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Spanish Succession Tax Update

Spanish Succession Tax Posted on Thu, February 02, 2017 15:41:44

April 18th, 2016

Introduction

A frequently asked
question by new clients prior to making Wills of their assets in Spain, is: ‘How
much Succession Tax is payable in Spain?’

A simple enough
question; and in the case of UK estates, for example- in the majority of cases-
there is a simple enough answer. By contrast in Spain,
there are a significant number of potential variables in the
calculation, such that
the position is generally very much case- specific. It can therefore be
misleading to provide generic advice/ calculations. (But an experienced
practitioner will be able quickly to assess- based on the relevant details- and provide
an indicative amount or percentage).

In this article, I
will briefly review the usual variable factors, to identify the details which are usually
required from clients. Then I will examine in more detail, a specific recent legal
development as regards the actual location of real estate interests within
Spain.

Variable Factors in
Spanish Succession Tax (SST) Assessment

The principal factors
which will determine the amount of SST which will be payable in a given
case include: categories of assets; open market value of assets; actualised
rateable value of real estate assets; official value of other assets (eg. vehicles);
residential status of deceased; residential status of beneficiaries; number
of beneficiaries; relationship/ connection between the deceased and each
beneficiary; total deceased estate value; and pre-existing owned asset value by
each beneficiary in Spain. The other determining factor for SST calculations
which requires particular explanation, given that there have been recent legal
changes, is the location within Spain of the real estate assets in a deceased estate.

Effect of Real Estate
Location on SST Assessment

Traditionally (for SST
calculation purposes), a distinction was made between Spanish property
owners who were actually fiscally resident in Spain; and Spanish property
owners who were fiscally resident outside Spain (for example, UK families with a
holiday home in Spain, for occasional use). Spanish residents had
the benefit of the SST exemptions/ allowances of the Autonomous Community
(there are 17 in Spain) within which the property was situated for the
purposes of calculating SST.

In contrast,
non-Spanish residents were allowed no such regional reductions in SST, and were subject
to the basic ‘national’ rules. So, even for spouses and descendants, each
beneficiary had an SST- free allowance of just 15,957 Euros; and everything beyond
that value level was subject to SST in the hands of each individual
beneficiary.

A challenge was made
against this practice through the EU Courts, on the basis that it created
discrimination between European citizens, dependent upon whether they were
fiscally resident in Spain or not. This was held to be contrary to the principles of
freedom of movement of European citizens/ their capital within Europe.

As such, Spain having
duly complied with the EU Ruling, no longer differentiates in SST calculations
for European nationals with properties in Spain, between those who are fiscally
resident in Spain and those who are not.

So, for UK nationals
with properties in Spain, (for as long as the UK remains an EU member), the actual
location in Spain of the property in question is of fundamental importance
in determining the SST liability. The actual impact of SST varies
dramatically between the individual Autonomous Communities within Spain, according to
the applicable Autonomous Community’s own allowances and deductions for SST
calculations. (As a side issue, many
commentators believe that the imposition by different Autonomous Communities
of different SST rules also creates discrimination between EU citizens
depending on where in Spain their property is situated. No Ruling or Directive
has yet been issued against Spain on this front. However, some see it as almost
inevitable that eventually Spain will be forced to centralise/
standardise the SST policy across all the Autonomous Communities, to bring an end to
this anomalous situation).

But pending any
further change, it is important to note the actual location of a Spanish property
continues to have a significant impact on SST liability.

Unilateral Relief
Treaty

Another issue for UK
estate planners to bear in mind in advising clients with Spanish assets, is the
availability of Unilateral Relief Treaty credit for the purposes of UK IHT
calculation, based on SST actually paid. This enables a final net overall UK
IHT/ SST calculation to be made. There are a significant number of rules/
restrictions to bear in mind in this regard- also that the current Treaties are based on
the UK’s current status within the EU. Should that change, then it is
assumed that the position would need to be revisited; and this could, of course, have
an important impact on overall tax rates in the context of inheritance of Spanish
assets owned by UK nationals.

The Legal 4 Spain team
is always available to provide preliminary advice on a no- obligation basis,
in relation to Wills of Spanish assets and Spanish estate planning generally.



Selling a Spanish Property Out of Probate

Sale of Spanish Assets Posted on Thu, February 02, 2017 15:36:02

September 21st, 2015

In many cases, whether
spouse-to-spouse inheritance or passing down the family line, beneficiaries
wish quickly to sell inherited Spanish properties.

In order to complete a
Spanish property sale following the death of an owner (or co-owner), the
succession process must be completed first.

The seller or sellers
must be alive; have legal capacity demonstrated in the personal attendance at the
Notary’s on completion of the sale, or be validly represented under Power of
Attorney.

In many areas of Spain
(even in an active market), the process of selling a property can be fairly
lengthy.

There is no problem
therefore (in order to get ‘the ball rolling’), in marketing a Spanish property
for sale before completion of an inheritance case. But obviously, the legal
position must be made clear to any interested parties. Furthermore, any
contractual commitment entered into must be of a conditional nature- completion
of the sale being subject to prior completion of the inheritance.

The following is a
brief summary of the principal ‘paperwork’ and logistical items to attend to,
before putting a property on the market for sale.

1. Property
Title
The original Title
Deed (‘escritura’) will be needed- or if it cannot be located, then an official
copy should be obtained from the Notary’s. The Registered Title details can be
extracted from the Title Deed; and an up to date copy of the Registered Title
should be obtained from the Property Registry. In many cases, there are
discrepancies between the official Spanish property title and the position ‘on
the ground’. So, it is often necessary to get the title updated prior to a
sale. Banks (for buyers’ mortgages) and well advised buyers generally will wish
to see correct property description in the title. Discrepancies can otherwise
seriously impact on achievable value. The title rectification process can be
fairly lengthy- usually with architects’ certificates and retrospective Town
Hall approval required. So, it is always best as early as possible to be aware
of any such issues; and to ensure that they are correctly addressed.

2. Energy Performance
Certificate.
In order to
market a Spanish property for sale, owners are legally required to obtain an up
to date Energy Performance Certificate. Competition in the market now for this
service means that it is generally a fairly quick and economical exercise.

3. Local Rates
Information.
The rates
details for the property will be needed, together with proof that there are no
rates arrears. Reference numbers can usually be found on the receipts for rates
(IBI/ SUMA) sent out by the local Town Hall (‘Ayuntamiento’) or the paying
bank. Missing information can be obtained from the ‘Catastro’- rates department
of the Town Hall.

4. Planning
Permission.
Such evidence as
is available from the time of acquisition of the property will be required, to
prove compliance with planning legislation; and permission for the legal
occupation of the property. For any missing documentation, official copies- or
confirmation of legal compliance- can be obtained from the planning
(‘urbanismo’) department of the Town Hall.

5. Community Details. Full details of the Community
Administrator should be available, together with a copy of the Community
statutes and (if possible) copies of the minutes of recent Community meetings.
A summary of Community charges over recent years will be needed; and also
details of any forthcoming charges, which have already been notified. The most
recent statement/ receipt of Community charges will be needed; and before
signing the sale and purchase deed (‘escritura de compraventa’) before the
Notary, a Certificate by the Community Administrator confirming that there are
no arrears of Community charges will be required.

6. Tax Issues. Capital Gains Tax liability will need to be considered; and also for
non-Spanish resident sellers, a tax retention of 3% of the sale price is made
on completion; and fairly stringent conditions apply to reclaims, even in the
event of a sale at nil gain.

7. Services Contracts. Receipts for the most recent payments of
property outgoings (principally electricity/ water; and if applicable, gas)
will be required, together with the latest contractual terms of supply- in the
absence of copies, these can be obtained from the local offices of the services
supply companies. Apportionment between seller and buyer needs to be addressed
following completion of the sale.

8. Power of Attorney. If the sellers do not anticipate being
personally present in Spain for the legal sale process, then it will be
necessary for a Power of Attorney (containing the necessary legal powers to sell
and carry out associated administrative tasks) to be signed in favour of the
appointed representative/ legal adviser. A well prepared Power of Attorney for
the inheritance case should include the relevant provisions, to save
duplication.

9. NIE Certificates. NIE (Spanish fiscal) numbers will be
required for any registered owner; and up to date NIE certificates will need to
be provided to the Notary on completion. These are also required for
beneficiaries anyway, so will be available from the inheritance documentation.

10. Mortgage. If there is an outstanding mortgage on
the property, details will be required as to the arrangements / requirements of
the lender as to redemption; and also any charges which will apply. A mortgagee
representative also needs to be available at the Notary’s on completion. So,
often this dictates the timing and location of completion.

11. Bank Account. Any Spanish property seller will require
a current bank account in Spain into which the completion monies can be paid.
Usually a lawyer’s client account will have been opened for the inheritance
case and can be used for this. It is advisable to be certain in advance, as to
the charges which will be applied in crediting the completion monies to the
account; and for the onward transmission of the completion monies. Spanish bank
charges can be surprisingly high; and the manner of payment of the purchase
price; and onward transmission/ form of Foreign Exchange service used, can
significantly affect the costs.

12. Legal
Representative.
In order to be
fully protected in any Spanish property transaction, it is essential to appoint
in writing a legal representative, who is independent- both from the other
party to the transaction; and also from the estate agent negotiating the
transaction. The appointed legal representative must be duly qualified,
registered with the applicable Colegio de Abogados (Law Society equivalent);
and up to date with their professional practice requirements. They must also
carry adequate professional indemnity insurance cover. It is also essential
that all communication is in a language which both the property owner and the
legal representative speak perfectly. There should be no risk of any
misunderstanding. Usually a specialist lawyer will have been engaged for the inheritance
case; so they are generally the logical choice for handling the legal aspects
of the sale.

13. Estate Agent
Appointment.
The issue of
estate agent appointment in Spain can be something of a potential minefield;
and is worthy of an entire separate article! Suffice to say for now that it is
an area which needs to be extremely carefully handled and documented.

The above is a
non-exhaustive checklist- really just the bare minimum.

The Legal 4 Spain team
is always available to provide preliminary advice on a no-obligation basis in
relation to probate and/or a sale or purchase of a Spanish property.



Key Points in Preparing for a Spanish Property Purchase

Spanish Legal Issues Posted on Thu, February 02, 2017 15:35:16

April 28th, 2015

Advance preparation
for the purchase of a Spanish property can simplify and speed up the purchase
process; and minimise transaction costs.

The following is a
reminder of some of the principal ‘paperwork’ items to consider, when dealing
with a Spanish property purchase.

1. Appointment of
Legal Representative.
In order to be
fully protected in any Spanish property transaction, it is essential to appoint
in writing, a legal representative, who is independent- both from the other
party to the transaction and also from the estate agent negotiating the
transaction. The appointed legal representative must be duly qualified,
registered with the applicable Colegio de Abogados (Law Society equivalent) and
up to date with their professional practice requirements. They must also carry
adequate professional indemnity insurance cover. It is also essential that all
communication is in a language which both the buyer and the legal
representative speak perfectly. There should be no risk of any misunderstanding
or ambiguity. Advice should be obtained also before signing a legally binding
contract, as to the structuring of the purchase, for estate planning purposes.

