Non resident selling a property in Spain. What about Capital Gain Tax?

When a non-resident sells property in Spain, they buyer is obliged to retain 3% of the price and pay it to the tax authorities to cover the vendor’s tax liabilities. 

So, if you are non resident in Spain, be prepared to be withold an amount of 3% of the price of the sale. 

This tax is the vendor’s capital gains tax, which has to be declared in his or her annual income tax returns (known in Spain as La Renta), and is taxed at 19%. Non-residents used to be taxed on capital gains at 25% but this was reduced to 18% (same as residents) as of 01/01/08, then put up to 19% on 01/01/10, and finally raised to 21% in 2012 - 2014, and then reduced to 20% in 2015, and finally, 19% for 2016 up to day .

The reason for this is that the taxman wants the money in case the vendor does a runner without paying his taxes, something that almost all non-resident vendors have done in the past.

(Please note that this retention does not cover the vendor’s ‘plusvalia’ tax liability, which is paid to the town hall and is a separate matter. 

See here: http://javierherrerallamas.blogspot.com.es/2013/08/plusvalia-municipal-capital-gain-tax.html)

But not everything it is lost. There are somes ways to reduce your tax exposure. Mainly there are three different ways:

Reductions on when the property was purchased

Those who bought a property after the 31st of December of 1.994 will not be entitled to any reductions. 

Those who bought in 1.987 of after will enjoy of a reduction of 11.11% on the net gain for every year they have owned the property before the 31st of December 1996 after taking the first two years. This means that a seller starts benefiting from this reduction, his first 11.11%, if he bought in 1.994, 22.22% if he bought in 1.993 and so on. 

Those who bought before the 31st of December 1.986 will be pay not tax, as the cuttoff point is 1.996. 

Reductions on the inflationary movements

This reduction is obtained by applying a percentage to the l purchase price, raising the original price to the level of the value of the peseta today. This inflationary correction factor is applied to the entire purchase price, as well as to all costs surrounding the purchase. Likewise, improvements and extensions on the property will have to be updated inflation-wise.

The correction factor to be applied will be the following:

Reductions on the inherent costs of the purchase, works done on the property and others.

Costs of the purchase: these would include VAT or Transfer Tax, Plusvalía Tax (where paid by the buyer), Land registry and Notary fees, lawyer´s and real estate agent´s fees, where applicable. 

Extensions and improvements done on the property: These should not be confused with maintenance and conservation costs, as these are not deductible. In practice, there is no clear cut distinction between one and the other. 

Examples of not deductible costs are repair or maintenance works, such as painting, repairs on heating systems, lifts, plumbing and so on.

Examples of deductible costs are the installation of iron bars, doors, double glazing windows and similar improvements on the property.

It well may happen that your tax bill is lesser than the 3% withold. In that case, you can apply for refund. This could take sometime depending upon the tax office; some are quicker than others. In theory it shouldn’t take more than a few months, though some places seems to be taking up to 16 months. Around a year seems to be quite common. So, usually, your money returns to your bank account by a Bank transfer. 

But also could happen that vendor’s tax bill is greater than the 3% retention. In this case, even when it is very unusual, the Spanish taxman may try and come after you for it back home.

But if you don’t hear from them within 4 years you know you’re safe, as that is the legal deadline for the tax authorities to take action.

Javier Herrera Llamas

New Andalusia Rental Law: Compliance and Fines

The regional Government of Andalusia, known as the Junta de Andalucía, has just passed a decree regulating tourist rentals in the region, following in the footsteps of other regions like Catalonia, the Balearics, and the Canaries. These new rules apply to any short term rental agreement which is habitually offered as accommodation at a price fixed by the owner and which is advertised through tourism channels, such as travel agencies or online platforms. According to the Junta de Andalucía, every property which is publicised on these portals and puts the owner in touch with travellers has to be registered as tourist accommodation -

This new regulation is arising a considerable amount of queries from our clients, so we have prepared these notes for general guidance:

1.-Is there a ban on short term rentals?

Many UK newspapers incorrectly reported that there was a ban on holiday rentals for property owned by private individuals. This is absolutely not true as the objective of these changes is not to protect the interests of the Hostelry Sector, but simply to set minimum quality standards that will make the whole tourism industry more competitive.

