would no longer be able to afford her own children the comforts associated (and that we often take for granted) with the middle class. The tipping point was reading this week this article which compelled me to write a short blog on the matter.

As I’ve often written in my articles, the strength of a democracy is correlated with the strength of its middle class. For it is the middle class of any country that undergirds the power of a healthy and balanced democracy, acting as a backbone. A dwindling middle class only spells political instability.

In these trying times of war, civil strife, global pandemics, soaring inflation, uber high taxation, and now a sharp increase of interest rates the middle class is being put to the test. More and more millions of families are facing the hardships of the errors caused by our self-complacent political class. And no, I am not referring exclusively to Spain, my comments also apply to the United Kingdom, the US, and many other democratic countries.

The politicians we have our days -with few exceptions- are career politicians, self-absorbed, that take decisions on the hoof based on short-term opinion polls; they are tacticians, always thinking on the next six months ahead, on the next polls. No longer do we have serving statesmen who are strategists and have their hearts set on the welfare of the many with a view on the nation’s long run. As a result, we are witnessing all over the world how the middle class is taking the brunt of these difficult times, weakening in effect western democracies, to the great delight of autocratic powers due east, always with a keen eye waiting for a chance to pounce and further their despotic and imperialistic agendas.

Like in the not-so-distant past, this will leave the door ajar for extremist movements to seize the opportunity and rise to power, abetted and financed by those autocratic regimes which seek to undermine the foundations and resolve of western democracies. They will capitalize on people’s discontent, on their newfound financial misfortune, sowing dissension and questioning our democratic values and beliefs.

But it is often said, and history proves it, that our greatest leaders turn up on the eve of such hard times, often from within the humblest ranks of our society. For they know, better than anyone, the values, and benefits that in time grow from nurturing the seeds of democracy.

“The legitimate object of government is ‘to do for the people what needs to be done, but which they can not, by individual effort, do at all, or do so well, for themselves’.” – Abraham Lincoln

Abraham Lincoln (1809 – 1865). From an impoverished humble background of corn farmers, this self-taught American lawyer, strategist, and politician would rise to serve as the 16th US President. He resolutely ensured a pro-Union victory, strengthened the federal government, modernized the economy, brought about the emancipation of slaves and preserved the Union. During his tenure, he held presidential elections in 1864 to be re-elected, amid a devastating Civil War that threatened to tear his country apart and engulf it in a sea of darkness; yet he gave example in the face of adversity, holding steadfast to his ideals, steering the ship safely into port and acting as a beacon of Democracy which light shone with a fierce intensity the likes of which the world has never witnessed, before or since. Never again would a country hold presidential elections amidst a bloody civil war in what constitutes one of History’s greatest democratic feats to date. But most importantly, he went into great lengths to ensure the festering wounds left open during the fratricidal Civil War were healed; generously reconciling both sides in equal terms, as one nation, indivisible, under God. Through his courage and sacrifice, which ultimately would claim his own life, he laid the groundwork of what was to become the greatest and most powerful nation on earth over the next two centuries. A true statesman that would always put ahead of any consideration the best interests of his people, by tearing down divisive walls and fostering at every opportunity union. It is for this very reason, that more than two centuries on, he is widely regarded as the greatest American President to grace the White House. Likely, the greatest American of all time, towering above the rest.

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Rental prices in Spain increased by two digits! Spanish Government extends the 2% rental cap to all of 2023

Raymundo Larraín Nesbitt, February, 7. 2023

As we predicted in previous articles (Spanish Government introduces inflation control in long term rentals – 1^st April 2022 and also Spanish Government extends the 2% rental cap a further 3 months - 21st June 2022), because of Spain’s high inflation, the government would continue to renew the 2% inflation cap on long term rentals.

The Government approved last December 2022 to extend the 2% rental cap for all of year 2023. This means that any rental update, on renewing a rental contract, is capped at 2%. Meaning that landlords have to bite the bullet and withstand the brunt of the (sharp) increase of inflation. Once again the government’s lofty ideals come at the expense of other people’s private property.

Spanish rentals have increased on average by more than 10% in most regions. This is very concerning as it represents a steep spike that affects vulnerable families' pockets.

Spain’s National Bureau of Statistics (INE) reported inflation hit 5.8% Year-Over-Year during January 2023. Although inflation ‘officially’ stands at 6%, in practice, it’s well over 20% as anyone can vouch for.

In view of the continued spike in inflation, the Spanish Government has extended the rental update cap of 2% to all of year 2023.

It has also approved several other measures such as:

Rental contracts that end on or before the 30^th of June can be forcefully extended a further 6 months.
Vulnerable tenants have seen the tenant evictions cancelled over the next 6 months until the 30^th of June (this will likely be renewed again and again by the Government).

For professional landlords (defined as owning 10 or more properties), rental updates are capped at 2%. For laymen, there is freedom to negotiate. However, if no agreement is reached, a 2% limit also applies. In practice, this translates into a 2% limit for everyone.

Again, I stress it is highly likely our government will continue to renew the rental cap indefinitely until Spain’s high inflation is brought to heel, which realistically could take several years, if we are to go by historic records.

So, a far cry from the ‘transitory’ inflation Monetary Authorities claimed we’d live through (as we advised all the way back in 2021: Tax breaks on buying property in Andalusia extended indefinitely! – 8th December 2021). Inflation is here to stay for the long run.

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

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