2. Survey. Even if not required for mortgage
purposes, a survey by an independent expert is recommended before any Spanish
property purchase- both to verify the condition of the property; but also to
ensure that the description of the property (in the Property Registry and Town
Hall/ rates department) is consistent with the position ‘on the ground’. This
avoids later problems. In many cases, there are inconsistencies, which require
correction.

3. Power of Attorney. If the buyer does not anticipate being
personally present in Spain for the legal / transactional process, then it will
be necessary for a Power of Attorney (containing the necessary legal powers) to
be signed in favour of the appointed representative/ legal adviser.

4. NIE Certificates. NIE (fiscal) numbers will be required
for any Spanish property buyer; and up to date NIE certificates will need to be
provided to the Notary on completion.

5. Bank Account. Any Spanish property buyer will require
a current bank account in Spain usually- to deal with the purchase funds; and
in any event, for payment of the property outgoings following completion. It is
advisable to be certain in advance, as to the charges which will be applied in
crediting monies to the account; and for making transfers from the account.
Spanish bank charges can be surprisingly high; and the manner of funding the
purchase price; and transfer/ Foreign Exchange issues, can significantly affect
the costs.

6. Mortgage. If mortgage funding is required, the
process should be started as early as possible, as significant delays can
otherwise occur- as all aspects of the title to the property and its value as
security will be scrutinized by the bank’s advisers; and this can be a lengthy
process. Also in undertaking any loan in Spain, full clarity on costs must be
obtained- not only in servicing the loan, but also the initial/ set-up costs;
and any amounts payable to redeem the loan also.

7. Capital Gains Tax/
Accounting.
From the very
outset of a purchase, attention should be paid to the collation of all financial
information and receipts- e.g. construction/ works invoices and other
accounting paperwork- principally to build up a solid record of possible future
deductions/ allowances for capital gains tax purposes, for the occasion of a
subsequent sale of the property.

8. Title Deeds. Following completion, the buyer should
receive an official copy of the Purchase Deed (‘escritura’). The Registered
Title details can usually be extracted from the Title Deed; as an up to date
copy of the Registered Title is usually appended to the rear of the escritura,
once the registered title is updated to reflect the sale and purchase of the
property.

9. Planning
Permission.
Proof of
compliance with planning legislation; and permission for the legal occupation
of the property will be required. Usually for any missing documentation,
official copies- or confirmation of legal compliance- can be obtained from the
planning (‘urbanismo’) department of the Town Hall.

10. Rates Information. The full rates details for the property
will be required, together with proof that there are no rates arrears.
Reference numbers can usually be found on the receipts for rates (IBI/ SUMA)
sent out by the local Town Hall (‘Ayuntamiento’) or the sellers’ paying bank.
Missing information can usually be obtained fairly easily from the rates
(‘Catastro’) department of the Town Hall. An apportionment of rates will need
to be made between the seller and the buyer on completion.

11. Community Details. Full details of the Community
Administrator will be required, together with a copy of the Community statutes
and (if possible) copies of the minutes of recent Community meetings. A summary
of Community charges over recent years will be needed; and also details of any
forthcoming charges, which have already been notified. The most recent
statement/ receipt of Community charges will be needed; and before signing the
sale and purchase deed (‘escritura de compraventa’) before the Notary, a
Certificate by the Community Administrator, confirming that there are no arrears
of Community charges will be required. An apportionment of Community charges
will need to be made between the seller and the buyer on completion.

12. Services
Contracts.
Receipts for the
most recent payments of property outgoings (principally electricity/ water; and
if applicable, gas) will be required on completion, together with the latest
contractual terms of supply- in the absence of copies, these can be obtained
from the local offices of the services supply companies. Following completion,
the services contracts will need to be transferred to the buyer- services
apparatus updating works may be required, so the advice of an independent
expert is recommended before a contractual commitment is made. An apportionment
of costs will need to be made between the seller and the buyer on completion.

13. Energy Performance
Certificate.
The seller is
required to provide an energy performance certificate in relation to the
property on completion.

14. Wills. Every purchaser of a Spanish property
should ensure that they have an up to date validly executed and registered
Spanish Will, which accurately reflects their wishes for the succession of
their Spanish property interest in the event of their death.

15. Non-Spanish
Resident Tax Returns.
Non-Spanish
resident owners of Spanish properties have to make an annual tax declaration in
Spain. Usually a fiscal adviser is appointed to deal with this, following
completion of the purchase.

The above is a
non-exhaustive checklist- really just the bare minimum.

The Legal 4 Spain team
provides a full property conveyancing service (buying and/or selling)
throughout Spain. We are always happy to provide a competitive cost estimate at
the outset of a transaction on a no-obligation basis.



Avoiding Legal Problems with Spanish Property Transactions

Sale of Spanish Assets Posted on Thu, February 02, 2017 15:34:25

April 6th, 2015

As the Spanish
property market news headlines switch to recovery mode- with sales on the
increase, profits to be made; so the prominence recedes of the Press focus
during the recessionary period, of the supposedly ‘high risk’ nature of Spanish
property ownership- from demolition orders for planning defects; through
properties falling down with no right to compensation for distressed owners; to
unscrupulous intermediaries disappearing with client funds.

But the common theme
throughout the previously reported disaster cases must not be forgotten. In the
vast majority of problem cases of Spanish property ownership, there was no
independent professional legal representation at the time of purchase or sale;
or perhaps worse still, reliance upon unqualified/ incompetent legal
representation.

Obviously non-Spanish
owners of Spanish properties wouldnever dream of property dealings in their own
country without proper legal representation. So it is quite astonishing that in
Spain, often with no knowledge of the legal system or even the language,
private investors decide to ‘take a flyer’ in terms of the detail of the
Spanish legal process!

It is precisely
because of the well-documented risks in Spanish property ownership and the
frequent lack of clarity as to transactional costs and taxes, that independent
professional legal representation is essential for Spanish property purchases
and sales.

With proper
professional advice, instead of taking a high-risk gamble, owners of Spanish
property can invest intelligently and securely in real estate in Spain.

Some key points for
buyers and sellers of Spanish properties:

1. Ensure that your lawyer speaks your
language fluently. For a significant investment such as real estate, everything
must be completely clear.

2. Ensure that your lawyer is qualified and
registered in Spain with the Colegio de Abogados, to be certain of professional
regulation. (And check that there is adequate professional indemnity insurance
in place to cover the risk of anyproblem with their work).

3. Ensure that your lawyer is dual
qualified and professionally regulated both in Spain and in your own country,
to have a full grasp of all the tax implications of your Spanish property
investment. This enables dealings in Spanish real estate to be conducted in the
most tax efficient way, having regard to your tax liabilities both in Spain and
crucially, also in your own country.

4. Ensure that your lawyer acts
independently from the estate agent, developer or other parties to the
transaction. If there is any connection, ensure impartiality and the usual professional
clearance of anyrisk of conflict of interests.

5. Ensure that your lawyer provides you at
the outset with a clear written budget of all costs and taxes; and undertakes
to follow up at the end of the case with a final, clearly detailed cost and tax
summary.

6. Ensure that your lawyer operates an
individually designated client accounting system for your full financial
security.

7. Ensure that your lawyer provides a
written report on title, well in advance of a contractual commitment,
confirming all title and planning information in relation to the property. All
parties to a transaction must be completely clear on all aspects before a
contractual commitment is made.

8. Ensure that an initial private contract
is entered into, with a deposit paid on exchange of contracts. This provides
security for both parties; and protection against wasted/ abortive costs and
unscrupulous behaviour in terms of last minute negotiations.

9. Ensure that your lawyer (usually in
conjunction with the estate agent) attends to the transfer of services to the
property following completion.

10. Specifically ask your lawyer to confirm
the above points, to ensure that nothing is overlooked; and that you are fully
protected by your legal representation.

The above is a
non-exhaustive checklist- really just the bare minimum.

The Legal 4 Spain team
provides a full property conveyancing service (buying and/or selling)
throughout Spain. We are always happy to provide a competitive cost estimate at
the outset of a transaction on a no-obligation basis.



Non-Spanish Residents’ Tax Returns for Spanish Property Owners- Update

Spanish Legal Issues Posted on Thu, February 02, 2017 15:33:38

March 5th, 2015

Overview

Every non- Spanish
resident owner of a property in Spain has to file during each calendar year (in
respect of the immediately previous calendar year), a tax return in Spain
(Form- Modelo 210). It is a simple matter, involves a relatively modest cost;
and (generally) a fairly modest amount of tax to pay, based on the property’s
rateable (Catastral) value.

Background

Although it is
obligatory for these tax returns to be made, the follow-up by the Spanish Tax
Authority against those who have failed to declare in the past has been fairly
limited in practice; and the consequences not disturbingly significant.

But this is changing.

Purchasing or
Inheriting a Spanish Property Puts The New Owner ‘On The Radar’

Very simply (and quite
unsurprisingly) technological advances in the manner of operation of the
Spanish Authorities- and therefore improvements in communication between them-
are occurring at a rapid pace.

It is therefore naïve
in the extreme to assume that dealing with a Spanish asset through one Spanish
Authority does not trigger awareness in others.

Shortly following
completion of Spanish property purchases and inheritances now, those acquiring
the property are immediately notified of the awareness of the change of
ownership by the corresponding tax authorities. (A helpful ‘pointer’!)

Consequences of
Failure to File Non-Spanish Residents’ Returns

1. A significant issue
(which we are now seeing occurring automatically) is that if a filing date is
missed, a recalibrated demand is sent out including penalties/ interest. The
powers of enforcement for failure to pay can be extreme- legal action,
embargoed accounts/ assets; ultimately the facility for the Spanish Tax
Authority to seize and auction assets to cover tax debts due. (Extreme cases
obviously, but the point being that the Spanish Tax Authority does have- and
does exercise on a case by case basis- extensive rights and facilities to
recover tax debts).

2. A further
potentially alarming consequence is something which is coming as a nasty
surprise for many sellers of Spanish properties who have failed to file their
annual tax returns.

When a non-Spanish
resident sells a Spanish property interest, 3% of the declared sale price is
retained for the Spanish Tax Authority. This is, in effect, on account of
Spanish capital gains tax liability. But if the retention is greater than the
actual tax liability, the seller can reclaim the tax.

But the Spanish Tax
Authority is now scrutinising the tax return history in dealing with reclaims-
and if found to be inadequate or incomplete, the tax retention on sale may not
be refunded.

So, 3% of the property
sale price can be ‘lost’ (even if there is no gain on the sale) for a simple
failure to make this tax return. To put that in context, on recent property
sale we saw for 900,000 Euros (at a loss) the seller waved goodbye to 27,000
Euros, for this administrative oversight.