2.-Are long term rentals under this new regulation?

Not at all. The regulation exclude properties rented for more than two consecutive months by the same person, which would be governed by the normal property rental law. If the property is rented out property for weeks or fortnights during the three summer months, it is clearly under the new regulation. 

3.- What facilities does a property have to have?

It must have its first occupation licence. The bedrooms must have exterior ventilation and means of shutting out the light. There must be coolings and heating systems at least in the lounge and bedrooms. The regulations insist on domestic appliances, a first aid kit, information about the area in the form of leaflets, maps, etc, and a complaints book. the regulations also specify that the property must be cleaned when clients arrive and leave. Bed linen must be provided, along with a spare set. Tourists must also be given a contact telephone number in case any problems rise, and must be made aware of rules set by the community of owners. The maximum capacity for a single property may not exceed 15 people.

4.- How & when can a property be registered on the Registro de Turismo?

Registration will start officially on May, the 12th, 2016 (in three months’ time, after the decree was published in the Official Bulletin of the Junta de Andalucía (BOJA). The Junta’s Tourism Department estimates that the register will be operative in May, and recommends using this interim period to prepare the paperwork and the property: find or obtain the first occupation licence, download the form, get hold of leaflets, tourist maps, etc or install air conditioning. The aim is that by the summer, properties will officially be able to continue with their normal activity. You can always to ask registration in advance.

5.- What documentation has to be presented?

It is not a complex process, but this is one of the most common concerns among owners. Prior to the presentation you will be needing to obtain your NIE number, and the details corresponding to the registration of your property in the Catastro. You will have to present a statement, that has to be filled in and signed, and then presented into the corresponding office. The registration will then be processed so the property can be rented, and a code will be assigned to identify the property. That code must be included when advertising it on online platforms. You could also authorize somebody to do it on your behalf.

6. -What are the tax implications of a property which is rented for tourism?

It is treated as an urban rental, in other words the money obtained from rentals has to be declared as annual income. It is not necessary for an owner to register as self-employed, no separate taxes have to be paid and IVA does not have to be charged if the property is being rented out by the owner. This type of tourist accommodation is treated as a service, not an establishment. 

We strongly advise to use this new regulation as an opportunity to revise your fiscal situation regarding your Spanish assets, and if necessary, regularize whatever tax statements could be pending. 

7.- Do you have to give each tourist a contract, or a bill, or ask for their ID for police registration purposes?

The rules say that you have to give each client a contract, even if they are only staying for one night. Also, that written agreement must be kept for one year in case inspectors from the Tourism authorities want to see it. The document must include the name of the person or company that is renting the property, the registration code, the number of people who will be staying in the property, the dates they arrive and leave, the total cost of the stay and the contact phone number for them to ring in case of problems. The owner can only issue a receipt for payment, rather than an invoice, and the rental price can be freely determined by the owner of the property. For security reasons, the people who will be staying in the property should provide their identity document upon arrival, but it is not yet been known whether these details need to be passed on to the police. Hotels and apartments do so online, but this process is not covered by the Tourism authorities.

8.- What happens if you want to rent out three or more properties within a 1,000 metre radius?

This is the most controversial point about these new regulations, because it states that people who rent out three or more properties in the same building or in blocks within a radius of one kilometre must register as Apartamentos Turísticos and are governed by this different regulation, which has been modified for this purpose. It is more demanding because it insists on an opening licence and certain requirements which include minimum measurements in different rooms of the property. Also, properties that are considered to “apartamentos turísticos” are treated differently for tax purposes. According to the Junta, anybody who owns three or more properties has to register as self-employed, and will be taxed in the same way as those who are running a business.In this case, they will come under the section of ‘apartamentos turísticos’ as far as Hacienda, the Spanish tax agency, is concerned.

Anyhow, it must be also mentioned that the rules, under the title Decreto 28/2016, de 2 de febrero, de las viviendas con fines turísticos y de modificación del Decreto 194/2010, de 20 de abril, de establecimientos de apartamentos turísticos, has failed to elaborate on two important aspects: what does compliance really entail and what are the fines for non-compliance.

