Nie Frequently Asked Questions

The spanish NIE has provided quite a lot of unpleasent last minute surprises, since is compulsory to show it on any important act made in Spain. 

You will find here the most frequently asked questions, so you save yourself a few  problems:

What is a NIE?

An NIE Number is a tax identification number to be used in Spain. Prior to purchasing a property, selling a property, obtaining a mortgage, starting up a business or working in Spain, it is a requirement by law that every individual possess an NIE Number. The application process is laborious and time consuming, and without the use of a service such as ours, would require normally two trips to Spain, and over 10 hours of waiting in queues, along with the filling out of complex application forms.

The actual NIE Number, when produced from a National Police Station in Spain is printed out on a piece of paper, and this sheet of paper is often used as a form of identity. Once you have been issued an NIE number, it is yours for life.

Everywhere on the internet it says that you have to apply in person for your NIE Number? Is this true?

Yes, this is certainly the case. Without question the Spanish law states very clearly that the person must apply for the documents in person. However, the Spanish law also clearly states that a legalised, Spanish power-of-attorney document enables any individual to be represented by another for all legal purposes in Spain (as long as it is declared as such within the power-of-attorney). Therefore through virtue of these combined laws, we are able to apply for a NIE number on your behalf without the need for you to be in Spain.

You should also note that, regardless of the clearly stated laws, many local branches of the national police throughout Spain choose not to allow this, which is why some lawyers are unable to act on your behalf for this purpose.

How long does the procedure take?

Once we have received your documents (POA and copies of passports - both legalised) the NIE number is obtained within 10 business days (which equates to normally 2 weeks, exceptions made for public and bank holidays).

Prior to sending the documents to us, they must be notarised (by a Notary Public in your area) and then stamped with the Hague Apostille. 

Do I need to send photos for my NIE number card?

No you do not need to send photos to apply for the NIE number.

The NIE number is in fact not a card at all. Rather it is a sheet of A4 paper bearing your details (as outlined on your passport) as well as an official stamp from the National Police of Spain. This original document is an extremely important item of identification in Spain, even though it does not include any photo. Your passport and/or eventually your residence card used in conjunction with your NIE number is generally sufficient for most functions to do with government & taxation in Spain(such as purchasing a property in Spain, paying taxes, selling a property in Spain, etc.).

What happens if I have lost my NIE Number?

Applying for a duplicate NIE number is the same process as applying for the first time. One thing to watch out for however, albeit most of the time this goes without saying, is that the same details are put on the second application form as the first because if not, they police will have problems in issuing the same number if they cannot prove 100% that it is the same person.

I am an EU Citizen, what documentation do you need from me?

As an EU citizen, in order to obtain an NIE Number on your behalf, we will require only a notarised, legalised power of attorney document and a notarised, legalised copy of your passport. There is nothing further required.

I am an NON-EU Citizen, what documentation do you need from me?

As a non-EU citizen, in order to obtain an NIE Number on your behalf, we will require a notarised, legalised power of attorney document, a notarised, legalised copy of your full passport, a full copy of your passport (all pages - email or fax is fine for this purpose), documented evidence (or proof of) why you require an NIE Number. In the case of a property purchase, a private purchase contract, a letter from a mortgage company, or similar type of document will suffice. 

I've been told I can apply for my NIE card through the Spanish consulate. Is this true? If yes, what benefits does your service offer over applying through a Spanish consulate?

Yes, this is entirely true. The primary benefit of using our service as opposed to applying through a Spanish consulate is speed. The average time required for an individual to obtain their NIE number via applying through a Spanish consulate is 16 weeks. This varies from one country to the next, we encourage people to contact their closest Spanish consulate first and enquire about their turnaround time.

Can I get a temporary NIE number at the consulate to sign the deeds of my property?

This is not possible. The NIE that you are issued initially is the same NIE for the rest of your life. Even if you lose the document and apply for a new one, the same number will be issued to you again. Therefore there is no such thing as a temporary NIE.

If you need the NIE for signing title deeds in Spain, as soon as we have submitted the application, we can send a stamped copy to the sellers, mortgage broker, lawyer or whomever is demanding the NIE as proof that the NIE is on the way. This usually pacifies the situation until the document is issued.