Particular attention
therefore needs to be paid to this issue in the context of (and indeed following)
a Spanish property sale.

Conclusion

The Spanish Tax
Authority ‘means business’ over this. Compliance is, in reality, neither
complicated nor expensive. We will be happy to refer enquiries to associates
who provide this service extremely efficiently and cost-effectively; and their
service being provided in English, for non-Spanish speakers.

This general
commentary is not intended to be exhaustive; and case-specific legal advice
should always be sought.

Please speak to us at
Legal 4 Spain when considering a sale or purchase of a Spanish property, to
ensure you have the best quality legal representation to protect your interests
fully; but always at a competitive cost.



Avoiding Excessive Spanish Bank Charges- Part 2- Foreign Exchange

Spanish Legal Issues Posted on Thu, February 02, 2017 15:32:46

January 30th, 2015

Having previously
covered the concerns many owners of Spanish properties express regarding the
level of Spanish bank charges, it has been recommended that the issue of
Foreign Exchange (FX) should also be specifically mentioned.

The current weakness
of the Euro currency is fueling interest in the Spanish property market, where-
even with the currency issue on one side- prices in many areas remain
attractively low.

However, the converse
of this happy consequence of Euro weakness for inward investors, is that
sellers of Spanish properties wishing to repatriate funds to their countries
outside the Eurozone, are facing unattractive exchange rates- which can impact
strongly on final returns from Spanish property sales.

But an important (and
potentially very costly) issue which faces all individuals coming into or going
out of the Euro currency is often overlooked. This is the process and cost of
FX- particularly in the context of larger transactions, e.g. buying and selling
properties. It comes as a shock to many, to find that the total cost of a High
Street bank to High Street bank transfer where currency changes between Euros
and Sterling (for example) can be as high as 5%. That is a 5% ‘loss’ to the
individual making the transfer!

And a significant
proportion of this cost represents the banks’ profit in the FX trade. Indeed,
several major banks make a point of emphasising their free or low cost
electronic transfers in and out of the Eurozone- superficially making this
option appear to be economical. However, as the real profit for the bank is in
the FX trade itself, the relatively tiny cost to the bank of the actual
electronic transfer is of no real consequence in larger transactions.

It is therefore
advisable before committing to an FX transaction, to be absolutely clear (based
on comparing the actual amount debited from your account in one country; to the
final net amount which will be credited to your account in another and
considering official FX rates) as to the cost to you of the FX transaction.
This also enables a like for like comparison between the cost of your High
Street bank to High Street bank transfer; and the deal offered by an
independent FX specialist.

Of course, before
engaging an independent FX specialist to save money on the FX trade, it is
essential to be assured of the legal and regulatory standing of the FX
specialist in question, to avoid the obvious risks and pitfalls.

But professionals
engaged in transactions in Spain for foreign nationals where there are
frequently FX requirements, will generally be able to recommend a pre-vetted
independent FX specialist, to assist in minimising the otherwise hidden costs
in the FX process.

Please speak to us at
Legal 4 Spain when considering a sale or purchase of a Spanish property- or if
you have any FX requirement- as this is an area we will be able to assist, to
protect your interests fully; but always at a competitive rate.



Avoiding Excessive Spanish Bank Charges

Spanish Legal Issues Posted on Thu, February 02, 2017 15:31:27

January 5th, 2015

Since we covered this
subject previously, there have been significant changes within the Spanish
banking sector, principally to save failing Spanish banks. The Press has has
then had a field day as directors’ dealings and conduct are scrutinised, with
unsavoury findings.

But notwithstanding
all this, there seems to have been little improvement- complaints of poor
customer service and excessive charges are continually levelled at the
remaining Spanish banks. This is particularly the case from non- Spanish
account holders, who are used to free current account banking; and very modest
fixed rate charges for electronic funds transfers.

Nearly all Spanish
property owners are obliged to have a Spanish bank account, to pay property
outgoings; and also to have a Euro banking facility, for general expenditure in
Spain.

But invariably, they
are shocked at the high charges for holding and operating a Spanish bank
account. And then the real sting for Spanish bank customers can come when a funds
transfer needs to be made, either in or out of a Spanish bank account.

Two cases have been
referred to us recently- one where a client made a transfer from their Spanish
Euro account to their UK Euro account (having sold their Spanish flat), and the
Spanish bank sought to charge 1,000 Euros for the transfer. Another, where an
inward receipt of Euro funds from a UK Euro account was charged at 300 Euros.
Both cases involved major Spanish banks; and in both cases when challenged, the
banks substantially reduced the charges.

It is curious that
Spanish banks should purport to charge such high fees in the first instance;
and then with little discussion, simply back down.

The first issue is
quite straightforward. UK nationals in particular, are accustomed to fairly
modest fixed fees (or even zero cost) when making electronic payments; and
routinely zero cost for electronic receipts of funds. In Spain however, when
the electronic transfers are international, (even transfers in Euros), the
default position in many cases, is for the bank to try to charge on a
percentage basis, rather than a fixed fee.

Clearly this is
commercially unjustifiable; as the process/ cost to the bank is identical,
whether the transfer is for 10,000 Euros or 1,000,000 Euros. So logically, a standard
fixed fee should be applied.

And also, the
implementation of the SEPA (Single Euro Payments Area) European Union
Regulations, is certainly a helpful factor for Spanish bank customers who are
concerned about high charges.

In Regulation
924/2009, the European Parliament decreed in particular, that charges for
electronic payments between EU member states (of up to 50,000 Euros) must not
exceed the applicable charge for an equivalent national transfer.

As national transfer
charges are very much lower (and generally zero for electronic receipts) the
SEPA Regulations should be introduced into the discussion with your Spanish
bank as to applicable charges, before any significant transfer into or out of
your Spanish bank account is authorised.

Quite possibly for
larger funds transfers, (and depending on the bank account terms) splitting the
payments into smaller amounts (sub- 50,000 Euros) can considerably reduce the
charges. Indeed, the most PR conscious Spanish banks are already including in
their standard terms, free transfers for up to 50,000 Euros within Europe,
waiving even the limited fee they would otherwise be entitled to charge under
the SEPA Regulations.

These are very
positive developments for Spanish bank customers; but during this process of
realisation/ change, it remains necessary to discuss and negotiate charges with
your Spanish bank before authorising significant funds transfers, so as not to
be caught by the bank’s default charging structure.

If necessary, new bank
account opening in Spain is now easier than ever before. A small amount of
research and paperwork can lead to huge savings, by moving to an alternative
Spanish bank that offers competitive charges as a standard feature.



Preparing for Selling a Spanish Property

Sale of Spanish Assets Posted on Thu, February 02, 2017 15:30:36

December 2nd, 2014

Advance preparation
for the sale of a Spanish property can simplify and speed up the sale process;
and minimise transaction costs.

The following is a
reminder of the principal ‘paperwork’ items to attend to, before putting a
property on the market for sale.

1. Title Deeds. The original Title Deed (‘escritura’)
will be required- or if it cannot be located, then an official copy should be
obtained from the Notary’s. The Registered Title details can be extracted from
the Title Deed; and an up to date copy of the Registered Title should be
obtained from the Property Registry. Sometimes there are matters which may
require attending to before the property can be sold- for example, references
to previous mortgages may need clearing off the Registered Title; or there may
be inheritance issues which require completion; or title/ property description
corrections.

2. Energy Performance
Certificate.
In order to
market a property for sale, Spanish property owners are legally required to
obtain an up to date Energy Performance Certificate. Usually, estate agents are
able to recommend local authorized certificate providers.

3. Rates Information. The full rates details for the property
will be required, together with proof that there are no rates arrears.
Reference numbers can usually be found on the receipts for rates (IBI/ SUMA)
sent out by the local Town Hall (‘Ayuntamiento’) or the paying bank. Missing
information can be obtained from the ‘Catastro’- rates department of the Town
Hall.

4. Planning
Permission.
Such evidence as
is available from the time of acquisition of the property will be required, to
prove compliance with planning legislation; and permission for the legal
occupation of the property. For any missing documentation, official copies- or
confirmation of legal compliance- can be obtained from the planning
(‘urbanismo’) department of the Town Hall.

5. Community Details. Full details of the Community
Administrator should be available, together with a copy of the Community
statutes and (if possible) copies of the minutes of recent Community meetings.
A summary of Community charges over recent years will be needed; and also
details of any forthcoming charges, which have already been notified. The most
recent statement/ receipt of Community charges will be needed; and before
signing the sale and purchase deed (‘escritura de compraventa’) before the
Notary, a Certificate by the Community Administrator confirming that there are
no arrears of Community charges will be required.

6. Capital Gains Tax/
Accounting.
If applicable,
(check with fiscal adviser) all construction/ works invoices and other
accounting paperwork should be collated to be ready to provide along with
fiscal submissions relating to Capital Gains Tax liability- principally to
ensure readiness for claiming any applicable deductions/ allowances.

7. Services Contracts. Receipts for the most recent payments of
property outgoings (principally electricity/ water; and if applicable, gas)
will be required, together with the latest contractual terms of supply- in the
absence of copies, these can be obtained from the local offices of the services
supply companies.

8. Power of Attorney. If the sellers do not anticipate being
personally present in Spain for the legal sale process, then it will be
necessary for a Power of Attorney (containing the necessary legal powers) to be
signed in favour of the appointed representative/ legal adviser.

9. NIE Certificates. NIE numbers will be required for any
registered owner; and up to date NIE certificates will need to be provided to
the Notary on completion.

10. Mortgage. If there is an outstanding mortgage on
the property, details will be required as to the arrangements / requirements of
the lender as to redemption; and also any charges which will apply.

11. Bank Account. Any Spanish property seller will
generally require a current bank account in Spain into which the completion
monies will be paid. It is advisable to be certain in advance, as to the
charges which will be applied in crediting the completion monies to the
account; and for the onward transmission of the completion monies. Spanish bank
charges can be surprisingly high; and the manner of payment of the purchase
price; and onward transmission/ form of Foreign Exchange service used, can
significantly affect the costs.

12. Legal
Representative.
In order to be
fully protected in any Spanish property transaction, it is essential to appoint
in writing a legal representative, who is independent- both from the other
party to the transaction and also from the estate agent negotiating the
transaction. The appointed legal representative must be duly qualified,
registered with the applicable Colegio de Abogados (Law Society equivalent) and
up to date with their professional practice requirements. They must also carry
adequate professional indemnity insurance cover. It is also essential that all
communication is in a language which both the property owner and the legal
representative speak perfectly. There should be no risk of any
misunderstanding.

The Legal 4 Spain team
provides a full property conveyancing service (buying and/or selling)
throughout Spain. We are always happy to provide a competitive cost estimate at
the outset of a transaction on a no-obligation basis.