1. In respect to compliance, the rules obliges owners to offer clients –among other requirements- the following: license of occupancy, rooms with adequate ventilation and darkening devices (shutters or similar), sufficient furniture and necessary appliances, touristic information whether in hard copy or electronic, of data for the area (bus schedules, close-by parking facilities, medical facilities in the vicinity and a plan of the town), complaint form, first aid kit, bed linen, cutlery and crockery adequate to the size and requirements of the property (and a replacement set for each). As if not enough, the law says owners will have to have a telephone number available to tenants where they can call to resolve any incidences, an instruction manual for kitchen appliances, details of the use of communal facilities and property equipment, as well as details on access of pets to the property and information on potential restriction for smokers and a few other requirements.But whilst some of the above are clear, the meaning of ambiguous words such as “adequate”, “sufficient” and “necessary” can widely differ depending on who you ask. Attending these grey areas is a pressing requirement.
2. The fine system is also not clear. The 2016 Act refers to a 2011 Rural Accommodation Act for elucidation of what fines are applicable. Some scaremongers have enjoyed spreading the belief that if you do not register, you will be fined up to 150,000 Euros. The reality is that failing to register their properties can “only” be fined between 2,000 and 18,000 Euros, the heavier monster fine of “up to 150k” being reserved for other contraventions i.e. unlawful discrimination or obstructing inspectors on duty.

Interestingly, the Act does not address the fines for failing to comply with one or more elements within the the long list on point a), for instance: missing spoons, dirty linen or insufficient first aid kit.

Previous experiences in other Spanish regions, where similar rules apply, shows us that lack of registration is attracting the vast majority of fines, with little or no precedent in respect to the degree or correctness of compliance.

So, if you are planning to rent out your property in a short term basis in the next future, we strongly suggest that you arrange in advance your registration. Also, should be wise to use this opportunity to check that you are fullfiling all fiscal regulations for your property in Spain. 

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

Mortgage floor interest abolished?. Take a look at your interest...

Do you have a mortgage loan? Do you monitor when your interest rate is reset? You certainly should...
As you know, a mortgage loan is made up of capital and interest that is repaid to the bank in monthly installments. Depending on the type of loan you take out, the interest rate may vary, increasing or decreasing as the case may be but the “floor clause” determines a minimum interest rate that would apply throughout the life of the mortgage. 

The floor clause was introduced by banks to compensate any economic loss they may suffer because of variable interest rates and many applied a floor clause of about 3,55% (or higher) so when Euribor reached historical lows, many did not benefit from it because the floor rate determined in their contract was higher.

On the 9th of May, 2013, the Spanish Supreme Court issued its first ruling annulling mortgage floor clauses. To sum the ruling up, it declared floor clauses in numerous mortgages null (though not all), consideringthis clause was agreed with a lack of clarity and transparency (there was a lack of information, it was included along with a ceiling clause, or was buried in an overwhelming amount of data, etc.).

The Supreme Court has outlined the following causes of complaint by the consumer as valid:

1. A lack of information regarding the nature of the floor clause or it is presented in a way that makes it seem irrelevant so the applicant doesn’t fully comprehend the impact it will really have in the long run. 
2. The bank does not provide simulations to show or explain how the interest rate may affect them further down the line.
3. The bank does not provide clear and concise cost comparisons about other mortgage alternatives that do not involve the floor clause. 
4. The floor clause in the mortgage contract is lumped in with a lot of other information so its importance is not apparent and the client’s attention is not immediately drawn to it

This means that every individual case must be looked at carefully, in order to rule out those that are illegal because they don’t meet the criteria, and keep those that were or are contracted with the full knowledge of the consumer. Also, shall be of interest that your solicitor checks up if your bank is one of those who has been awarded sentences against on this matter, and what is their current attitude. 

What can you do if the floor clause appears in your mortgage loan? 

1. Approach the bank in question and ask to speak to the manager.
2. If this initial meeting is not successful, you can write a claim to the bank’s complaints investigator who must respond within 2 months in a legal manner that must outline a valid line of argument. It is usually advisable this claim is formalised under supervision after checking with your solicitor the main content of it.
3. If the response is negative still, you should lodge a Claim before the Banking Ombudsman of the Bank of Spain, charged with resolving this type of dispute. Their response must be issued within 4 months and the final report may be used in court if it determines the floor clause to be abusive.

