Lawyer Raymundo Larraín outlines the procedure to gift property (and money) in Spain attracting little to no tax.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 20 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2023. Plagiarism will be criminally prosecuted

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of July 2023

Introduction

The continued (vertical) hike in interest rates pursued relentlessly by the ECB (basically to mend its own errors on printing money to no end during the Covid pandemic, which generated a huge inflation bubble) has continued to erode people’s income. In plain English, we are all poorer thanks to the errors of central banks. The good news is that no one in these central banks will be held accountable for their gross incompetence (not even a slap on their wrist), yay! The bad news is that all of us punters get to pay for central banker’s mistakes – as in literally. Nay!

The bottom line is that we are all now collectively poorer as a result of their gross negligence, and as a result many families are struggling to make ends meet as they are out-of-pocket with the rising cost of loans and life in general (inflation). This translates to loving parents lending a helping hand to their offspring, so they can get their paws on the first rung of the property ladder.

Gifting property

In today’s article, we outline a method so that parents – or other family members – support their children (or loved ones) financially so they can, for example, buy their first property. But it is also extensive to gifting properties between spouses, other family members, etc.

My professional experience is that most foreigners are blissfully unaware of the legal procedure involved on gifting property (or money) in Spain to their loved ones saving huge amounts in tax in the process.

Gifting property arises when:

1. Joint owners (i.e. spouses) decide to re-arrange property holdings.
2. When parents gift their property, or money, to their children.
3. When property owners gift their property to other family members, or friends.

Gifting property (or money) has indeed become very popular in Spain, as several regions have approved new tax laws that suppress inheritance and gift tax (Andalucia, Madrid, Galicia, etc). People are jumping at the chance of paying little to no tax in case these tax laws are changed again in the future when a new government takes power …

Taxes paid by the giftor:

1. Capital Gains Tax
2. Plusvalia tax

Taxes paid by the giftee:

1. Gift tax (in several regions in Spain this is almost zero)

Additional expenses:

1. Lawyer’s fees
2. Notary fees
3. Land registry fees

Gift procedure

A lawyer needs to be retained from the outset to organize & supervise the gift deed which will be witnessed by a Spanish notary. This requires planning ahead carefully to mitigate your tax bill. If you fail to plan, you plan to fail.

If the legal procedure is not followed correctly (i.e. you do not bother to instruct a lawyer and attempt do it on your own), you will likely not qualify for the lenient tax breaks available and be slammed with a huge tax bill.

Please note we are only giving in this article a (very) basic outline on how the procedure works, the devil is in the details.

Dissolution of joint property ownership (DJPO)

If existing joint owners wish to re-arrange their property holdings, they can opt instead for a DJPO, which reduces taxes by as much as 86%, or more! More on this in our in-depth article: Dissolution of a joint property ownership.

A DJPO applies when:

1.- In divorce or separation proceedings. Couples owning property jointly may decide to split up. Taking for granted they own a property in equal shares, one of them decides to sell their 50% to his ex-partner. The ex-partner will pay him/her his quota.

2.- Re-arranging inheritances. Beneficiaries of an inheritance transfer their quota on a property to a fellow heir. E.g. Sisters who inherit property transfer a share between them.

3.- Re-arranging property holdings between family and friends. Stakeholders such as family, friends, or investors co-owning a property may decide to re-arrange their holdings.

Conclusion

If you care for your loved one’s well-being, and want to help them out in life, all the while paying little to no tax, you may wish to consider this option I explain above.

At LNA we will gladly assist you to re-arrange your property ownership by way of gifting it. Just give us a call, and one of our friendly staff will speak to you.

LNA offers this service: Gifting property & money

“If you fail to plan, you plan to fail.” – Benjamin Franklin

Benjamin Franklin (1706 – 1790). Founding Father of the United States. Exceptionally gifted statesman, scientist, inventor, diplomat, writer, printer, postmaster, and political theorist. He campaigned from early on for colonial unity, initially as an author and spokesman in London for several colonies. He was tasked to raise funds in Europe for the War of Independence. Malaga’s cathedral only has one tower (known as ‘La Manquita’), as the funds were gifted to 13 struggling colonies in their War for Independence against a mighty overseas empire. He was one of the drafters and signers of the Declaration of Independence of the 4^th July 1776. Appointed as the first United States ambassador to France, he exemplified the ingenuity and prowess of a young emerging American nation.