Dealing With Spanish Probate

Probate in Spain Posted on Thu, February 02, 2017 15:29:55

November 12th, 2014

In preparation for dealing with the
administration of estates which include Spanish assets, it can be useful to
have an overview of the Spanish probate process- to be prepared; and to avoid
surprises.

Ten key procedural stages in the
Spanish probate process are:

1. Collating Documentation and
Information.
As with any estate succession,
thorough preparation at the outset is essential. Principal items to locate/
cover for Spain typically include: Death Certificate; Will; title deeds for
Spanish properties (‘escrituras’); most recent property rates receipt; Spanish
registered vehicle documentation; asset valuations; bank account details (and
official extract covering the date of death); full details/ date of death
statements for any Spanish loans, mortgages, investments; and Spanish fiscal
number certificates (N.I.E’s) for deceased and beneficiaries. If the deceased
left no Spanish Will, then an official sealed copy of the UK Grant (with UK
Will annexed, if applicable) may be required; and possibly further proof of
legal status and relationship with the deceased (e.g. Birth and Marriage
Certificates).

2. Signature of Power of Attorney. A professional Spanish representative is generally
appointed under Power of Attorney, in order to minimise inconvenience for
beneficiaries, as the Spanish inheritance process involves a significant amount
of personal attendance. UK estate administrators may also need to be
represented in Spain (under Power of Attorney), in addition to beneficiaries.
Usually, experienced Spanish practitioners will have arrangements in place with
UK Notaries’ Society members and The Foreign and the Commonwealth Office, to
enable the Power of Attorney to be signed just as easily in the UK as in Spain-
for signatories’ convenience. Generally, the entire Spanish legal process can
be conducted without the need for UK executors/ beneficiaries having to go to
Spain.

3. Obtaining N.I.E’s. As indicated, a Spanish fiscal number is required by
each estate representative/ beneficiary. Often seen as a significant hurdle,
but experienced Spanish practitioners will have a system in place for these to
be simply and rapidly obtained- including within the UK.

4. Spanish Central Wills Registry
Search.
An obligatory early step in
the process is that a search must be carried out to confirm the existence or
absence of a Spanish Will. If it is revealed that there is a Spanish Will, but
no official copy can be found; then usually a copy can be obtained via the
Spanish Notary.

5. Certification of Law and Official
Translations.
Any non-Spanish legal
documents which are required to prove beneficial entitlement (Death
Certificates; Grants of Probate, etc) may need to be Apostilled by the Foreign
and Commonwealth Office, in order to be legally admissible in Spain. In some cases,
they must also be translated and certified by an official translator. An
advantage of the existence of a valid separate Spanish Will (if there is one),
is that it reduces the complexity and extent of the documentation, which has to
be produced to the Spanish Authorities. In many cases, the Authorising Spanish
Notary will require a Certificate of English law, confirming the legal
entitlement of the beneficiaries and/or to provide any case-specific comfort as
may be required on cross-border legal issues.

6. Opening of Client Bank Account. It is fundamentally important before provision of
client funds, to ensure that the Spanish probate representative operates a
client accounting policy/ facility which fully protects the estate and the
beneficiaries. The standard obligatory requirements in Spain can be less
extensive than in the UK.

7. Execution of the Inheritance Deed
before the Authorising Spanish Notary.
Generally,
the procedural urgency in achieving the signature of the official Inheritance
Deed and concluding the Notarial process, is that this then enables the Spanish
Succession Tax to be paid. Payment of the tax must be made within 6 months of
the date of death, in order to avoid interest/ penalties accruing on the tax
debt. As the tax can generally only be paid once the Spanish Notarial process
is completed, it is critically important that the Spanish process is commenced
at the very earliest stage possible; and proactively pushed forward, to settle
matters with the Notary as quickly as possible. Otherwise, there is a danger
that an unnecessarily inflated Spanish tax liability will arise.

8. Payment of Tax. It is important to have obtained from the Spanish
practitioner at the outset of the case, a detailed estimate of all applicable
costs and taxes. This ensures adequate preparation time for provision of funds,
to enable the tax payment to be made immediately following the signature of the
official Inheritance Deed. In addition to Spanish Succession Tax, Plus Valia
Tax may also be payable. This is a local Spanish Town Hall tax, payable upon
the transmission of a property interest. Most Spanish Town Halls charge this on
inheritance, as well as property sales. It is calculated by reference to the
Spanish property’s rateable value; and the period of ownership. Traditionally,
this was a nominal amount. But with revisions to rateable values in particular,
in some areas of Spain it can be a very substantial amount.

9. Banks. Dealing with bank accounts in Spanish probate cases
can often be the longest and most frustrating part of the process, but this can
only be fully addressed once the Inheritance Deed has been signed and any
Spanish Succession Tax paid. Succession of bank accounts is not addressed at
local bank branch level in Spain. The bank’s central legal department instead
usually deals with succession matters. Direct contact with the bank’s central
legal department is generally fairly difficult. For the Spanish banks,
succession work is decidedly low priority.

10. Property and Vehicle Registries. Following the signature of the Inheritance Deed; and
payment of any Spanish Succession Tax; applications can be made to the Property
and/or Vehicle Registries, in order for the Spanish estate assets to be
registered in beneficiaries’ names. The Property Registration process in
particular, involves a further level of legal scrutiny. So, in some cases,
additional requisitions can be raised at this stage, beyond matters covered
with the Authorising Spanish Notary earlier in the process.

Conclusion.

The Legal 4 Spain team offers a full
Spanish probate service; and is always available to provide preliminary advice
on a no-obligation basis in relation to probate cases, which include Spanish
assets.



Reclaiming Wrongfully Charged Spanish Succession Tax

Spanish Succession Tax Posted on Thu, February 02, 2017 15:29:12

November 2nd, 2014

Introduction

As covered previously, the European
Court of Justice has ruled that Spain’s practice of charging non-Spanish
resident beneficiaries Spanish Succession Tax (SST) at a different rate from
Spanish residents is discriminatory; and therefore unlawful.

Entitlement to demand a repayment of
previously paid SST

Thus far, there are no exhaustive
guidelines. But in principle, where a non- Spanish resident has accepted an
inheritance of Spanish assets and has paid SST during the last 4 years at a
rate which is higher than they would have paid had they been Spanish resident,
then they are entitled to demand a repayment of the difference between the
non-resident rate and the resident rate.

For these past ‘discriminatory’
cases, it remains to be seen whether a specific, official process will be
established in Spain, to enable repayments of previously paid SST to be
reclaimed.

In the absence of a clear
administrative process in Spain for demanding a repayment in these
circumstances, an individual legal action needs to be mounted by each
beneficiary who considers that they have overpaid SST and are therefore
entitled to demand a repayment.

And the legal right in these cases
to demand a repayment is time critical, so the right could be lost unless
prompt action is taken.

Issues with the legal process for
reclaiming SST

The assessment of eligibility for
making a claim can be a fairly complex and time consuming exercise. In
particular, there have been changes in the way several of the Spanish
autonomous communities have charged SST over the last few years (mainly
reducing allowances for residents). This means that in a surprising number of
non-resident beneficiary cases, despite significant SST charges, no
discrimination can be shown.

Pending official guidelines, it is
considered to be essential that cases must be fully prepared and demands
submitted within 4 years of the date of the original tax payment, otherwise the
legal right to demand a repayment could be lost.

It should also be noted that the
reclaim would only be in relation to SST, not in relation to other Spanish
probate costs and taxes (eg. Plus Valia tax).

It is considered unlikely that the
Spanish Tax Authority will establish a rapid, simple and economical system for
processing applications for repayment. There will inevitably be detailed
documentation requirements; and certification of a receiving bank account will
be required.

The reclaim process is therefore
likely to be fairly lengthy. The consensus is that the period from commencing
the case to reaching a conclusion is likely to be typically in the region of 3
years.

The process of demanding a repayment
is also likely to be fairly costly. Preliminary estimates are that, to assess/
initiate the process will be likely to involve a cost of a minimum of 250 Euros
per claim. And then the total cost of the reclaim process could be in the region
of up to 20-30% of the amount reclaimed in total. (Although some interest may
be recoverable, partly to offset the costs).

If a credit for the SST paid has
been obtained in the beneficiaries’ own country (for example, against UK IHT),
then this could undermine the Spanish case for demanding a repayment.

From initial discussions with
specialist practitioners in this area, the range of minimum cases (below which
they would not consider it worthwhile taking a case on) is between 1,500 Euros-
2,500 Euros SST paid (per beneficiary).

Of course, any entitled beneficiary
can pursue their own claim for any amount of SST which is reclaimable- with or
without professional representation. There is no minimum level. But independent
professional advice is always recommended, to ensure the case is worthwhile
pursuing; and is handled correctly.

Spanish legal proceedings generally
can be lengthy and complex; and therefore costly. So it is essential at the
outset of any Spanish legal case, to have a clear understanding of the costs
which will be incurred; and the chances of success, to avoid the risk of
‘throwing good money after bad’.

Conclusion

For Spanish probate cases currently
in progress, the obligation remains for beneficiaries to pay SST according to
the current Spanish law (even though not EU compliant); and then (maybe)
subsequently have the right to make a reclaim.

From the Spanish property owner or
beneficiary’s point of view, this situation is far from satisfactory. But the
EU Court Ruling has unavoidably created a ‘legal limbo’; pending fresh fiscal
legislation/ directions from Spain.

Many practitioners have concluded
that the SST reclaim process is likely to be so fraught with potential issues-
delays, costs, procedural uncertainty, that the number of individuals who will
pursue cases- and see them through to a successful conclusion- will be
relatively small.

It is anticipated also that some
beneficiaries will conclude that, irrespective of the potential legal
entitlement, they have drawn a line under completed Spanish probate cases; and
have little interest in reopening the cases; and/ or taking on the cost and
stress of embarking upon this Spanish legal process.

But, for those individuals who do
wish to pursue an SST reclaim, it is recommended to be in the hands of a
specialist professional, as any procedural errors could be fatal to the claim.
Another risk inherent in reclaim opportunities of this nature is that
non-specialist operators tend to ‘spring up’, even taking on claim cases with
no real merit, but charging hefty up-front fees. As with all professional
services providers, some investigation as to background, reputation and
professional regulation/ indemnity cover is essential.

This general commentary is not
intended to be exhaustive; and case-specific legal advice should always be
sought.



Costs of Selling a Spanish Property

Sale of Spanish Assets Posted on Thu, February 02, 2017 15:28:29

October 14th, 2014

Before setting a sale price, Spanish
property owners who are considering selling should be aware of all the
associated costs and taxes, in order to be able accurately to calculate the net
amount they will receive from the sale.

The costs and taxes on selling a
Spanish property can typically be in the range of 10-15% of the sale price, in
total. The following is a reminder of the principal areas to consider.

1. Estate Agency Fee. The seller usually covers the estate agency fee. The
applicable percentage of the fee needs to be individually negotiated in each
case. It will be determined by the nature and location of the property; its
price; and the detail of the service which will be provided by the estate
agent. The typical range of estate agency fees for ‘ordinary’ Spanish property
sales is 3-5% plus IVA. (A higher % applies if it is a low value transaction).