Before you rush madly to your local branch screaming and shouting, an important point to remember here is that not all cases are classed as abusive, especially if the floor clause was disclosed beforehand and even if a judge rules the clause to be abusive, it does not necessarily mean that compensation will be granted for losses sustained when the official interest rate fell below the floor rate established in contract.

Can I obtain my money bank?

Our High Court stated clearly that this court order was non retroactive, and would not affect previous payments already made. Thus, the TS declared that Banks could not be forced to the return of the interest overpaid, understanding that a general declaration forcing all the banks to pay back interests already overcharged, could have meant a serious problem to the economy of the country as a whole.


But, non following this criteria, several new court orders from other courts have been published, such as from the Provincial Court of Cuenca, where the Castilla La Mancha Bank was forced to remove the mortgage floor rates from the agreement and return the interests overcharged. Similar rulings can be found in court orders in Málaga, Ourense, Alicante, etc. Most of these Court Orders understand that these individual returns claimed for, by themselves and one by one, do not imply by their amounts any risk for the national economy and the banks must pay back the overcharged interests.

So, before you rush madly to your local branch screaming and shouting, an important point to remember here is that not all cases are classed as abusive, especially if the floor clause was disclosed beforehand. Even if a judge rules the clause to be abusive, it does not necessarily mean that compensation will be granted for losses sustained when the official interest rate fell below the floor rate established in contract. 

Javier Herrera Llamas

New Law on investment Residence in Spain. Property = visa

On 28-09-2013 has been enacted the Investors’ Support and Internationalization Act which includes, among others measures, a Spanish residency programme that will allow investors to become permanent investors if they invest, at least, €500,000 in a property. The law intends cleary to facilitate non EU nationals traveling to, or residing in Spain, who intend to carry out a ‘relevant investment’.


Let´s see together the most important items of the new law:

What is a relevant investment?

According to the new Law, the following will suffice to attain residency in Spain:

• An investment of at least €2,000,000 in Spanish Government bonds.
• An investment of at least €1,000,000 in shares of Spanish companies.
• An investment of at least €1,000,000 with a Spanish-based bank or financial entity (basically, depositing that money in a savings or fixed deposit account).
• An investment of at least €500,000 in Spanish property (one or more), per applicant, provided the first €500,000 of the property value is unencumbered (mortgage free).
• A business investment that is to be carried out in Spain and is deemed of public interest for which purpose, at least one of the following conditions will be considered relevant: a) jobs it will create b) socioeconomic impact in the geographical area where the activity is to be carried out and c) relevant contribution to technological or scientific innovation.

Investment by foreign companies also qualify for residency provided it does not originate from an offshore tax haven, and that the investor owns, directly or indirectly, the majority of its voting rights and has also the right to designate or remove the majority of the members of the board of directors.

Investment Residency Visa and Investment Residency Permit

The Act has created 2 different types of documents to enter and reside in Spain, the Residency Visa and the Residency Permit. 

The Residency Visa is valid for up to 1 year, and the Residency Permit is valid for up to 2 years, which can be extended for a further 2 years. This would give a total of 5 years, 4 of which are deemed proper residency and the first one, just the right to stay and live (an important distinction because 5 years of continued residency entitles the beneficiary to reside permanently in Spain). In addition to meeting the conditions to qualify for the Investors’ Residency Visa, an applicant for an Investors’ Residency Permitwill have to comply with the following:

• Hold an Investors’ Residency Visa that is not overdue by more than 90 days over the expiration date.
• Have travelled to Spain at least once during the validity of the Visa.
• Prove that the investment that enabled the applicant to receive the Visa is still in place.

What other requirements have to be met?

The Act will also require that any applicant complies with the following (standard in the Non-Lucrative or Non-Working Residency Permit):

• Not be in Spain irregularly.
• Be over 18 years of age.
• Absence of a criminal record in the country of original residency.
• Have medical insurance.
• Have sufficient money or financial means to support the applicant (and family) during the period of stay in Spain: if we are guided by the prerequisites of the Non-Lucrative Residency Permit, the applicant will need to prove earning of at least €2,128/month, plus an additional €532/month per family member.