Benjamin was a politician in his spare time; nobody’s perfect.

At Larrain Nesbitt Abogados (LNA) we have over 20 years’ experience assisting clients buying, selling, or renting properties. We can also offer you a competitively priced accounting service to file your landlord taxes every tax quarter nationwide. We are also specialized in taxation, immigration & residency visas. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88, or by completing our contact form to book an appointment.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Ní neart go cur le chéile. VOV.

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

2023 © Raymundo Larraín Nesbitt. All Rights Reserved.

The Spanish government has approved another ‘temporary’ Wealth Tax on ‘big fortunes’ that is more about politics than economics, and likely to be counter-productive.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 19 years’ taxation & conveyancing experience at your service. We offer a wide range of over 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of December 2022

Introduction

Spain is different.

In order to better understand why Spain would approve a second Wealth Tax, I need to preface this article with a political digression on how we got here in the first place because this new tax is being introduced solely for political reasons, serving no other purpose.

Politics, always the politics

As frequent readers will recall, Spain already has in place another ‘temporary’ (read permanent) Wealth Tax, control over which was devolved to Spain’s 17 autonomous regions. This tax was once suppressed, and then reinstated again by a socialist government and applies nationwide (Impuesto de Patrimonio). Being a devolved tax Spanish regions have leeway to make adjustments as they see fit to the point of even suppressing the Wealth Tax.

In broad strokes, Spain is traditionally split into two ideological camps like many other countries:

1. Left-wing parties that favour higher taxes to finance the needs of an ever-expanding public administration, and increasing public expenditure to finance more services (health, education, etc).

2. Right-wing parties that favour low taxation and a slim but efficient public sector to dynamize the economy and increase employment.

These two opposing camps often clash on administrative and tax matters and coalesce on implementing different tax measures, depending on which side is ruling at any given moment.

Spain is now ruled at a national level by a coalition government of socialists and communists whose self-declared goal is to increase the fiscal pressure on taxpayers, which brings us to the new tax this article is about (known as ITSGF for short, explained below) to prop up an ever-growing public sector.

As I’ve already mentioned, Spain’s autonomous regions are run by governments of different political stripes. In the regions where centre-right parties have been elected like Madrid, Andalusia, and Galicia, they have put in practice (to great success) liberal fiscal policies that reduce taxation, even going so far as to suppress some taxes altogether like the original Wealth tax.

In these three liberal regions, as I have painstakingly recorded over the years through multiple articles, the economic phenomenon of Laffer’s curve can be observed. In a nutshell, this economic theory (penned by US economist Mr. Arthur Laffer) says that a tax reduction can actually increases tax revenue up to a certain marginal revenue point (only if supplemented by other measures, such as a reduction of public expenditure).

These regions have de facto suppressed both the Wealth Tax and Inheritance Tax, amongst many other tax instruments, as I’ve reported in several articles over the years:

• Andalusia to abolish inheritance tax in 2019 – 29th January 2019
• Andalusia, now a tier 1 region for low taxation in Spain -8^th July 2019
• Andalusia effectively abolishes the ‘Wealth Tax’ in the region – 19^th September 2022

The liberal fiscal policy pursued by these three regions has triggered strong economic growth with welcome consequences in those regions. Besides a notable increase in tax revenue, the unemployment rate has fallen, and foreign investment has increased. This resounding success is in stark contrast to the rest of Spain where economic policy has strangled the economy through higher taxation, fostering huge levels of unemployment.

Despite the success of liberal regions, the national government in Madrid has decided to enact a ‘new’ (second) Wealth Tax to quash the fiscal competencies of liberal regions under the cover of harmonising (read equalizing) the fiscal policy nationwide to avoid what they label as ‘unfair’ competition and fiscal dumping (Spanish anglicized made up word).

The frustrating thing is that all regions in Spain have the same freedom to pursue such liberal policies if they want to, prompting economic success on its wake, but they purposely deny themselves such an option because of their own ideology, which drags down their regional economies.

For example, take the case of Catalonia. This is one of Spain’s industrial and financial powerhouses whose rightful place should be at the forefront of the economy. However, the regional government has held the economy back through a series of misguided policies that reduce incentives for local companies to create jobs, and deter foreign investment. Take, for example Barcelona’s hostility to foreign property-investors.  