2. Energy Performance Certificate. In order to market a property for sale, Spanish
property owners are legally required to have an up to date Energy Performance
Certificate. Usually, the estate agent will be able to recommend a local
authorized certificate provider. In terms of pricing, it is a fairly
competitive market now; and there are a number of certificate providers
covering wide areas, so it is easy to determine a fair price for this service.

3. Tax Retention on a Spanish
property transfer.
When a non-Spanish resident
owner of a Spanish property sells, the buyer has to retain 3% of the declared
sale price and pay this to the Spanish Tax Authority. So, this is a 3% deduction
from the amount the seller receives. In some cases, the retention can be
reclaimed subsequently, but the reclaim process can be quite convoluted and
expensive to pursue.

4. Plus Valia Tax. When there is a transmission of a Spanish property
interest, the local Town Hall is entitled to charge Plus Valia Tax, which is
calculated by reference to the rateable value of the property and the period of
ownership. In a sense, it is a hybrid between a stamp duty and a local level
capital gains tax. The amounts in question vary widely from area to area; and
in some areas the charge is surprisingly high. So, it is always essential to
have a clear idea in advance of the Plus Valia which will be payable on a sale.

5. Community Administrator
Certification.
It will ordinarily be a term
of the sale that the seller pays all outstanding community charges up to the
date of completion. This is confirmed by the provision of a Community
Administrator’s Certificate, which the seller procures (and pays for). The
charge for the provision of this certificate typically ranges from 50-100
Euros.

6. Capital Gains Tax. A seller of a Spanish property might potentially face
an obligation to account for any profit in Spain and/ or in their home country
(if a non-Spanish resident). But this is a case-specific issue, so advice
should always be sought in both jurisdictions before proceeding with a sale, to
ensure full fiscal compliance.

6. Legal Fees. Expert independent legal representation is essential
when selling a Spanish property (please see our previous Blogs for details).
The cost depends on the value of the transaction and its complexity. But
typically, 0.75- 1% plus IVA (usually subject to a minimum fee level) should be
budgeted for.

7. Bank Charges. Bank charges in Spanish property transactions can be
surprisingly high. Some Spanish banks even charge to receive funds; and always
to transfer funds following completion. Often the charge is a significant %.
So, this should be confirmed in advance. If net sale proceeds are to be
repatriated to the seller’s country of origin, then (if outside the Eurozone),
a specialist Foreign Exchange broker should be used. This will improve on the
direct bank to bank FX rate; and there is then greater control over the timing
of the transfer; and agreement of the applicable FX rate. This specialist
service can also be useful, in case Tax Authority source of funds certification
is required.

8. Mortgage Redemption Charges. If the property is owned subject to a mortgage, then
before agreeing a sale, the terms of redemption of the mortgage (or its
transfer to another property) must be confirmed with the bank. Sometimes a
substantial redemption fee can be payable.

9. Notary Costs. Although technically this should be a shared cost, it
is often the case that the buyer pays the Notary fee. But sellers need to be
aware that this is an area of possible negotiation. The amount of the Notary
fee will depend on the value and complexity of the transaction. But we
recommend that the budgeted figure is around 0.75-1% plus IVA. So it is
important to agree before exchanging contracts, how this cost will be borne.

10. Property Registry. The buyer almost always bears the Property
Registration cost, so this should not be an issue of concern to the seller. But
as an aside, the Property Registration cost also depends on the size/
complexity of the transaction; and also the type of property and its location.
The Property Registration cost is typically around 0.5-0.75%.

In conclusion therefore, most well
advised Spanish property owners will assume a typical range of 25-30% to cover
the ‘in and out’ costs and taxes when assessing the total cost of buying and
then later selling a Spanish property.

This general commentary is not
intended to be exhaustive; and case-specific legal advice should always be
sought.

The Legal 4 Spain team provides a
full property conveyancing service (buying and/or selling) throughout Spain. We
are always happy to provide a competitive cost estimate at the outset of a
transaction on a no-obligation basis.



Spanish Succession Tax Under Review Following European Court Ruling

Spanish Succession Tax Posted on Thu, February 02, 2017 15:27:50

September 29th, 2014

Overview

The European Court of Justice has
ruled that the Spanish Tax Authority’s succession tax system conflicts with the
European Union principles of freedom of movement of EU individuals and
circulation of money within the EU.

Spain must comply with this EU Court
Ruling by making changes to its succession tax system, to become EU compliant
within 6 months. Otherwise, Spain will face financial penalties.

As yet, there has been no formal
response from the Spanish Tax Authority as to its proposals to comply with the
EU Court Ruling.

Background

Spanish Succession Tax is not
administered centrally; or charged in a uniform way nationally; or at a single
rate; or subject to universal national allowances and reductions.

In many countries, the calculation
and charging of succession taxation is simplicity itself. However in Spain, it
is a highly complex system, which creates a great deal of uncertainty,
inconsistency and controversy.

At the heart of the complexity is
the fact that for Spanish residents, the responsibility for succession tax
administration lies with the 17 individual autonomous communities. Each
autonomous community has discretion as to charging basis; practice; and
allowances/ exemptions.

This fiscal quagmire alone creates
bewildering inconsistencies across Spain.

But the further peculiarity,
(central to the EU Court Ruling), is that for non-Spanish residents, succession
tax is administered by the Central Spanish Tax Office, which strips from
non-Spanish residents, the more ‘generous’ succession tax allowances/
exemptions which the autonomous communities otherwise offer. So, for non-
residents, a meagre succession tax-free inheritance amount of just below 16,000
Euros per spouse/ descendent beneficiary is allowed. Any inheritance received
above that value is taxable.

And as a side issue of great
consternation, it has been acknowledged that many Spanish families living in
Spain also suffer discrimination under the current system, according to where
(in Spain) their family members live.

So the current system not only
unlawfully discriminates against non- Spanish owners of Spanish properties. For
Spanish families also, its haphazardness can be financially ruinous.

The ball is now in Spain’s court, to
see how they will react, in order to bring Spanish Succession Tax into line
with the EU requirements.

It remains to be seen whether this
will be by centralizing/ standardising administration or (if that is deemed too
radical), at least a harmonisation of practice across Spain; and/ or a switch
of criteria from individual place of residency to asset location.

Commentary

• A period of just six months is
very tight indeed for Spain to implement a complete overhaul of- and radical
change to- its succession tax system.
• With Spanish elections on the horizon, it is perhaps unlikely the current
Spanish Government will progress matters with great dynamism. Any change will
benefit some, but disadvantage others. Succession tax can be an emotive issue
for voters.
• If the six month deadline is not met, then Spain will face EU financial
penalties; but meanwhile, continue to administer succession tax on the current
basis.
• Pending fresh Spanish legislation/ directives, any individual wishing to
challenge a Spanish Succession Tax charge or to reclaim previously paid tax,
will presumably need to bring their own legal case, citing the EU Court Ruling.
• If (to comply with the EU Court Ruling) Spain reduces the succession tax
impact on non-residents, to be equal to the current impact on residents, then
not only would that add fuel to the fire for a potentially massive number of
reclaimants, but this would guarantee a reduced future fiscal income; therefore
being hugely expensive for Spain.
• Conversely, if Spain were to increase the succession tax impact on residents,
to be equal to the current impact on non-residents, then the issue of demands
for refunds could be conveniently complicated. And overall, this would
significantly benefit Spain by increasing future succession tax revenue.
• So, a feasible strategy for Spain could be: to leave matters as they are for
now; and just pay any EU fine for interim non-compliance. Then, after the
elections, introduce new national regulations to standardize succession tax,
with the emphasis on asset location rather than individual residency. And in so
doing, phase out resident reductions, to equalize the impact of succession tax
across the board.
• Perhaps a cynical posture, to react to the EU Court Ruling by increasing
succession tax impact. But with the stark choice between potentially facing a
huge fiscal loss; and increasing fiscal revenue, it would be surprising for
Spain to choose the former option.
• Ultimately therefore, the EU Court Ruling could mark a turning point, from
which the overall impact of succession taxation in Spain, (although
standardized in some form, to satisfy EU requirements), actually increases- in
particular for Spanish residents.
• In terms of reclaims for previously paid tax, even if a clear reclaim route
is established, if the reclaimants had received credits against fiscal
liability in their own countries (e.g. pursuant to double taxation relief
treaties), it is assumed that any Spanish reclaim application would be denied.
• It is also likely that if a clear reclaim route is established, the process
itself would be complex, lengthy and therefore expensive to pursue. It is
unlikely that the Spanish Authorities would be inclined to make it a rapid,
simple and economical process.

Conclusion

As regards Spanish inheritance cases
currently in progress, the current Spanish legal/ fiscal obligation continues,
pending fresh Spanish legislation/ fiscal directions. So, inheritors of Spanish
assets are legally obliged to continue to pay succession tax on the basis of
the current system- even though it has been determined by the European Court of
Justice to be operating contrary to EU rules!

An uncomfortable position for
inheritors in the meantime. And furthermore, if they fail to make tax payments
when due, they may face interest/ penalties on late tax payments. But then
having paid tax sums due, although there are certainty changes anticipated to
the Spanish succession tax system, the exact nature and timing of the changes
is uncertain. And finally, if any reclaim option does arise, it is likely to be
lengthy, complex and expensive to pursue.

We will report further as soon as a
decision on the way forward for Spanish Succession Tax is announced.

This general commentary is not
intended to be exhaustive; and case-specific legal advice should always be sought.

The Legal 4 Spain team provides a
full probate service for properties and other assets anywhere in Spain. We are
always happy to provide a competitive cost estimate in the first instance, on a
no-obligation basis.



New European Law Affecting Wills and Inheritance in Spain

Spanish Wills &Estate Planning Posted on Thu, February 02, 2017 15:27:03

September 15th, 2014

A new European law will come into
full effect on August 17th 2015, with the intention of simplifying inheritance
cases across Europe.

This new law will apply to owners of
Spanish properties.

The problem the new law addresses

There has been legal uncertainty
previously in the estates of many non-Spanish owners of Spanish properties, as
to whether Spanish succession law applies or the owner’s own national
succession law.

The distinction is particularly
important for English owners of Spanish properties, where their own (i.e.
English) succession law effectively enables them freely to choose their heirs
(including as to Spanish assets), without limitation in the majority of cases.

Conversely, if an English owner of a
Spanish property were to choose (or be legally forced) to follow Spanish
succession law, then a strict division of the Spanish estate would be imposed
under Spanish law- with a minimum of two thirds passing to descendents; and
very limited discretion generally as to who receives the Spanish estate.

The solution provided by the new law

The new law gives people affected by
the problem, choice as to which succession law applies to their estate.