Application Process and Timescales

The Residency Visa will be applied for and granted by the Spanish Consulate of the demarcation of the applicant. The Residency Authorization will be applied for and granted by Directorate General of Migrations. An application for a Residency Visa will be resolved in a maximum period of 10 days, except where the application is subject to the EU visa Code. The Residency Authorization will be granted in a maximum period of 20 days from application after which period, if the Consulate has not responded, the application will be presumed granted.

How would it work, in practical terms?

An applicant that wishes to apply for a Residency Visa under the Act will first need to apply for an ordinary visa, with a view to travel to Spain and investigate investment options/opportunities, meet with lawyers, real estate agents, banks, etc. 

Once a decision is made and the investment carried out, the Residency Visa will have to be applied for at the Consulate. Obviously, it is possible that an investor decides to proceed with the investment operations remotely (for instance, purchasing a property via a lawyer, with a Power of Attorney) and, on conclusion of the property conveyance transaction, he applies for a Residency Visa with the required proof of his investment i.e. Property Title Deeds. The Act does stipulate that the investment needs to be maintained during the period of the validity of the Residency Visa or Residency Permit, and that routine checks may be carried out to verify if this is the case.

Do I have to be in Spain for more than 6 months during any year period?

Specifically, NO! The Act stipulates that Residency Visa or Residency Permit holders do not need to spend more than 6 months in Spain, with a view to renew the permit (which implies that, as stipulated in the law, provided they are in Spain at least once during the period of the Residency Visa, they are pretty much free to spend their time as they wish, in Spain or in any other country). This means a very significant change with the previous regulation.

Can I become a Permanent Resident in Spain or a Spanish Citizen through this method?

YES. In fact, the Act specifically states that the applicant’s absences will not prejudice the right to permanent residency (5 years onwards) and citizenship.

Can a person still apply for permanent residency without having to invest the sums in this law i.e. buying a property worth say €200,000, with a €180,000 mortgage?

The Act has not modified the other existing types of residency permit applications, which are:

• Non-Lucrative Residency Permit (Autorización de Residencia No-Lucrativa)
• Self-Employed Work and Residency Permit (Autorizacion de Residencia y Trabajo Por Cuenta Propia)

This means a person can still apply for residency in Spain via the regular -above- procedures.

Can I apply if I already have a (unencumbered) property in Spain worth €500,000?

The Act does not include investors who already had a property in Spain prior to its enactment although, nothing stops them from selling, buying again and then apply for the Investors Residency Visa and further, the Investors Residency Permit. People that comply with the other financial criteria (having cash deposits, shares etc.) can apply, so there is always other practical ways to obtain the same result.

We hope this brief resume of the Law helps you to understand the new regulation, and to set an investment strategy to obtain residency rights in Spain, if that is your goal.

Javier Herrera Llamas

Policy for integration of immigrants in Spain. All in review...

Rajoy's government seeks to unify the criteria in Spain in relation to the integration of immigrants.
Currently the requirements for access to different services by non-EU foreigners vary considerable depending what administrations are you dealing with.

The government noted that the non-EU integration has been developed so far by the state, communities and local governments in the matter exerting competition  with lack of coordination in is Security, health, integration programs, etc.. and in many cases causing conflict of interest. This have caused a divergence of the conditions of access of non-EU citizens to the various services and also in the conditions which must allow for remain in the country.

The goal of the Government is to establish a common criteria for all public administrations setting a legal framework for the development of a national policy and thus framing criteria for a national integration policy.

Thus, the Council of Ministers has decided to reform the Inimigration act in order to define common criteria of integration of immigrants and to determine the scope of each of the public administrations.

The most important items that have been made public are the following:

1.- A single work permit.
2.- Complete definition of who will be granting the working permits and how they will be processed in a way that ensures that all administration take part in the process, but is still friendly with the applicant.


All this must be put in relation with the avowed purpose of facilitating investment in Spain for the acquisition of property or for business reasons and to provide a simple and effective way to acquire residence in these cases. What still remains to be determined in detail.