In a nutshell, the purpose sought by our government in Madrid through this new tax bill is primarily to exert control, negating all the successful fiscal policies lawfully passed by these three liberal regions freely exercising their constitutional rights, and bring them to heel in line with the rest of Spain’s (failing) regions under the government’s direct control.

This will no doubt have serious repercussions for the Spanish economy, because Madrid is Spain’s financial powerhouse. If you mess up Madrid’s economy, the country will hurt (badly).

New solidarity tax on the rich (impuesto temporal de solidaridad a las grandes fortunas, or ITSGF for short)

The instrument for this policy is a new ‘Temporary Solidarity Tax on Big Fortunes’ (known for short by its Spanish initials ITSGF) to be enacted on or before the 31^st of December 2022 with retroactive effects to the 1^st of January 2022. In other words, it covers all of the tax year 2022.

Its goal is to collect 1.5 billion euros a year from the ‘super rich’ (personally I’d call it a win if it even manages to rake in 300 million euros). As you can see from the wealth tranches below, it doesn’t take billions to be considered ‘super rich’ in Spain.

The ITSGF is divided into three tranches:

• €3,000,000 to €5,300,000 – 1.7%
• €5,300,001 to €10,600,000 – 2.1%
• Over €10,600,001 – 3.5%

In practice, taxpayers have a minimum allowance of €700,000, so the above figures must take this into account, besides other personal tax allowance like a main home.

Unconstitutional

As mentioned above, the Wealth Tax was devolved to Spain’s 17 regions, as enshrined in Spain’s Constitution of 1978. It is no longer a (tax) competency held by Spain’s central government. The ITSGF in effect encroaches on a legal competency that was assigned to regional tax authorities and is constitutionally enshrined.

In other words, the central government has no business with the Wealth Tax, which is a matter for the regions, but that has not stopped it interfering with a new Wealth Tax dressed up as a ‘Solidarity Tax’ to gain an advantage over its political rivals by cornering them and negating their (economic) success.

Moreover, it is one of our general tax principles that you cannot be taxed twice for the same thing. It stands to reason that introducing a second tax that taxes exactly the same thing is unconstitutional and can – and should – be legally challenged at court.

Under normal circumstances, I can safely say this new politically motivated tax would be quashed by Spain’s Constitutional Court for self-evident reasons.

However, we are not living under ‘normal’ circumstances. We have a Spanish President whose relentless pursuit of power has led him to ‘colonize’ all independent democratic institutions in the country by appointing his own people, which includes tarnishing the prestige and independence of the Constitutional Court itself by promoting two allies who give the government a majority of vote in this court. Therefore, the outcome of this law being repealed is uncertain, at best.

Impact on the overall economy

In short, negative.

This could prompt an exodus of affluent taxpayers, who will relocate to neighbouring states with low taxation, such as Portugal and Andorra. This will enable them to mitigate their tax bill, within the law.

It will also disincentivize foreign investments in Spain. At a time when Andalusia (but also Madrid and Galicia) were attracting substantial foreign investments that translated into the creation of jobs and higher tax revenues, this new tax will throw a spanner in the works, dampening the business mood.

This new tax is – clearly – politically motivated having no economic or legal logic to it, to put it mildly. In fact, we can credit our President Mr Sanchez as the creator of political taxes that serve no discernible purpose other than to create a political advantage of sorts; even if it’s at the expense of the whole country.

Podemos, the pro-Russian, hard-left junior partner of the socialist government, has basically pushed for this law to be passed if Mr. Pedro Sanchez wants to secure their political backing in the new upcoming national elections in 2023.

But ultimately, it’s not even about this tax.

It’s about taking away the freedom and (tax) competency of autonomous regions and placing them under the control of a central government that seeks to quash any and all dissension and freedom, ‘equalizing us all’. Ironically, Mr. Pedro Sanchez is acting much as General Franco did under his loathsome four-decade dictatorship, killing freedom.

Spain’s future is bleak

An economic meteorite is heading towards Spain in the shape of a ballooning public debt (€1.5 trillion) and soaring interest rates.

