THE MOST TERRIFYING BUILDING IN SPAIN!

Did you know that if you have a holiday home in Spain that you are liable to pay an annual tax and that you must file a tax return, every year, with the Spanish authorities?  In fact, you are liable to pay two different annual taxes in Spain on your Spanish property – to be strictly accurate.

Almost everyone knows that they are liable to pay Spanish rates (IBI – Impuesto sobre Bienes Inmuebles) on their property in Spain and that this is payable to their local authority.  However, less well known (to put it mildly) is that non-resident home owners with properties in Spain are liable to a further tax on their homes payable to the Spanish state.  This tax is called, rather horribly, a ‘Non-Resident Imputed Income Tax on Spanish Property’ or Renta, to give it its Spanish title.

The ‘Non-Resident Imputed Income Tax on Spanish Property’ is a tax calculated on the imaginary income of your property in Spain – as if you had rented it out and received an income from it.  However absurd this may seem, it means that you, as a non-resident home owner of Spanish property, must make an annual tax return and pay the tax assessed on the perceived income earned by your property in Spain.

Needless to say, very few non-resident owners of Spanish property are aware of this particular tax in Spain and so, obviously, they do not pay it!

However, not making a tax return as a non-resident (let alone not paying any tax) can cause real problems and expense.   Usually this occurs when you sell your Spanish property – only to find that you are suddenly faced with paying back taxes that you never knew about, together with interest and penalties.

Bad news!

Recently, I had a meeting with Ábaco in Torrevieja to talk about taxes in Spain and the need to make an annual tax return in Spain even if you are non-resident in Spain and your Spanish property is a second home that you do not rent out.

I went to Ábaco because they are Spanish tax specialists with an international client base and because the Spanish tax authorities have just sent out one million letters to non-resident home owners in Spain warning them to make a tax return.  This letter (see below) from the Agencia Tributaria and entitled COMUNICACIÓN has already caused a good deal of consternation!

In fact, as Caroline Clinton of Ábaco makes clear, it is not just the people who have received the letter from the Spanish tax authorities who should be worried.

“Of course, at this time of year, most second home owners in Spain are out of the country”, Caroline says.  “This means that most will never receive this letter and, by definition, not make a proper tax return and then face not just the tax but sanctions as well.”

In fact, as Caroline points out, “the Spanish tax authorities have been known to remove money owed directly from the bank accounts of non-resident homes owners in Spain.  This is not something anyone would want and may destabilise a bank account for when bills and direct debits fall due”.

So, what is the answer?

Well, frankly, there is no getting around it.  If you have a holiday home in Spain and you are non-resident then you must make a tax return in Spain and pay the tax in Spain that the Spanish tax authorities assess on it.

Meanwhile, be aware that whilst the Spanish tax authorities were not known for their efficiency, in the past, this has been changing, probably spurred on by the present economic crisis. Indeed, during the past year the Spanish tax authorities have finally been allowed to communicate directly with the Spanish Land Registry and with services providers such as the water and electricity companies.  This allows them to establish, more or less, whether a Spanish property is being used full time or not or whether a property is probably being rented out.

My point is that the laissez faire days of old regarding paying tax in Spain should be considered past and so you must now act – if you are to avoid problems and unnecessary expense.

But what can I do and how do I make a tax return in Spain as a non-resident, I hear you ask?

There are a number of ways of making a tax return in Spain but, almost certainly it is quickest and easiest to employ a professional lawyer, gestor or tax expert in Spain to help you.  After all, it is never simple to do anything in another language and ‘fighting’ bureaucracy in Spain is definitely not for the faint hearted!

I have to say that I was impressed by Ábaco who have a solution designed specifically for non-resident homes owners of property in Spain . ÁbacoConnect is an online Spanish tax advisory service.   The service is an excellent idea as it allows you to instruct and enable Ábaco Asesores to file a Spanish tax return for you, even if you are not in Spain.  Their fee is modest and currently, I gather, they have a special offer making their filing of your 2010 tax return in Spain free!

Incidentally, a final word on Ábaco.I was impressed when I saw them, not least because they are a ‘proper’ firm of lawyers and tax advisors, as opposed to the ‘one man bands’ so prevalent in Spain.  Ábaco have 35 employees (in two offices), speak 7 languages, are sophisticated and have specialists in litigation, Spanish inheritance tax, conveyancing and general Spanish taxation.  They also have a strong bias to English speakers and work in an efficient atmosphere that reminded me of a quality UK lawyer’s office in London!