Javier Herrera Llamas

Foreing investment in Spain duplicates in 8 months. Why?

Recently, the Economy Minister Luis de Guindos has revealed that foreign investment in Spain has doubled between January and August 2013. Until August had reached 19,000 million in direct investments, compared with 9,000 million recorded in the same period last year.

When he was just saying that, Microsoft co-founder Bill Gates has made a big bet on the recovery of Spain’s construction sector by becoming the second-largest shareholder in FCC,  a Spanish builder hit hard by the collapse of a decade-long property bubble five years ago. He has acquired 6 per cent of its treasury shares for €113.5m.

What are the reasons for this increased investment?. Apart from the classic reasons that have made Spain the 2nd most popular holiday destination in the world (Tapas, 300 days of sun every year, cheap and simple acces via low cost airlines, solid infraestructures, security, etc), it does seem that there are new ones that are setting  this trend.

The audit Ernst & Young positioned Spain  in the fourth place of the classification of the Europa´s most attractive.  The reasons they outlined were 10:

1. Falling housing prices

The housing bubble that spurred an entire country exploded in 2008 and since then prices collapsed in a steady decline is not yet known whether it has bottomed out with a "Bad Bank" which brings more toxic assets at bargain prices.

According to an "investment guide" of BNP Paribas, there are several reasons to invest in real estate in Spain successfully, including the own price of real estate assets located in its lowest level in recent years and represents a "unique opportunity" and just for the future return on investment in terms of economic recovery cause a spike in prices.

2. Competitive salaries

In Spain, labor costs, according to Eurostat, is down since 2008 while in the other European partners increased between 5 and 10%. A workforce 30% cheaper than the average of the Eurozone it is very tempting for foreign companies .

3. Residence permit for two years

The purchase of properties from more than 500,000 euros by foreigners will entitle them to a residence permit for two years. This clause is designed to "avoid embarrassment" to these foreign citizens having to leave the country every ninety days to renew their visas.

4. Unique opportunity

Large companies believe it is time to invest in Spain because the activity will start to grow in 2014 and foreign investors can purchase prices opportunities that will best when the economy strengthens.

5. Prime position on the map

Its privileged position makes it an ideal platform for conducting international business: it belongs to the European Union, is the gateway from the north also with South Africa because of our close historical and economical.

6. Starting business is easy 

Starting a business in Spain is not difficult. The types of companies are in line with those in other OECD countries and there is also a wide range of possibilities, which meet all requirements. We must also emphasize almost total liberalization that governs foreign investment and exchange control, in line with EU rules.

7. Recovery confidence

The reformist path, the announcement of the European Central Bank's plan (OMT) to buy debt in the secondary market, or the defense of the euro (in its irreversibility) by eurozone partners have reduced uncertainty and recovered confidence of investors in our country.

Since the suspicion touched last summer background with a runaway premium that exceeded 600 basis points, now it remains at levels around 300 points and interest paid on the debt are therefore lower. A Matter of Trust recovered reflected in the increased investment.

8. Room for improvement at European level

Most global investors rely on increasing the attractiveness of Europe. "60% of executives from BRIC countries and 45% of Americans are confident that Europe will be a more attractive destination for investors in the coming years," noted in the document.

Moreover also stressed that the imminent risk of rupture in the Eurozone, which, as mentioned in the previous point, weighed heavily in the past year, has now been diluted. "Although the eurozone crisis persists, the international business community believes in the strengths of the area and consider that Europe is a reasonable long-term bet," argued Marc Lhermitte, Partner Consulting and author's own report.

9. Greater labor flexibility

Labor reform alone will not create jobs but  introduces the basis for international companies have more ground to present their policies and decide to come to Spain. Economy Minister Luis de Guindos, considers labor reform, in addition to the adjustment measures, are able to attract foreign investment, and in this sense the minister pointed out the example of Ford's decision to increase its production in Valencia or Renault and Nissan decided to reinforce its commitment to Spain.

10. Modern patent and trademark law

Spain has one of the most modern legislation on patents, trademarks and industrial designs, according to the Observatory defends Mark Spain.