Unless decisive action is taken, either by the EU, or by a new government that adopts sensible economic policies such as lowering taxes and reducing public expenditure, Spain could find itself in a very delicate situation where it has difficulty borrowing and/or even repaying the (high) interests of its public debt. If, on top of this, its credit-rating takes a tumble, like it did during 2011-2013, it could push the country over the edge.

I get how most politicians are not economists and tend to overspend and overpromise with an eye on poll day. I really get it, it’s part of the game we call democracy.

However, when the ambitions of the few threaten the welfare of the many, we need to put checks and balances in place. And that onus, I’m afraid, now falls on our EU Overlords to rein in the exuberant excesses of our deluded political class.

For it is clear Spanish politicians are not up to the task, and their complacency blinds them from stepping up and taking responsibility for our economic future. Short-sighted career politicians who take decisions on the hoof, based on short-term opinion polls, are a nuisance under normal circumstances, but they can become a big liability when the economy slows down and is derailed by high inflation.

Next year we have general elections in Spain, so our government is in overdrive hyping all sort of promises and financial commitments to secure votes and political allies across the left of the political spectrum. Foremost amongst the government’s main objectives, in view of the general elections, is to bring down unemployment (13%, the highest out of any OECD country, that’s out of 38 member countries) that most affects collectives such as women and young adults. To ‘massage’ the high unemployment figures, which don’t reflect well in polls, the government has been busy hiring public-sector workers at full throttle using public money, and EU money.

A few key figures to keep on mind on where Spain is heading next economically:

• 80% of all new jobs created in Spain have been in Spain’s (bloated) public sector, fostered by the government.
• On average, the wages in the public sector are 70% higher than those in the private sector.
• Over 75% of the much-vaunted EU’s NextGen funds have been allocated to public administrations! In other words, they have not reached SMEs (which constitute 90% of Spain’s productive industry) nor millions of ailing Spanish families who (literally) cannot afford high energy bills and struggle to make ends meet every month.
• Spain’s fiscal pressure is 27% higher by comparison to fellow EU countries.
• Spain spends over 300 billion euros a year in pensions and civil servants' wages. In 2005 civil servants' wages were 7.5% of GDP, now in 2022 they are almost 13% (its almost doubled).
• Over 300 companies a day are filing for creditor protection in Spain (the highest figure on record, even surpassing that of 2011-2013 when Spain almost defaulted on repaying its high interests and was on the brink of being bailed out by the EU as the country’s credit-rating took a plunge) which means thousands of workers are losing their jobs every day.
• And last but not least the most severe one: Spain’s public debt has ballooned by over 30% under the incumbent, to a staggering record-breaking 1.5 trillion euros (€1,500,000,000,000). That’s over 133% to GDP of debt! Every day another 300 million euros is piled into this debt. This is by a long shot the most serious figure of all.

So basically, what our government is doing is ploughing forward with blinkers on, over-indebting the country, and using all that borrowed money to hire yet even more civil servants with an eye on the next general election. In the words of Oscar Wilde: “The bureaucracy is expanding to meet the needs of the expanding bureaucracy.”

In a context of ultra-high inflation, where central banks are ‘forced’ to hike up interest rates like there is no tomorrow month after month, owing 1.5 trillion euros can pose a real threat for Spain’s ability to repay back loan interests in the future, let alone the principal.

It is no longer far-fetched to imagine a scenario of interest rates reaching two digits over the next two years, much like in the eighties. This would seriously compromise Spain’s ability to repay its ever-growing debt interests, even compromising its borrowing ability unless the ECB keeps its policy of open hands.

If Spain continues its present course unchecked, it does not seem unreasonable to expect  ‘issues’ on repaying its loan commitments, or even raising new debt. As Italy’s situation is not much better, the European Union, in order to ensure its very own survival, should really start to rein in the borrowing of Spanish politicians and school them on the benefits of a frugal economy: to save money, invest it wisely, and think about the long run; not to overspend it and take on more and more loans they can’t repay.

Spain’s economy is not as resilient and strong as that of Germany; we categorically cannot be burdened with such high public debt figures in the long run least it compromises the economic viability of the country itself.

Better oversight

The EU should seriously consider monitoring where the over 130 billion euros in EU money sent to Spain is going. No one seems to know what this money is being spent on.