Well advised English owners of
Spanish properties will in any event, have already made separate Spanish Wills
in anticipation of the new law, clearly electing for their own national
succession law to apply. So they can be certain that their Spanish estate will
pass as they wish; and not pursuant to the strict Spanish legal requirements
(which in the vast majority of cases, are incompatible with English testators’
actual wishes).

In any event, English (and indeed
other nationality) owners of Spanish properties are advised to take this
opportunity in anticipation of the new law, to review their Spanish Wills with
their legal advisers, to ensure that they have clearly and unambiguously chosen
for their own national succession law to apply to their Spanish assets (if that
is what they wish). Also, to ensure that their Spanish Wills are in all other
respects, fully up to date; legally compliant in Spain; and tax efficient.

In the event of a failure of by an
English owner of a Spanish property to leave a valid Spanish Will electing for
English succession law to apply to their Spanish estate, the position under the
new law will be determined by a new statutory ‘habitual residence’ test, such
that:

• If the English owner of the
Spanish property is habitually resident in Spain at the time of death, then
Spanish succession law will apply to the Spanish estate.
• If the English owner of the Spanish property is habitually resident in
England at the time of death, then English succession law will apply to the
Spanish estate.
• If the English owner of the Spanish property is neither habitually resident
in Spain at the time of death nor in England, then it could be either English
law or the law of the actual country of habitual residence. This scenario would
need to be legally determined on the circumstances of the case.

Conclusion

In order to avoid uncertainty-
bearing in mind also that many people change residential status in the final
period of their lives, particularly due to healthcare considerations- it is
always best not to rely on the ‘default’ position under the new law. Instead,
it is always best practice for a Spanish property owner to sign a professionally
prepared, up to date Spanish Will with a clear statement of their wishes as to
the succession of their Spanish estate. This can also ensure that any up to
date tax saving opportunities are used to their full advantage.

This general commentary is not
intended to be exhaustive; and case-specific legal advice should always be
sought.

The Legal 4 Spain team provides a
full estate planning and Will writing service for properties and other assets
anywhere in Spain. We are always happy to provide a competitive cost estimate
in the first instance, on a no-obligation basis.



Costs of Owning a Spanish Property

Sale of Spanish Assets Posted on Thu, February 02, 2017 15:25:39

September 1st, 2014

Before committing to
the purchase of a Spanish property, it is important to have a full
understanding of the on-going costs and taxes associated with Spanish Property
ownership.

1. Rates (IBI/ SUMA). Town Hall rates are payable by almost
all Spanish property owners (whether resident in Spain or not). The amount is
calculated by reference to the rateable (Catastral) value of the property- an
important figure, also for other taxation purposes. Some Town Halls charge
rates in installments; others in a single annual charge. Following a property
transfer, it can take the Town Hall up to a year to update their records with
the new owner’s name.

2. Rubbish Collection
(Regogida de Basura).
Some Town Halls
include rubbish collection services in the rates charge (above). But, some Town
Halls chare separately for this aspect of local services – either in
installments or annually. In applicable areas, all property owners have to pay
this, irrespective of whether or not they are Spanish resident; and irrespective
of the number of days they occupy the property, actually generating rubbish!

3. Non-Spanish Residents Tax (Renta de no residentes
imputada de Bienes Inmuebles).
This tax is payable annually in arrears by Spanish property
owners who do not live in Spain, but who own property in Spain for their
personal use. For example, the tax is payable by 31 December 2014 in respect of
the calendar year 2013. The tax is calculated by reference to the Catastral
value (see above). The Spanish Tax Authority in effect, charges a tax for the
lost opportunity of renting the property out- (which would otherwise generate a
taxable Spanish income). It is a difficult head of taxation to explain/
justify. Perhaps an assumption at one time was made that non-Spanish resident
property owners would rent out their Spanish property, but would not declare
the rental income to the Spanish Tax Authority. For legally/ fiscally compliant
Spanish property owners, it is generally regarded as an unfair tax; and
therefore an (unavoidable) irritation.

4. Tax on Rental
Income.
This head of
taxation is for owners of Spanish properties (whether resident in Spain or
not), who do actually rent out their property. The applicable rate of taxation
is 24.75%. Specific fiscal/ accountancy advice is needed in each case, not just
to meet fiscal filing requirements; but also to ensure that deductions and
allowances are properly applied, to minimize the taxation burden as much as
legally possible. If a non-Spanish resident rents out their property for only
part of the year, then an apportionment has to be made between the period of
imputed rental income (see 3 above) and actual rental income.

5. Wealth Tax. Both Spanish residents and non-residents
need to consider whether they are liable to pay Spanish wealth tax each year.
The Spanish Tax Authority regularly changes the requirements. Generally, the
exemptions are substantial. In the vast majority of cases of non- Spanish
resident owners of Spanish properties, as it is only their assets in Spain
which are taxable, the allowances are more than sufficient to provide a full
exemption.

6. Community Charge. The vast majority of Spanish properties
form part of a Community of owners. Each individual owner must pay their
proportionate part of the Community (or block) costs. The amount and regularity
of payments depends entirely on the nature of the Community; its facilities;
and timing of the expenditure cycle (i.e. whether in a period of routine
maintenance/ expenditure, or if exceptional work is to be carried out). In the
purchase of a Spanish property, a buyer must: obtain Community charge payment
history; review recent Community meeting minutes and resolutions; and make
enquires of the Community Administrator, in order to be clear as to the
anticipated liability.

7. Parking/ Street
Access.
Some Town Halls
enforce an obligation for Spanish property owners to pay an annual charge/ tax
for a ‘Vado Permanente’, being a right of access from the property on to the
adjoining road (where applicable). Again, this is a difficult tax to explain/
justify, as it presupposes that the property owner has paid the rates on the
property; and local car tax. But then an additional annual tax is levied in
applicable cases, in order to be entitled to move your car from your property
on to the public road! At the time of purchase of a Spanish property, an
enquiry should be made of the local Town Hall to see if this charge applies.
Also in some areas, there are street parking/ local residents’ street parking
charges.

8. Utilities/
Services.
Spanish property
services costs are very much case-specific; and a full understanding is
necessary before buying a Spanish property. The nature of the services
available varies according to the location of the property and the type of
property. For example, some areas have mains gas supply, others don’t. Rural
properties may have Community arrangements for the (non-mains) supply of water;
some Communities include mains supply water charges in Community charges,
others do not. Most properties have postal delivery services, but some do not.
Also, following the purchase of a Spanish property, in order to have services
contracts put into new owners’ names; independent certification of the
installations (and updating works) may be necessary. So in all cases, this must
be carefully investigated and budgeted for.

9. Insurance. In all cases of Spanish property
ownership (as it differs from property to property), a full understanding is
needed of the extent of the insurance cover which applies through the Community
services/ charges; and the ‘gap’ which the individual property owner needs to
cover- either with their own insurance policy or accepting the risk personally.
In many cases, a good starting point is to ask the insurance agent who deals
with the Community cover. It can be beneficial to have the Community insurance
and individual homeowners’ insurance through the same agency/ insurance
company, in order to avoid the risk of gaps in insurance protection.

10. Bank Account. All Spanish property owners need to have
a Spanish bank account, for the payment of property outgoings/ local taxes,
etc. Spanish banks distinguish between Spanish residents’ bank accounts and
non-residents’ accounts. The account charges also vary according to the type of
account. In selecting a Spanish bank, branch location and facilities are
obviously important factors. However, a full understanding is also necessary of
the applicable charges. Unlike many other countries, banks in Spain charge
separately for everything imaginable- account holder certification; account
‘maintenance’; issue of debit card; obligatory postage of statements (despite
internet access); receipt of funds into the account; funds withdrawal; issue of
cheques; etc. Banking in Spain can be a surprisingly expensive business; and
there are significant differences in charges from bank to bank. So, claims of
‘standard practice’ should be disregarded; and as with other services,
‘shopping around’ is recommended in selecting a Spanish bank.

This general
commentary is not intended to be exhaustive, but a handy guide to some of the
regular costs/ taxes Spanish property owners face.

The Legal 4 Spain team
provides a full property conveyancing service (buying and/or selling)
throughout Spain. We are always happy to provide a competitive cost estimate at
the outset of a transaction on a no-obligation basis.



Costs of Buying a Spanish Property

Sale of Spanish Assets Posted on Thu, February 02, 2017 15:24:53

August 12th, 2014

In budgeting for the
purchase of a Spanish property, buyers should be prepared for all the
associated costs and taxes, to ensure that the total cost of purchase can be
properly assessed.

The associated costs
and taxes can easily add up to an additional 12-15% on top of the purchase
price; and the following is a reminder of the principal areas to consider.

1. Survey/ independent
valuation.
The buyer must
be satisfied as to the property’s true open market value and its physical
condition, before entering into a contractual obligation to purchase.
Independent professional advice is recommended; and the cost will depend on the
nature and complexity of the property and advice needed. But typically (if not
included in a mortgage budget), 0.5-1% plus IVA should be budgeted for as a
minimum, for obtaining reliable independent professional advice of this nature.

2. Purchase taxes. The rate of purchase tax the buyer faces
depends on where the property is situated. Also, whether the seller is a
developer selling a newly built property; or it is a private/ resale of a
property. But this tax alone can be as high as 10% of the purchase price, so it
is essential for buyers to be clear at the outset as to the applicable tax rate
for an intended purchase.

3. Tax retention on a
Spanish property transfer.
When
a buyer purchases from a non-Spanish resident seller, the buyer has to retain
3% of the declared purchase price and pay this to the Spanish Tax Authority.
But although the buyer takes responsibility for this retention and accounting
to the Spanish Tax Authority, it is actually an amount paid by a non-resident
seller on account of the seller’s own tax liability. So, although confusion
over this issue does arise, this ‘cost’ is actually a deduction from the amount
the seller receives; and it is therefore a seller’s cost, not a buyer’s cost.

4. Estate Agency Fees. The buyer should only be responsible for
agency costs if a property finding service has been contracted. Otherwise, the
estate agency fee should ordinarily be a cost covered by the seller.

5. Mortgage costs. A buyer who is taking out a mortgage to
fund a Spanish property purchase typically needs to budget on an additional
cost exposure of 2% plus IVA, taking into account: survey/ independent
valuation (to be recommended even if there is no mortgage- see above);
additional Notary/ registration fees; and lender charges.

6. Legal Fees. Expert independent legal representation
is essential when buying a Spanish property (please see our previous Blogs for
details). The cost depends on the value of the transaction and the complexity.
But typically, 1-1.25% plus IVA (usually subject to a minimum fee level) should
be budgeted for.

7. Bank Charges. If the purchase monies are coming from
outside Spain and from non-Euro currency, then a specialist Foreign Exchange
service should be used. Otherwise, up to 3- 5% can be ‘lost’ in a direct bank
to bank FX/ transfer.

Additionally, some
Spanish banks even charge to receive Euro transfers above a certain value. So,
sometimes it can be cheaper to make multiple smaller transfers. This should be
checked in advance.