So we will still have to wait and see those principles converted into specific rules.

In the meantime, always we can follow the well stablished routes to acquire residence, that will remain in force until changes come in force.

Javier Herrera Llamas

Buying property =Residence in Spain?. Looking into details…

Recently the Spanish government announced its intention to offer resident visas to wealthy overseas investors spending a minimum €160,000 on a property purchase.

The measure is expected to imitate agreements already established in Portugal and Ireland. Jaime Garcia-Legaz, Secretary of State for Trade, insisted that the law change is necessary to reduce Spain’s unsold housing stock.  He told a conference in Madrid: “In coming weeks, we will start to reform the law regarding foreigners to reactivate demand abroad and contribute toward reducing housing stock.” The Prime Minister Mariano Rajoy stressed that the plan has not yet been finalized, but added that Spain ‘‘needs to sell these homes’’ and that getting them off the market could help revive the nation’s devastated construction industry.

The reason for that is quite simple: Spain has more than 700,000 unsold houses following the collapse of its real estate market in 2008 and demand from the recession-hit domestic market is stagnant. In the mean time, Spain is in the midst of a double-dip recession with 25 percent unemployment, though Rajoy said he believes Spain has managed to avoid a financial implosion and will start growing again in late 2013 and in 2014.

This is not something completely new in Spain. 

In fact, if you own a property in Spain you are granted a multiple entry visa permit allowing you to visit Spain more up to 90 days each 6 months. 

If that is not enough, you can today apply for a non lucrative residence permit. This allows the foreign national to reside in Spain, without carrying out labour activities, provided always that you can show a yearly income of more than 25.560,52 € per year, and other 6.390,13 € per year per each member of the family.

Is, anyway, not enough to show that the applicant has financial resources to live in Spain without working, but also will require: 1) not being found in Spanish territory illegally, 2) no criminal record in Spain and in the former countries where has resided for the past five years, 3) not listed as objectionable in the territorial space of countries with which Spain has signed an agreement to this effect, 4) Having a public or private insurance with a concerted health insurer authorized to operate in Spain, 5) not being previously deportated from Spain or any other EU country. and 6) not having any of the diseases that may have serious public health implications .

So, as you can see the proposal is not such a big change !!!.

Legislation can take some months to pass through the Spanish parliament. However, the Prime Minister has insisted that this programme will be accelerated to help deal with the problems within the Spanish economy.

The details of the Law has not yet being made public, so very little information is existing.  but we can make some well founded guessing

Will the Visas Apply to a family?

At this stage we still don't know but it is likely that close family members may be included.

Is it limited to Russia and China?

We expect not. Since Russia and China were expressly mentioned in the initial brief,  but the intention is to cover most countries that are not on the Spanish governments' list of high risk countries for terrorism.

Will the visas allow to work?

There are no details at this stage. And quite probably will not. However the measure could pave the way for buyers to eventually obtain a Spanish passport and then be eligible to work anywhere within the 27 EU states.

Will the visas grant access to schools and hospitals?

We expect it will not be a general opening of the public welfase system, but will be allowed for residents contributing to the Spanish welfare system. And quite probably, some form of medical insurance still may be necessary.

Will the visas allow residency elsewhere in Europe?

This is likely to meet some disapproval with other member states within the EU. But the legal aspects of this within the EU framework could be complicated and may have to allow freedom of movement. We will have to await further details

Can you take a mortgage?

We expect that the visas will only be granted to investors bringing a minimum of €160,000 investment into the country. Borrowing the money from a Spanish bank doesn't really achieve the aims of the government. A likely no on this.

Conclusion:

With the Spanish property market at bottom prices, with clear signs of prices being recovering for 2014 – 2015, I think is a very good time for those interested in setting residence in Spain to start looking into some properties to buy in 2013. 

Do not hesitate to ask any question you may have on this. We'll help you confirm to all the legal formalities, prepare the documents and submit them to the Spanish embassy, and to the federal body in charge of these issues (Gobierno de España, Ministerio del Interior). Our competence in this area will significantly reduce the waiting time and risk of problems. 

Javier Herrera Llamas

Cash Paments Restricted !!!!