The EU’s high commissioner, Ms. Monika Hohlmeier, appointed to oversee the expenditure control of the EU’s Next Gen Funds across all EU member States, recently declared in an interview: “I have no clue what Spain is doing with it (EU funds)”. We could always ask Spain’s own national commissioner to shed some light on the matter but, oh wait, she resigned early on this year, so that’s that.

Billions of euros in EU taxpayers’ money are being squandered and no one knows where it’s going, and no one is held accountable. But clearly these EU rescue funds are not reaching struggling families or ailing SME’s, which was precisely the whole point of the Covid rescue funds.

I wrote an admonitory article on this almost two years ago: Now you see it, now you don’t - 12th February 2021

Conclusion

It is clear to me that Spanish politicians are burying their heads in the sand, refusing to acknowledge the harsh reality of a sharp rise in interest rates, all the while consumed by their own petty squabbles.

Unless the EU steps up, and acts decisively (even if spurred to act out of self-interest to ensure its own preservation), Spain will head down a dangerous path that could lead to repayment issues on its vast public debt.

As much as we are all (very) grateful to generous EU taxpayers’ solidarity through the Covid rescue funds (NextGen funds), the truth of the matter is that the EU is spoiling Spain like a child indulging it on its reckless credit addiction. Spain needs to grow up and face the harsh reality, adapting its economic policy to become more competitive and resilient in a digital economy, to reduce its overall expenditure (does our government really need 22 ministries?), to curb its insatiable reliance on public debt.

Madrid, Andalusia and Galicia have shown us there is an alternative, a way out of this vicious credit spiral through the pursuit of liberal policies that have helped their economies boom, unlike in the rest of Spain.

I fully understand that overcoming bipartisan rivalries is easier said than done, granted, but Spanish politicians really need to get their act together and start thinking about tomorrow, adopting a grand long-term strategy for the good of the country and its people, instead of just living for today burning borrowed money like there is no tomorrow; much like in Aesop’s fable of the ant and the grasshopper. Winter is coming.

The core argument I try make in this article is that the new ITSGF bill is a bad idea that exemplifies everything that Spain’s government is doing wrong economically, and that we ought to avoid at all costs. It is primarily a political tax whose purpose is more about firing up the base than raising tax. This government has proven adept at pinning the blame for economic woes they’ve helped create on easy targets such as banks, utility, and energy companies, and now the latest villain, the ‘super-rich’ (insert evil laughter here).

Back on planet earth, if our EU Overlords do not act to rein in Spain’s credit addiction, as clearly Spanish politicians are not fit for the task, Spain will endure serious financial problems in the future that could even threaten the EU itself.

The European Union is -without a shadow of doubt- the most ambitious and greatest political achievement of humankind of all time; a living testament to those eleven men that made it possible and averted all future wars in European soil. We should not jeopardize its future turning a blind eye on spoilt nations that are hell bent on inflicting themselves self-harm and which may even, in the near future, pose an existential threat to the strength of the Union.

There is still time to correct the course avoiding the choppy waters ahead. The EU must intervene and curb Spain’s unbridled craving for public credit embodied by Mr Sanchez. It is in the Union’s own best interests to put an end to it.

“Españolito que vienes

al mundo te guarde Dios.

una de las dos Españas

ha de helarte el corazón.” – Antonio Machado

Antonio Cipriano José María y Francisco de Santa Ana Machado y Ruiz (1875 – 1939). Brilliant Spanish poet and one of the leading figures of the Spanish literary movement known as the Generation of ’98. Died in imposed exile during the fratricidal Spanish Civil War. He is credited as being one of Spain’s most popular poets. Amongst his timeless classics, Campos de Castilla stands head and shoulders above the rest.

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

At Larrain Nesbitt Abogados we have over 19 years’ experience buying, selling, and renting properties. We are also specialized in taxation, immigration & residency visas. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88, or by completing our contact form to book an appointment.

Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Ní neart go cur le chéile. VOV.

2.022 © Raymundo Larraín Nesbitt. All Rights Reserved.

Copyrighted © 2022. Plagiarism will be criminally prosecuted.

Lawyer Raymundo Larrain does a brief rundown on the ECJ’s landmark ruling from 28-01-2022 on tax form Modelo 720 (Worldwide Asset Declaration for Spanish residents).

Marbella-based Larraín Nesbitt Abogados (LNA) has over 19 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2022 Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
21^st of February 2022

Introduction

It was long time coming, the writing was on the wall.