Spanish banks will
also charge for issuing the bankers’ draft on completion, and that alone can
cost between 0.25-1% of the amount being paid. The type of cheque required and
applicable charges should be specifically discussed with the bank in advance.

8. Notary Costs. Although technically this should be a
shared cost, it has become normal practice in most Spanish property sales for
the buyer to pay the Notary fee, but this is an area for possible negotiation.
The amount of the Notary fee will depend on the value and complexity of the
transaction, but we recommend that the budgeted figure is around 0.75-1% plus
IVA.

9. Property Registry. The buyer almost always bears the
Property Registration charges. Again, the amount will depend on the size/
complexity of the transaction and also the type of property and location. But
we recommend that the budgeted figure is around 0.5-0.75%.

10. Sellers’ Costs. Thinking ahead to the future sale of a Spanish
property should also be part of the buyer’s assessment at the time of purchase.
In the following weeks, we will post a summary of sellers’ costs in a separate
Blog. But, all matters considered, the total cost of selling a Spanish property
is generally not dissimilar to the total cost of buying (so a typical guideline
range being 12-15% of sale price). Additionally, a seller might also face a
capital gains tax liability following the sale.

In conclusion
therefore, most well advised Spanish property buyers will typically assume a
range of 25-30% to cover the ‘in and out’ costs and taxes when assessing the
total transactional cost of Spanish property ownership.

The Legal 4 Spain team
provides a full property conveyancing service (buying and/or selling) throughout
Spain. We are always happy to provide a competitive cost estimate at the outset
of a transaction on a no-obligation basis.



Don’t Fall for the Summer Scams in Spain

Spanish Legal Issues Posted on Thu, February 02, 2017 15:24:09

July 24th, 2014

Summer in Spain
inevitably brings an unwelcome visitor– the bogus gas inspector, preying on
those who are enjoying their relaxing holidays. Like all the best scams, this
one evolves from an element of truth. In Spain, mains gas supply is relatively
scarce, so supply is usually by bottled gas- and the pipes and apparatus must
be inspected every 5 years by law.

The scam works as
follows: a ‘representative’ usually wearing a uniform and carrying a clipboard
turns up unannounced, to carry out a ‘compulsory gas inspection.’ An ID may be
fleetingly presented; and even forced entry into your property attempted. After
a brief inspection, the gas installation is condemned, and the financial pain
commences. Several recent cases we have heard of have involved charges of
between 300-500 Euros for replacement of an out of date pipe, yet all the
‘inspector’ did was dust the pipe- usually actually in need of renewal, so
still left in a dangerous state.

Any official company
would make an appointment to carry out an inspection, and their employee’s ID
should be offered for thorough examination. The two principal companies dealing
with gas supply in Spain, Repsol and Cepsa, may contract out the inspections to
authorised companies. Your local Ayuntamiento (Town Hall) should be able to
tell you who is authorised to carry out gas inspections in your area. Make a
note of the name of the company and contact details, so you can check that your
gas inspector is legal.

If you have any doubts
at all, refuse entry and do not sign anything. If your uninvited caller refuses
to leave, threaten to call the Police. This will usually see them on their way.
Sometimes these conmen operate in pairs- one of them ‘casing’ the property with
a view to burglary either then or at a later time; whilst the other one carries
out the ‘gas inspection,’ thus perpetrating two scams in one.

Some very obvious, but
worthwhile precautions are:

1. Never allow any
casual callers into your home.
2. Do not sign anything until it is fully understood; and the service provider
verified.
3. Never allow unsupervised access to your home.
4. For official matters, always ensure you speak a common language or have an
interpreter present.

Legitimate company
representatives or tradesmen will not object to your verifying with their
office, and the vast majority of (legitimate) Spanish companies operate an
appointments based system anyway, so you should always receive advance notice
of any inspection visits.

Another property
services related scam in Spain is operated by genuine but unscrupulous
employees of official companies. They may seek to sell other services (eg.
insurance or fumigation services). Sometimes an up-front deposit is requested
for bogus add-ons. Any such offers should be carefully scrutinised and never
agreed to on the spot, without further investigation/ consultation.

These crooks (when
dealing with Spanish and non-Spanish alike) capitalise on supposed ignorance of
householders- so be aware of the scams, to ensure that you are not separated
from your hard earned Euros!



An Introduction to Spanish Probate

Probate in Spain Posted on Thu, February 02, 2017 15:23:20

July 8th, 2014

Discovering that there
are Spanish assets in a non-Spanish estate gives rise to a number of issues in
preparing for the estate administration.

Some key points are:

Location of Death. If the death occurred outside Spain,
then the death has to be proved to the Spanish Authorities as the first stage
of the legal/ procedural work. This enables the compulsory search of the
Spanish Central Wills Registry to be carried out, to establish with certainty,
the presence or absence of a Spanish Will.

Will. A major factor in assessing the
complexity of a Spanish probate case (and of course, actual beneficial
entitlement) is determining whether: there is a valid Spanish Will; no Spanish
Will but a foreign Will covering the Spanish assets; or no Will at all. The
search of the Spanish Central Wills Registry confirms whether or not there is a
valid Spanish Will; and also (if there is), the date and Notarial location of
the last such Will. However, it should be noted that the Spanish Authorities
will admit evidence of later revocation of such a registered Spanish Will by a
subsequent non-Spanish Will. (Hence, drafting of English Wills where there is a
pre-existing Spanish Will has to be undertaken with considerable care).

Location of Assets. Generally, it is unnecessary that the
legal practitioner appointed to deal with the Spanish assets is in the actual
locality of the Spanish assets. Administration of Spanish estates for
non-Spanish individuals is a specialised area of legal practice. So, the key
factor in appointing a legal practitioner is not their actual location, but
that they have the necessary dual-jurisdictional qualification and experience
in dealing with the succession of Spanish estates for non- Spanish individuals.

Asset Type. The exact legal procedures and necessary
documentation in a Spanish probate case will be determined principally by the
type of Spanish assets. In some cases, a simple monetary legacy left in a
Spanish Will can involve the same amount of procedural documentation and legal/
Notarial work as the succession of a Spanish property.

Property ownership. The regime of property ownership in
Spain for multiple owners is the equivalent of tenants in common in the UK.
Spain also has a forced heirship law which may-or may not- apply in dealing
with the Spanish assets of non- Spanish individuals, depending on the
circumstances.

Power of Attorney. A Spanish representative is generally
appointed under Power of Attorney, in order to minimise inconvenience for
beneficiaries, as the Spanish inheritance process involves a significant amount
of personal attendance. Estate administrators may also need to be represented
in Spain (under Power of Attorney), in addition to beneficiaries. The form and
wording of the estate legal documentation will determine this.

NIE Number. Having a Spanish fiscal number is
obligatory for beneficiaries and sometimes for estate administrators also.
Generally the NIE number can be obtained under Power of Attorney, without the
need for the applicant to be personally present in Spain.

Apostille. Non-Spanish legal documents which are
required to prove entitlement (Death Certificates; Grants of Probate, etc) may
need to be Apostilled by the Foreign and Commonwealth Office, in order to be
legally admissible in Spain. In some cases, they must also be translated and
certified by an official translator. An advantage of the existence of a valid
separate Spanish Will is that it reduces the complexity and extent of the
documentation, which has to be produced to the Spanish Authorities in a Spanish
probate case.

Taxation. The Spanish Succession Tax liability in
a Spanish probate case must be very carefully assessed at the outset. The more
remote the relationship between the deceased and the beneficiary, and the
higher the value of the estate, the higher the tax rate. There are other major
differences of approach between Spain and other countries- for example in
Spain, there is no automatic inter-spouse exemption. Also for real estate
interests, in addition to Spanish Succession Tax, there is also usually a local
Town Hall (Plus Valia) tax liability payable on succession. Although post-death
Will variations are not allowed in Spain, depending on the family circumstances
and the estate documentation, it may be possible to achieve alternative
succession routes in the succession process; thus potentially reducing the tax
exposure. Any such strategy in the case handling must be determined right at
the outset, agreed upon with the beneficiaries; and implemented during the
course of the case handling. It cannot be addressed retrospectively.

Banks. Dealing with bank accounts in Spanish
probate cases can often be the longest part of the process. Succession of bank
accounts is not addressed at local bank branch level in Spain. The bank’s
central legal department instead deals with succession matters. Direct contact
with the bank’s central legal department is generally fairly difficult. For the
Spanish banks, succession work is decidedly low priority. So, considerable
patience is required on the part of the practitioner and beneficiaries!

Sale of Inherited
Assets.
In order for
beneficiaries to be able to sell registered Spanish assets, the Spanish probate
process must be completed first. For relatively minor estate assets such as
vehicles, this can be inconvenient, as there can be a significant delay, before
a sale can be completed.

Conclusion. As the exact procedures and
documentation are always case-specific, an initial full analysis of a Spanish
probate case is always essential. This ensures certainty from the outset as to
the procedural steps which will be required; and the information and
documentation which will need to be produced. Unless a Spanish probate case is
carefully planned and programmed from the outset; and meticulously managed as
matters proceed, there is a very significant risk of delays. Any such delays
can be frustrating and time consuming for the practitioner; and costly for the
beneficiaries- as Spanish tax liabilities can increase over time, with the
imposition of interest and penalties.

The Legal 4 Spain team
is always available to provide preliminary advice on a no-obligation basis in
relation to probate cases, which include Spanish assets.



Always Use independent lawyers in Spanish Property Transactions

Sale of Spanish Assets Posted on Thu, February 02, 2017 15:22:36

June 26th, 2014

It is now a clearly
established general principle for Spanish property transactions, that neither
the seller nor the buyer can or should leave it to the estate agent to deal
with the legal work in the sale or purchase. Otherwise this puts the estate
agent in an impossible position professionally; and the seller/ buyer does not
necessarily get the benefit of the full professional service which they need,
in order safely to deal with Spanish properties.

Quite aside from the
very obvious conflict of interest issues, the skill set and professional
regulation and accountability between the legal and estate agency professions
differ to a significant extent. So, it is very rare that a well informed buyer
or seller of Spanish property will confidently conclude that their interests
are properly protected if represented by the same person for both the estate agency
role and the legal function.

The more experienced
and professional Spanish estate agents recognise and accept this; and due to
the highly damaging publicity of scandals and scams in Spanish property
dealings in the recent property boom, professional operators in the Spanish
property market are more concerned than ever to ensure that clients should not
be exposed to this type of
pitfall in Spanish property transactions.

However, there is a
separate ‘variation on the theme’, which Spanish property buyers and sellers
also need to be wise to; and that is: ‘legal advisers’ who are either connected
to or (perhaps of even greater concern) employed by the estate agent dealing
with the sale or purchase.