Finally, I should stress the obvious – and that is that if you are non-resident and you rent your holiday home in Spain then you must, in any event, make a tax return in Spain declaring your income.  This should be done every three months.

Nick Snelling – Culture Spain

RELEVANT INFORMATION ON TAX IN SPAIN

See Ábaco Connect – for Spanish tax advice

BEAUTIFUL GANDIA BEACH FIRST THING IN THE MORNING

I was sent a poignant article yesterday from a Spanish friend of mine, which I think makes the current economic crisis in Spain all the sadder.  Evidently, the general shortage of money amongst most people here has meant that markedly fewer flowers are being left on graves on All Saints’ Day (1st November every year).

All Saints’ Day in Spain is a national holiday and notable for immaculately dressed Spaniards, laden with flowers, visiting the graves of loved ones.  Usually the day before All Saints’ Day any town will suddenly have flowers, wreaths and bouquets for sale everywhere to service this tradition.  However, the article states that less flowers than ever before are being left at gravesides – and increasingly artificial flowers are being used instead.

If this was not bad enough increasingly people are opting to have cremations rather than burials.  This is against Spanish tradition, as normally a death in Spain is followed by a burial.  However, cremation is cheaper and also does not have the on-going rental costs of a burial plot.

Meanwhile, there is a predictably horrible increase in charitable burials for people with no money or family who cannot afford to pay for the burial – the cost of which is absorbed by the local town hall.  It seems that many of these charitable burials are immigrants and homeless people.

One of the shocking things for us Britons is the speed of burial or cremation after a death in Spain.  Here, should someone die, they are normally buried or cremated within 24 hours!  This is almost heresy in UK terms when burials and cremations are frequently (to the utter horror of the Spanish!) weeks after the death of the individual concerned.

I am still not sure what system I prefer – the speed of the Spanish or the delay of the British?  Certainly, when burials are done so fast it feels terribly hurried, here today and, literally, gone tomorrow.  Perhaps this is kinder to family left behind and allows them to grieve freely without the torture of waiting weeks for a burial service?

As I say, on this morbid subject, it is hard to know what is best although one obvious problem with the Spanish system is that it gives people far away from the deceased little chance to attend the burial service.  This is of consequence, I think, for expatriates who will naturally have family and friends abroad.

The other ‘odd’ aspect to death in Spain is that the Spanish do not have Wakes.  After a service they disperse, whereas for Britons the Wake is an important occasion during which the life of the deceased can be celebrated and the family publicly comforted.

Unfortunately, I have been to a number of funerals in Spain, mostly of expatriate friends.  Generally, these have taken a form that would be completely recognisable to the UK (apart from the sheer speed of time that elapses between death and burial).  Most communities have someone experienced in arranging funerals in Spain, with my community no exception.  So, the deceased’s family are looked after with arrangements made for the funeral with the minimum of fuss.

The funerals have ranged from religious (with a British Anglican or Catholic minister) to secular with a lay preacher or close friend conducting the service.  Without exception the funerals in Spain I have attended have been conducted sensitively and been profound and dignified occasions…

Finally, may I urge any expatriate in Spain to make a Spanish Will and also ensure that they know all about Spanish tax residency and Spanish inheritance tax?  I have written about this many times before and yet still hear of awful inheritance tax problems for a surviving partner – because of a misunderstanding about residency (Spanish residency and Spanish tax residency are two very different things).

Contact me, if you need to know more or get my book (which has sections on Spanish Inheritance Tax and Residency).

Nick Snelling – Culture Spain

HOW TO BUY A SPANISH PROPERTY AND MOVE TO SPAIN SAFELY

I am delighted to report that my book ‘How to Buy Spanish Property and Move to Spain – Safely’ has just been published in print form, as well as being now available on Kindle and as an e-book.  In fact, I received my first copies yesterday, which is always a nerve wracking moment for an author (does the cover look alright – are there any hidden errors etc.?).  However, it looks good and should do justice to the excellent reviews that I have received from a series of high profile experts on Spain.

Of course, during the past, I have posted a number of articles on Culture Spain warning people to be careful (and especially knowledgeable) before buying property in Spain – whether holiday homes or property in Spain for permanent living over here.

Equally, moving to Spain is not something to do without significant preparation and many times I have stressed that any move to Spain is a good deal more delicate to get ‘right’ than most people ever realise.I say ‘delicate’ because invariably it is a reasonably big step for anyone and can be life changing for better or worse – with so much depending upon how any move to Spain or property purchase is undertaken.