Through the dogged perseverance of one Spanish lawyer, Mr. Alejandro del Campo, we now have this ruling. We should all be grateful to him (and our EU Overlords).

Finally, after years of anxious wait, the European Court of Justice (ECJ, for short) delivered a landmark ruling on Spain’s unfamous 720 tax form. We had published several articles on this topic leading up to this long-anticipated moment (i.e. European Court of Justice’s lead council states Spanish Tax Form 720 fines are disproportionate – 16th July 2021).

On Thursday 28^th of January, the ECJ declared null and void several sections of the law related to tax form 720.

This was featured prominently all over the Spanish press and is now being misconstrued as the end of 720. But, is it really?

(Spoiler) No! Not by a long shot.

We keep receiving emails from clients telling us they no longer need to file 720 because it “has been abolished” etc.

In light of this, I’ve written this short article to shed some light on the matter and hopefully clarify the matter.

ECJ’s ruling

The ECJ’s ruling declared null and void a series of aspects that we had previously bitterly criticized in our articles and blog posts:

1. The no imprescriptibly of the debt.
2. The disproportionate fines of 150%.
3. The disproportionate fines on not disclosing all the financial data or doing it wrong.

All three aspects above have been declared null and void by the ECJ in yesterday’s ruling.

I really don’t want to go into this in detail, but as an example, only crimes of genocide in our legal system have no imprescriptibility. And quite frankly, you honestly cannot compare a heinous act such as genocide (a crime against Humanity) with not disclosing your estranged rich uncle left you 60k in some fancy Swiss bank. I mean honestly.

In short, the above points are an affront to core tenets enshrined and upheld by the community of nations known to us as the European Union i.e. freedom of movement of capital. As a result, they are null and void as they are deemed incompatible with core principles of our Union (UK not included).

Does that spell the end of the dreaded Modelo 720?

Again, for the avoidance of doubt, no.

720 remains, and will very much remain, a tax form that all tax residents in Spain will need to abide.

If you meet the 720 criteria, you must file a 720 tax form on or before the 31^st of March of every year. It’s only for reporting purposes, no tax is paid and in principle, you only need to do it as a one-off, not every year.

So, what’s changed then?

The three points I collate above.

The Spanish Tax Office will waste no time (understatement) in working on this and tweak the penalties associated to 720 over the next weeks so they are fully compliant with the ECJ’s ruling on the 720 and with the EU’s founding principles that pervade all our legal system.

I bet my bottom dollar that they’ll sort it out before the end of February 2022. When it comes to these matters, that is to demand taxes from us poor buggers, our tax office moves so fast it would even make a cheetah blush in shame. Eat your heart out Mr. Bolt Usain, you’re no match for our tax office.

Going forward

Going forward, as mentioned, any resident taxpayer that meets the criteria of 720 needs to submit it, so no changes there.

The only difference is that the associated penalties on non-compliance, or presumably on making any mistakes (knowingly, or not), will be far more lenient and fall in line with other tax forms.

What about fines? What happens to all those that were fined in the past?

The Spanish Tax Office racked up an estimated 230 million euros in fines since the inception of 720 in 2012.

As a result of yesterday’s landmark ruling, all those taxpayers that were (heavily) fined now have the door ajar to apply for a tax rebate on the amount fined, plus legal interests on top.

We advise taxpayers, that find themselves in such a predicament, to contact our law firm so we study their case and assist them in recovering their money.

Conclusion on the ECJ ruling on the Modelo 720 Spanish tax form (Worldwide Asset Declaration)

Once more, the ECJ, the highest court in the land, proves its mettle and draws the line on abuse. The voracity of the Spanish Tax Office knows no bounds and it is up to law courts and impartial judges and magistrates to defend us from this abuse.

Ideally, and it pains me to write it, it should really be Spain’s Supreme Court that should be doing this job and holding the line. But I guess they are far too busy still trying to rule – twelve years on – such cases like the one on abortion. I kid you not. A slooow justice indeed, no cheetah fast-pace here.

Once more, I must commend our EU Overlords for delivering impartial justice and setting the record straight. Thank you.

Rant over.

For the broader market (read real estate & foreign investments), the implication of this ruling is that resident taxpayers should no longer hold back submitting this tax form as the fines that will now be levied by the Spanish Tax Office (still to be disclosed) will be very reasonable and should no longer be feared.