An example of this is that our country is the world's second most renewable energy patents per capita, only behind Germany and ahead of the United States, and especially noted for his innovation in the sun, which focuses 43% of the total, according to the latest report by the Spanish Patent and Trademark Office (SPTO).

The country is also the fifth most renewable patents absolute number, behind the U.S., Japan, Germany and the UK, while investment volume ranked seventh

On top of that, the economy numbers in Spain shows that the recovery is not far away. 

Since 2009, the divergence between Spain and the core countries of the euro zone has been to a large extent corrected: inflation, which peaked at 4.3 percent in 2008, was negative in 2009 and is less than 3 percent today, despite sharp increases in indirect taxes; the spread in unit labor costs with respect to the euro zone average, which was 19 percent, is now 9 percent, both across the whole economy and in industry. The current account deficit, 10 percent of GDP in 2007, was less than 2 percent in 2012.

While public servants have had pay cuts of between 10 and 25 percent, cuts of 20 to 40 percent are not uncommon in the private sector. In short, Spain has regained competitiveness and is in a position to benefit from growth in her trading partners. Lastly, the restructuring of the banking system is nearly completed (partly at the cost of a higher public deficit), and de-leveraging of the banking sector is slowly proceeding (from 19 in 2007 to 16.7 in 2011)

Sources of growth exist, however: first, a healthy export sector that has increased market share throughout the recession; of these exports, steel and chemicals make up for 26 percent of the total, followed by capital goods (20 percent) and automobiles (17 percent); food products, Spain's traditional source of foreign exchange, are now only 16 percent of the total. Second, there is a return of confidence in the stability of the Spanish economy and in the resolve to pursue reforms.

So is not only the government and the Bank of Spain are saying it. 

Authorised voices confirm that, in short, in 2013 Spain may start to get out of the slump. If so, it will be slow progress, but progress. A long way, but upwards.

Javier Herrera Llamas

NON-RESIDENT PROPERTY OWNERS. TAX AUTHORITY IS LOOKING FOR YOU !!!

The Spanish tax authorities are recently starting a campain to clamp down on those who have failed to pay Deem Income Tax – dubbed the ‘enjoyment’ tax – over the last four years. Letters are being sent to non-residents who have not paid the charge, along with fines for late payment.

In our experience, foreign owners of Spanish property fall into three categories:

•  those who know of their income tax obligations and pay them
•  those who know some kind of tax is payable but choose to ignore them
•  those who are living in blissful ignorance of important tax liabilities.

Non-resident taxes - recapitulating

A rather irritating quirk of Spanish tax law means that non-resident owners of property in Spain have to pay Spanish income tax even if they have no Spanish earnings such as rental income. 

Making it brief, we could summarize it :

• Anyone who spends less than half the year in Spain can generally consider themselves non-resident for Spanish tax purposes
• If they own assets in Spain (including property, shares, deposits of cash, bonds), any income arising from these is liable to tax.
• This income is reported annually on the Spanish tax form 210 and is due by the end of the year following the year when the income arose. 
• Anyone owning a property which is not rented out and does not produce an income is nevertheless deemed to have earned an "imputed income" from that property upon which tax is payable at 19% (EU owners) or 24% (non EU)

How much is the tax?

The tax is calculated as a percentage (19 or 24) of the “income” the Spanish authorities deem you could make renting out the property. This is calculated as 2% of the rateable value (reduced to 1,1% for areas re-rated after 1993). If you only owned the house for part of the year the tax is pro rated to the period of ownership. If there are multiple owners (e.g. husband and wife) they pay an equal share of the total tax but must each submit a return. The rateable value is the “valor catastral” found on the IBI (rates) bill you get every year.

When is it payable?

You must make your return for a given year by the end of the following year, so for the every tax year you are required to declare and pay before December, 31st.

Am I resident or non-resident?

A pretty easy question to answer for most of us: if you have a holiday home in Spain which you use periodically but actually live in your home country and pay taxes there then you are non-resident for this purpose. If you live in Spain and only occasionally return to your home country where you have cut most ties then you are more than likely tax resident in Spain and should register as such. Note that failing to register as tax resident does not stop you becoming liable for Spanish resident taxes!