Financially the stakes are certainly high, given that buying a property is always an expensive business and one fraught with potential difficulties in any country.  This is certainly true of Spain, which is notorious for its property problems – from houses being complete illegal(!) all the way through to homes that are as ‘safe’ to buy as any in the UK or Northern Europe.

Needless to say, successfully moving to Spain or buying a safe and sound property in Spain devoid of problems depends upon you knowing what you are doing – before you actually do it!

Sadly, many people come to Spain thinking that, more or less, everything is the same as in Northern Europe.  After all, Spain is in the EU – and so surely the law and operation of the law, from property legality through to construction, should be almost identical?Well, like it or not, things in Spain are different.  Very different!  In some ways this is wonderful and is what provides Spain with a culture and way of life that is seductive and often enchanting (the reason why many of us holiday in Spain or live in Spain).

However, it is far from enchanting to find that the Spanish property that you have bought is illegal or has very significant potential liabilities (such as for infrastructure works).  It is also not so enchanting to find that you have (with the best will in the world) bought in the wrong area or that the community that you thought you had joined is transient not permanent.  Or that the schools are not suitable for your children or that the work you hoped to gain – never really existed.

And so on…

The whole point of my book ‘How to Buy Property and Move to Spain – Safely’ is that it should provide you with a solid, trustworthy and authoritative ‘road map’ if you want to buy Spanish property – whether as a holiday home in Spain, an investment or as a permanent home.  Furthermore, it should be the best guide to Spain available to you, if you are thinking of moving to Spain.

Indeed, the book is not just about property and buying Spanish property.  It has everything you need to know, should you either come to live or holiday in Spain –  from the different types of police in Spain (and all related emergency contact details!) to schooling in Spain, working in Spain, pensions in Spain, healthcare and inheritance tax, typical construction problems, contract disputes, how to get a mortgage or find a lawyer etc…

The book has 26 sections, 80,000 words, 325 pages and nine, highly qualified contributors – not bad for £14.99 (print book) or £7.99 (for the Kindle version).

If you want to see the Reviews for ‘How to Buy Spanish Property and Move to Spain – Safely’, details of the contributors and all other relevant information then do have a look here.

Frankly (if I may be immodest!!), my book about Spain could save you thousands of Euros and it will certainly help you to avoid the pitfalls of Spain – so that you can enjoy your life here or any holiday in Spain to the absolute maximum…

‘HOW TO BUY SPANISH PROPERTY AND MOVE TO SPAIN- SAFELY’

‘Buy Now! Print version from Amazon - only £14.99

Buy Now! Kindle version from Amazon - only £7.99

Buy Now! E-Book Version - only £5.95 

The general election in Spain is scheduled for the 20th November 2011. Is the socialist government 'on the rocks'?

The past few days in Spain have seen some interesting responses to the present economic crisis in Spain including the revival of the wealth tax in Spain.  Meanwhile, in some areas, there is a teacher’s strike in Spain with educators (amazingly!) complaining about an increase in their current working hours.  Finally, temporary work contracts in Spain are being made unlimited (as opposed to the previous existing obligation for an employer to employ a worker full time – after the employee had worked a maximum of four temporary contracts).

To me, the wealth tax in Spain is the most confusing event in the Spanish news at the moment.  So much so that neither a gestor nor a Spanish lawyer that I spoke to yesterday could tell me exactly what the wealth tax covers, let alone the percentage at which it is taxed!  However, if you are wealthy, it may well affect you – so if you live here now and are tax resident in Spain or thinking of coming over to Spain as a permanent resident then you should check this out.  Our QROPS specialist may be of help as he is a UK qualified accountant living permanently in Spain and will probably know the ins and outs of this law as it becomes clearer.

From what little I can establish, the wealth tax in Spain will only affect those people with assets (excluding that of their primary residence) of over 700,000 Euros.  According to the Spanish government this means some 160,000 people in Spain – which I find somewhat incredible, frankly.  I cannot believe that as few as only 160,000 people will be affected, given the significant wealth evident in Spain in so many areas, whether on the Costas or within the major cities.

Of course, the wealth tax in Spain is about trying to raise more money.  This is understandable given the parlous state of the economy in Spain.  However, what is less credible is the PSOE’s (socialist party) claim that the tax raised (estimated at some 1.1 billion) will create some 300,000 work contracts for young people.  That would be great, of course, but anyone with any sense will be curious as to how exactly the jobs will be created.  I have no idea and doubt that the present, incompetent socialist government knows either – probably they have picked this number out of the ether.