Bottom line, the ECJ’s key ruling is (most) positive, and it is much appreciated by us punters, kudos!

“Justice delayed is justice denied.” – legal maxim

Larraín Nesbitt Lawyer’s taxation service:

Tax form 720

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, inheritance, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Related tax articles

• Tax form 720 – 20th April 2018
• Tax form 720 – 21st March 2019
• Spanish Tax Office to fine 5,000 taxpayers over tax form 720 – 1st September 2019
• Tax form 720 – Modelo 720 – 21st of February 2020
• Modelo 720 – Tax form 720 – 8th of January 2021
• Spain’s worldwide asset reporting tax form (modelo) 720 explained – 8^th January 2022

Article originally published at Spanish Property Inisght:  European Court of Justice rules on tax form 720 – 21^st February 2022

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. No taxman or politician was harmed on writing this article. Voluntas omnia vincit.

2.022 © Raymundo Larraín Nesbitt. All Rights Reserved.

Lawyer Raymundo Larraín briefs us on the new tax changes in force in Andalusia as from 2022. The landmark tax reduction is so significant that it has ushered in a new era in wealth-planning.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 19 years’ taxation & conveyancing experience at your service. We offer a wide range of over 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record of successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2022. Plagiarism will be criminally prosecuted.

 Inset photo: La Alhambra, Granada

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
21^st of January 2022

I’m going to cut to the chase on this one because, in all honesty, it’s growing old reporting every month on the continued changes in taxation in Andalusia (lowering them one month after another). I will be focusing mainly on the tax changes dealing with buying & selling property, inheritance, and income tax. But the scope of these changes run broader and deeper.

Any reader who follows us regulalry, will have noticed the large influx of tax articles featuring Andalusia over the last three years. This is because Andalusia’s new regional government is hell-bent on lowering taxes across the board and we are immersed in what can only be described as a ‘tax revolution’.

After almost 40 years of high taxes under the previous Administration, the newly-appointed Authorities have reduced taxes as much as is legally possible – within the constraints of devolved competencies – and we are all very grateful for it.

Changes below are a recap from law 5/2021, which came into force as from the 1st of January 2022. Please note I will not mention any previous tax changes (such as the key suppression of inheritance tax in Andalusia approved in 2019) only new tax changes.

Wealth Tax (Patrimonio)

• Tax-free allowance increased to €1,250,000 per taxpayer with a physical disability equal to or greater than 33% (was €700,000).
• Tax-free allowance increased to €1,500,000 per taxpayer with a physical disability equal to or greater than 65% (was €700,000).
• Improved wealth tax sliding scale:

Personal Income Tax (IRPF)

• Tax allowance on buying main home 5% for young people (under 35 y.o.)
• Tax allowance on long-term rental 15% (capped at €600/year).
• Improved regional sliding scale: *

*works in tandem with national scale

Inheritance Tax (ISD)

• 99% tax reduction on acquiring a main home for Groups I and II (irrespective of value).
• 99% tax reduction on acquiring business/company for Groups I, II, and III.
• Tax allowance for Group III increased to €10,000 (was €8,000)
• Additional tax allowance of €250,000 for inheritors with disability greater than 33%
• Additional tax allowance of €500,000 for inheritors with disability greater than 65%
• Group III: top marginal rate is reduced to 45% (was 70%, top rate applies only in the most extreme cases, when millions are inherited).

As a gentle reminder:

Group I: Natural and adopted children under 21.

Group II: Natural and adopted children over 21, spouse, registered civil partnerships, parents, adoptive parents, grandparents, and great-grandparents.

Group III: Relatives in second and third degree: in-laws, brothers/sisters (siblings), nephews/nieces, aunts, and uncles.

Gift Tax (ISD)

• 99% tax reduction on parents gifting money to children to buy a main home.
• 99% tax reduction on parents gifting the main home to children.
• 99% tax reduction on parents, or family members, gifting capital to set up a business (capped at €1,000,000).
• 99% tax reduction on parents gifting money to children.