Tomorrow, November, the 19th, the new Law 7/2012, to fight against tax fraud, becomes in force.

One of the declared goals of the new Law is to set more restrictions to prevent people from paying cash transactions. Let´s see how the Spanish goberments is forcing us, the people, to change old habits of cash paying.

If you are taking part into a  transaction for business or professional reasons (the one by  which any of the parties act as an entrepreneur or professional ) payments in cash can not exceed an amount equal to or greater than 2,500 euros.

If the reason of the deal it is a personal one, provided you can proof you are non resident in Spain, no more than 15.000 € should be acceptable.

Is also important to bear in mind that cash include not only money, but also bankers checks issued to the bearer.

As well, to calculate the amounts, the law states expressly that to calculate those limits, all transactions or payments that may have split the delivery of goods or provision of services are accountable.

Failure to comply with this measure is an administrative violation, being jointly responsible both payer and recipient of the sanction to be imposed, this being a financial penalty proportional 25% of the basis of the sanction.

As a novelty, so that the action does not give rise to liability for infringement, the parties involved in the transaction should be reported to the Tax Office, within 3 months from the date of payment, the operation performed, the amount and identity of the other party to.

So, like Bob Dylan once said, Times are a´changing.

Prepare your self to change also your habits.

Javier Herrera Llamas

Save money in your purchase of property in Spain

If you are interested in buying a home, you better do it before December 31, 2012, or you it will cost more.

On January 1, 2013 come into force some changes that you should consider:

VAT rise from 4% to 10%

The housing tax that was established in the mid 4% last year, just at the end of this year, going to tax the purchase of new housing at the reduced rate of 10%. The 6% difference in the rate of tax is a lot of money when it comes to shopping so significant. For example, if we acquire by the end of the year a house worth € 200,000, will pay € 8,000 in total taxes, while if purchased from January 1, 2013 will pay € 20,000, ie, we will have a tax savings € 12,000 by the change in VAT.

 In Houses under construction , the obligation of paying the vat starts at the time of the advance payment we made to the promoter. Therefore, if we can not transfer the property by Notarial deed before year-end, because it is not ended , make advanced payments to the maximum extent possible. In this way, you save 6% of all you make advance payments before 31 December. 

Also, remember that:

The reduced VAT rate of 4% applies to all properties that can be used as a dwelling, regardless of the use to which it is put. The autonomous benefit from reduced VAT for the purchase of an apartment or rental office.

This tax also applies to parking spaces that are purchased together with housing for up to two.

Does not apply reduced VAT rates to local, or land.

And if you buy second hand:

Purchasing a second-hand housing to an individual or through a real estate agency, the VAT increase will not therefore affect the tax paid on the purchase is the Property Transfer (ITP), between 7% and 8%, depending on your region.

Neither will be affected most floors selling financial institutions. The reason is that you only pay VAT on the purchase of new housing, in the case of transmission of the house. In most of the floors of the bank, the first transmission has already been given, the Promoter to the bank, so even in the house yet no one has ever lived, in order to Hacienda no longer considered new and therefore , purchase involves the payment of ITP.

Elimination of deduction for house purchase

Being resident in Spain, the tax saving is € 1356, 15% of all annual payments of the purchase and financing up to a maximum of 9,040 euros per return. So that, to declare a marriage individually, the deduction can reach € 2,712 between the two (15% of € 9,040 each).

Exemption of 50% of the profit on a sale

All urban properties purchased between 12/05/2012 and 31/12/2012 are exempt (when sold) 50% of the gain, both in income tax for residents, non-residents and corporations IRNR.

This tax benefit is less known, perhaps because it is not as immediate as the VAT, but as the economy is, you never know when you're going to have to sell the properties, either because they can not afford to pay or by any otherwise, change of residence, marriage, etc..

Continuing the example above, if the home purchase € 200,000 sell it in 2013 for 210,000 €, ignoring the costs to avoid complicating the example, we have a gain of € 10,000 of which € 5,000 exempt (50%) and therefore pay € 1,050 in income (21% of the 5,000 € not exempt). However, if the house we bought in 2013 and later sell, capital gains are taxed at the progressive scale ranging from 21% to 27%

Javier Herrera Llamas