As an example, an
associate was recently consulted on a Spanish property sale, with a sale/
purchase contract, which oddly contained extensive skillfully crafted legal
drafting to deal with the protection of the estate agent’s commission. But
then, just brief and sloppy wording as to the sale/ purchase, which left the
seller legally at risk; and unable easily to withdraw from the sale- even in
the event of a buyer’s breach of contract.

This was completely at
odds with the reality of the transaction. What should have happened was that
the property sale/ purchase should have been addressed as the main issue; with
the estate agent’s commission very much as a secondary concern.

It transpired that
this contract had been (perhaps unsurprisingly) prepared by the estate agent’s
‘in house lawyer’. This explained the focus on the estate agent’s commission
rather than the sale and purchase agreement.

Some points Spanish
property buyers/ sellers should bear in mind:

1. The Solicitors’
Regulation Authority in the UK (by way of an example) has expressed concerns
about the high level of risk of a conflict of interests where a lawyer employed
by (and therefore seen to be advising) the estate agent is also dealing with
the legal work for the buyer or seller in the same transaction. There are
specific professional conduct rules; and non-compliance can lead to grave
consequences for the professional in question.

2. As such, it is a
well established principle in the UK (and indeed other countries) that the
estate agency representation on one hand, is one professional relationship; and
on the other hand, the legal representation of buyer/ seller is entirely
separate and independent.

3. Many non-Spanish
buyers of Spanish properties, who are very cautious in their own home
countries, following ‘normal’ conventions in terms of taking independent
professional advice in property transactions, come to Spain, and (for some
curious reason) relax and ‘take their eye off the ball’; and take risks that
they wouldn’t dream of taking at home. The best advice when addressing a
Spanish property transaction is to consider all the steps and precautions you
would take if buying or selling a property in your home country; and as far as
possible, apply the same principles to the transaction in Spain. In fact, in
nearly all respects, there is no reason at all why things should be any
different in Spain. Indeed, if anything, people should proceed even more
cautiously in Spain, given the well publicised cases in recent years
(particularly relating to planning issues) where investors in Spanish property
have lost their property or their investment. This underlines the need for top
quality, independent legal advice in Spain.

4. The reality in
Spain is therefore the same as in the UK/ other countries- that the functions
of the estate agent and the legal adviser are entirely distinct; and should
therefore be carried out by separate and unconnected professionals, to ensure
that the three parties with a substantial interest in a property transaction
(namely the buyer, the seller and the estate agent) are each independently advised.
Each needs their interest fairly protected, to ensure an appropriate balance of
the respective interests.

5. In some cases,
estate agents who disregard these conventions (against the interests of their
clients, it has to be said), convince the client that the client is saving
money; as the estate agency fee of 3, 4 or even 5% (plus IVA) includes legal
representation. But as this is not independent legal representation, properly
safeguarding client interests, it is therefore impossible for this to be seen
as ‘good value’. Better that the corresponding proportion of the estate agent’s
fee in such cases be applied instead to the engagement of entirely independent
legal advice. Economically, this should make no difference to the buyer/
seller, as the same total fee is payable. And it should make no difference to
the estate agent, as one assumes that there is a cost to ‘their’ provision of
legal services in this regard, so unless they are profiting from that also, the
release of this function and the corresponding cost to an independent
professional should be economically neutral for them.

6. If the estate agent
indicates there is no cost to the provision of ‘in house legal representation’;
then that also raises alarm bells, as it is impossible to provide a high
quality professional service such as legal property sale/ purchase
representation without any cost base- unless the skill/ quality/ qualification/
regulatory compliance of the person/ people behind the legal service simply
isn’t what it should be.

7. This article should
not in any way be viewed as a criticism of estate agents in Spain generally. On
the contrary, the reality is that the vast majority with whom we work are truly
skilled and knowledgeable property professionals- expert negotiators and transaction
facilitators. It is unfortunately the very few who potentially spoil it for the
many. And this is a matter of deep frustration for all who are committed to
building confidence in the Spanish property market as a secure destination for
inward investment. You are referred to our Blog of 1st October 2013, with
advice on appointing estate agents in Spain (prepared with the helpful input of
professional Spanish estate agent contacts, as indeed has been this article).

8. Equally, a Spanish
property buyer/ seller has to be extremely careful in selecting a legal adviser
on a Spanish property transaction. You are referred to our Blog of 27th
November 2013, with some general advice/ pointers in this regard. The title
‘abogado/ lawyer’ does not automatically imply all the necessary knowledge and
experience to be able to advise a non-Spanish national dealing with Spanish
property.

In relation to any
proposed Spanish property sale/ purchase, please contact the Legal 4 Spain
team, to ensure you have the best quality, completely independent legal
representation to protect your interests fully; but always at a competitive
cost.



10 Points to bear in mind approaching the Spanish tax return deadline

Spanish Legal Issues Posted on Thu, February 02, 2017 15:21:44

June 6th, 2014

Dealing with the
annual Spanish income tax return (‘Declaración de la Renta’) for Spanish
residents/tax payers is not one of our professional service areas.

Nevertheless, it is an
issue that concerns many of our clients and contacts; and we have been asked to
circulate some general information about it.

The final date for
submission of Spanish tax returns is 30 June. However, for cases where tax is
to be settled by direct debit, the cut off point is earlier. In any event, it
is recommended that filing/ payment is submitted by mid June at the latest, to
avoid the risk of last minute ‘hitches’.

This summary does not
relate to non- Spanish residents owning properties in Spain. The rules that
regulate their obligation to file an annual Spanish (non-residents’) tax return
in Spain differ substantially. That subject will be covered separately.

Some points of general
information we wish to publicise are:

1. Key dates. Spanish tax returns to be filed by 30
June 2014 deal with the calendar year from 1 January 2013 to 31 December 2013.
Financial matters from 1 January 2014 to 31 December 2014 will be covered by
the tax return to be filed by 30 June 2015.
2. On line filing. It is recommended that the tax returns are filed
on line (in preference to posted, paper forms); as it is relatively
straightforward and more secure.
3. Professional advice is recommended. It is possible to deal with
Spanish tax returns personally. However, we recommend that a certified ‘gestor’
(administrator/ accountant) is consulted; to submit the tax return for the
client. For straightforward cases, the charge is generally fairly modest.
4. Avoid errors! Errors in tax returns can be unexpectedly complicated
and extremely time consuming and lengthy to regularise subsequently. Accuracy
of the data provided and precision in the completion of the tax form in the
first place are therefore crucially important. As stated above, professional
advice is recommended.
5. Claim allowances! There may be allowances/ credits/ deductions
depending on the specific circumstances of the tax payer. To ensure all
applicable benefits are correctly claimed, professional input is recommended,
as stated above. Also, advance planning and documentation collation is
essential, to ensure nothing is missed in a ‘last minute rush’. Some examples
of the benefits to consider are: the personal tax allowance; additional
allowance for married couples declaring jointly; employment allowance; pension
contribution deductions; and pension benefits.
6. Late filing penalties. Failure to submit a tax return on time
can result in a late filing penalty (usually 100 Euros).
7. Increases in late-paid tax. Failure to submit a tax return on
time when tax is payable can result in additional tax charges- a periodic
increase in the tax amount plus interest.
8. Exemption from obligation to file. There is an exemption from
the general obligation to file a tax return for those earning under 22,000
Euros annually when tax is deducted at the employment income source. But beware
the ‘small print’. In each case when an exemption is relied upon, there are
various exceptions to this general rule. For example, cases where: there is
foreign employment income; or more than one source of income.
9. File early; reduce rebate delays. An advantage of filing the tax
return sooner rather than later is that it brings forward the date of receiving
any rebate due. Rebates can in any event, take several weeks (if not months) to
come through.
10. Information required. In order to complete the tax return, the
information/ documentation varies from case to case; but for employment income,
an employer’s certificate is required; receipts for property rates payments;
end of year certificates for any bank accounts; statements of any investment
income/ disposals/ gains; and any rental income details.

There is a lot of
information about Spanish tax returns on the internet, but much of it is out of
date and/ or confusing. Caution is therefore strongly advised. There is also
the on line guidance provided by the Spanish Tax Authority- indeed, in English
for non-Spanish speakers. But many find that resource complex and unwieldy.

For these reasons (and
the others stated above) in our opinion, a personally appointed ‘gestor’
(engaged in good time), is generally the best option. This assists in avoiding
the pitfalls in this exercise; and ensuring that the benefits due are properly
provided for and claimed- thus ensuring full legal compliance, but tax payment
at the lowest level legally and legitimately possible.



10 Legal Requirements for Drivers in Spain

Spanish Legal Issues Posted on Thu, February 02, 2017 15:21:02

May 23rd, 2014

In light of the
recently updated traffic laws in Spain, we have obtained from the Guardia Civil
an up to date list of the points they are routinely required to check in Spain,
when stopping a driver in a ‘control’ (check point), or in the event of a
traffic offence.

1. A ‘Carnet
de Conducir’ (driving licence)
which is valid for Spain, permitting
the driver to drive the vehicle in question. This must be the original document
or a copy certified by an official Spanish body- eg. the ‘Ayuntamiento’ (Town
Hall) or ‘Jefatura Provincial de Tráfico’ (Provincial Traffic Headquarters).
2. A ‘Documento de Identidad’ (ID document eg. Passport). This
is required to verify the identity of the driver and validate the driving
licence in cases where the driving licence does not include a photo.
3. The ‘Permiso de Circulación’ (vehicle registration
document, showing the vehicle description and registration number; and owner’s
name and address). This should be the original document (or certified copy, as
point 1. above).
4. The ‘Ficha Técnica’ (the statement of technical
specification, which also contains the record (and should have the up to date
stamp) of ITV (periodic vehicle inspection) for vehicles requiring an ITV. This
should be the original document (or certified copy, as point 1. above).
5. The ITV (periodic vehicle inspection) sticker. The ‘Ficha
Técnica’ contains the written record of the inspection history, but it is also
a legal requirement (for a vehicle for which an ITV is necessary) to have the
ITV sticker clearly displayed.
6. The most recent receipt for the local Town Hall car tax.
Although this is not on the official list of requirements, it is recommended to
keep it with the paperwork, to be able to demonstrate compliance with all
national and local requirements.
7. The original current certificate of car insurance (or certified
copy, as point 1. above); and proof of payment of the annual premium.
8. Two warning triangles and a spare set of bulbs.
9. Two reflective safety jackets (kept inside the car-
accessible without leaving the car).
10. A spare set of glasses if the driver wears glasses for
driving.

The above is a
current, general guide to the basic requirements, rather than an exhaustive
list. In the case of non- standard passenger vehicles; or any case-specific
individual circumstances, there could be additional requirements. Guardia Civil
‘Cuarteles’ (garrisons, attended by officers for contact with members of the
public) are located all over Spain. If in any doubt, attend in person and
request guidance.

Non-compliance with
these simple and basic rules can lead to fines or penalty points.

So, please SHARE this
with your friends and contacts who live in Spain, or visit and drive in Spain,
to help them to be lawful (and to avoid fines/ penalties!).



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