Of course there many situations which are not so clearcut, e.g. during a transitional year when you are settling in Spain. The rule of thumb is that spending over half the year in one country makes you tax resident but there are a lot of subtleties and variations. Where your family or business is based can be a factor. 

Why do so many non-residents not know about this tax?

The problem with non-residents tax is that it is additional to rates and not directly equivalent to anything in the UK or other European countries.

In fact paying tax on "imputed income" from a holiday home which is not rented out seems downright unfair, which is perhaps why so many people avoid it even when they know about it.

What if I don't submit a form and pay the tax?

The government doesn't request payment of income tax and many non-resident owners don't know about it and therefore do not fulfil their obligation to declare and pay it. Initially there may appear to be no adverse consequences, but the tax office (the Agencia Tributaria) know the status of all properties from the IBI and other records and know whether they are owned and occupied. It is a simple task for them to identify which property owners are (a) non-resident and (b) not declaring their taxes. They have recently begun chasing non-payers with letters demanding that non-resident taxes (or resident taxes if applicable) are paid. Obviously, in all these cases, interests & fines will be charged by Spanish Tax men. (Hacienda). In general non-payers can expect to have to pay the tax they owe plus interest and a "sancion" which can add 50% to 150% to the bill.

What if I have to catch up on earlier years?

You can easily catch up on old years with unpaid taxes but there can be interest costs and penalties.  Before 2008 the tax was higher as well because Spain also had the "wealth tax". On the plus side, there is a statute of limitations that applies to unpaid Spanish tax which means that tax is not collectable after four years. 

What if I rent the house out?

Non-residents who rent out their property should declare the income by filing a Form 210 and paying tax (with some deductions for allowable expenses if they are EU residents) within a month of receiving each payment or when a payment falls due, whichever is earlier.In practice, most non-resident property owners take advantage of the quarterly reporting option.

In conclusion 

Do not forget to review your tax situation, and to ensure that your last 4 years are paid properly. 

You will be saving time, money and aggravation !.

Javier Herrera Llamas

New exemptions on taxes on Charter Yachts

On October 31th the modification of the Law 38/ 92, on Special Tax, allowing Spanish flagged and foreign charter yachts of any length in Spanish waters and ports without paying the Special Tax on Certain Means of Transport, known also as the registration or matriculation tax, came into force.

The matriculation tax, which is 12% of the yacht's value, applies to those yachts of more than 8 metres in length which are registered in Spain or yachts with a foreign flag performing charter or commercial activities in Spanish waters or ports. Until October 30th, the law allowed a tax exemption for charter yachts of less than 15 metres in length as long as the exemption was applied for from the Spanish Tax Agency before starting charter activities in Spain. With the reform of the Law, it is possible to apply and receive the exemption on yachts of any length which comply with other requirements established in the Law.

Clearly, this is good news for the yachting industry, particularly for commercial super yachts because now they can operate from Spanish ports or allow clients to board in Spain without the risk of having to pay the Matriculation Tax, provided that they have applied for and obtained prior exemption.

Requirements to qualify for the exemption

To qualify for the exemption the yacht must only be used for chartering (private use is forbidden) interpreted as the lease to a third party for payment. You are also prohibited from renting the yacht to the owner, or a person linked to the owner, or to the same person for a period longer than three months in a year.

The exemption must be requested by the person or company performing the yacht's activities in Spain, whether this is the owner or not, you are obliged to register in Spain as a charter entrepreneur.

It should be noted that Spanish Tax Inspections have been very diligent in checking that those yachts enjoying the exemption meet the requirements of the law.

Particularly, those being used exclusively to charter. A significant level of fraud was detected because many owners who had obtained the exemption, failed to charter the yacht.

Operation in Spain

Operating commercial yachts in Spain, whether using a Spanish port as base or not, as we have said, enables a Matriculation Tax exemption application to be submitted, however, in one form or another, this will have implications for other taxes, such as, VAT, Income Tax, Company Tax or Non Resident Tax. Also, in some Spanish regions it is necessary to receive administrative authorization before carrying out any activities.

The management of each case is different and we recommend seeking specific advice to ensure the best results to your case . 

Javier Herrera Llamas