As to strikes in Spain by teachers complaining about increased hours.  Well, this beggars belief!  As I have written before (The State System in Spain – an hilarious insight) full time teachers currently work an 18 hour week with, I gather, a proposal now to increase this to 20 hours a week.   Hardly what most of us would consider onerous, let alone justification for strike action when 20%+ of the Spanish population have no work at all and the unemployment rate for 18 – 24 your olds is somewhere in the region of 45%.

On a vaguely more positive note, both the PP (Spanish conservative party) and the PSOE (governing socialist party) have agreed to legislation to allow employers to employ workers on temporary contracts indefinitely.  Or at least without a time limit for the next two years.  This is in an effort to circumvent employers being obliged by law to offer an employee a permanent contract after the employee has worked for them for a maximum of four temporary periods.

I say that this change is ‘vaguely more positive’ because, whilst it is of help now to employers, it dodges the perennial problem of permanent work contracts in Spain.  These are expensive and restrictive to employers who have traditionally avoided them ‘like the plague’.  Needless to say, this has resulted in a significant percentage of the Spanish workforce being condemned to temporary work throughout their lives.

In reality, the existing employment legislation in Spain works, long term, for neither workers nor employers.  So, few people would argue against a wholesale redrawing of the employment laws in Spain to make employment more flexible for employers – which would encourage them to offer more permanent contracts to Spanish workers and perhaps make Spanish industry more dynamic.

Of course, I hardly need emphasise how important it is to tackle employment within the state system in Spain and the utterly untenable and crazy situation where there are guaranteed jobs for life for state employees…

Lastly, the existing current Spanish government (PSEO – socialists) appear to be heading for a resounding defeat in the general election in Spain scheduled for the 20th November 2011. A recent poll gives the conservative PP party a 14.1 point lead and a potential absolute majority – with 81% of socialist voters polled expecting a massive rout.  I suspect that this will be nothing less than the socialists deserve given their appalling economic record over the past few years.

Of course, it is open to question whether the PP (conservative) party will make a better job of governing Spain than the socialists.  This is something about which most of the Spaniards I know are sceptical, along with the supporters of the Indignado movement - which may play an important part in the general election…

Nick Snelling – Culture Spain

FURTHER RELEVANT INFORMATION ON THE STATE SYSTEM IN SPAIN AND POLITICS IN SPAIN

 The state system in Spain – an hilarious insight 

General election in Spain 2011

Politics in Spain, the political parties

The Indignado Movement (riots in the UK, protests in Spain) 

PURCHASE TAX IN SPAIN FOR NEW PROPERTY - A VILLA FOR SALE IN VALENCIA

In an interesting development today the Spanish government have said that they are going to halve the purchase tax in Spain for newly built Spanish properties.  Currently purchase tax in Spain for new builds is 8% but this will now be dropped to 4%.  Meanwhile, purchase tax in Spain for re-sale properties in Spain will remain at 7%

Needless to say, this is an attempt by the Spanish government to encourage sales of new builds which remain a millstone around the drooping neck of the Spanish property market.  So, the reduction in new build purchase tax in Spain is something to be welcomed – albeit that it should have been done long ago!

Certainly, few people would argue that purchase tax for properties in Spain (both new and old) is very high and should be reduced in any event.

Of course, it remains to be seen whether purchase tax in Spain for re-sale houses will also be dropped although I cannot see that happening – not least because sellers of re-sale homes do not have the massive lobbying power of the troubled Spanish banks and the big developers.

So – does this mean that you should now target new Spanish properties, if you are a buyer?

Well, as always, everything is down to location, quality and price with straight maths only a part of the equation to buying a Spanish property safely.

Certainly, there are some excellent Spanish new build properties on the market at very tempting prices (even more so now that the purchase tax has been reduced by 4%).  However, alongside these are many that are very poor and often located exactly where the average foreigner least wants to have either his holiday or permanent home in Spain.  It also has to be said that in some cases Spanish new build properties have been built to minimum standards and sometimes this can be markedly the case when it comes down to their actual size.

A good example that always surprises me relates to flats and apartments in Spain which have shrunk in size over the years.  Thirty to forty years ago it was not unusual to see apartments that had 120 – 140 m2.  Then the average build size for a three bedroom flat slid to 90 m2.  During the recent Spanish property boom this reduced further and many times I have been in new three bedroom flats of between 70 – 80 m2 – which, to my mind, is pretty small.