Property Transfer Tax (ITP)

• 7% flat rate (irrespective of property value)
• 5% for young families (under 35 y.o.) on buying a main home (capped at €150,000)
• 6% on buying a main home (capped at €150,000)
• 5% on buying a main home and with disability (capped at €250,000)
• (long list of case-per-case reduced rates goes on and on) etc

Stamp Duty (AJD)

• 1.2% flat rate on buying property (off-the-plan)
• 1% on buying a main home (capped at €150,000)
• 0.3% in rentals

Conclusion

These tax changes are as good as it gets, period.

Andalusia’s regional government continues with its unabated trend of lowering taxes across the board.

The tax improvements are so prominent, they have turned Andalusia into an ultra-low taxation area.  Andalusia and Madrid now have the lowest taxation in all of Spain.

The improvements foster foreign investments in Spain, and in particular in Andalusia.

These pivotal tax changes have not gone unnoticed by non-residents. In a 2021 survey, 12,000 expats from 174 countries, voted Malaga as the world’s second best place to work & live in.

If regional politicians continue doing such a stellar job, I won’t have anyone left to throw darts at, sigh.

At Larrain Nesbitt Abogados we can assist you buying & selling property in Spain and deal with its taxation. Ask us.

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

Larraín Nesbitt Lawyers is a law firm specialized in conveyance, taxation, inheritance, residency and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Legal services available from Larraín Nesbitt Abogados:

• Conveyancing – Buying
• Conveyancing – Selling

Related articles

• Buying distressed property in Spain – 8th August 2011
• Let-to-Buy in Spain: The Smart Choice – 8th of April 2012
• Buying resale property in Spain – 21st February 2013
• How to buy commercial property in Spain – 4th July 2014
• How to buy rural property in Spain – 8th August 2014
• How to Buy Property in Spain Safely – 10th October 2014
• House Hunting in Spain – Interview with The New York Times. June 2015
• Buying property in Spain from a private seller (Resale Property) – 21st of February 2017
• Buying property in Spain – 10 reasons to hire a lawyer – 8th November 2016
• Selling property in Spain – 10 reasons to hire a lawyer – 8th December 2016
• How to inspect an off-plan property overseas – Q&A with The Sunday Times. July 2017
• 8 Tips on Buying Off-Plan in Spain – 8^th June 2018
• Tax advantages on becoming resident in Spain – The Address magazine (pages 358 - 373). December 2018
• Taxes on buying Spanish property – 8th December 2018
• Do’s and don’ts on buying property in Spain – 8th April 2019
• 8 tips on buying a home in Spain – 8th June 2019
• Rentals climb for fifth consecutive year in Spain! – 12^th February 2020
• Home-Buyer's Checklist - OFFPLAN – 1^st March 2020
• Home-Buyer's Checklist - RESALE – 11^th March 2020
• 8 reasons to buy property on the Costa del Sol (Andalusia) – 8th April 2021
• Marbella’s high-end market is booming! – Idealista 30th June 2021
• Andalusia: now is the right time to buy property – 8^th October 2021
• Andalucia property tax reduction extended into 2022  – Kyero 9^th November 2021
• Tax breaks on buying property in Andalusia extended indefinitely! – 8th December 2021
• Andalusia’s new tax changes for 2022 – 21^st January 2022

Originally published in Spanish Property Insight: Andalusia’s new tax changes for 2022

Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. No politician was harmed on writing this article. VOV.

2022 © Raymundo Larraín Nesbitt. All Rights Reserved.

Lawyer Raymundo Larraín briefs us on the new Entrepreneur law which aims to assist and incentivize new businesses in Spain.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 19 years’ taxation & conveyancing experience at your service. We offer a wide range of over 50 legal and corporate services. Our team of native English-speaking lawyers and economists has a long track record of successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2022. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of January 2022

Introduction

Spain’s social-communist government enacted in December 2021 a new Entrepreneur law (Ley de Startups) whose aim is to incentivize startups. This new law introduces a plethora of (very) positive changes that will make the life of businesspeople much easier, removing red tape and foremost creating great tax incentives, both for workers and for investors (business angels).

Slew of tax & admin novelties

I’m going to list them as bullet points for ease of comprehension.

• Dramatically reduce the number of admin steps to incorporate a new company. In effect, deregulation.
• Foster state investment in startups. Last year over three billion euros were devoted to this end.
• Reduction of non-resident income tax from 25% down to only 15% over a 4-year tax period (providing the company turnover is positive).
• Tax exemption retribution through stock options (capped at 50k/year).
• The first 100,000 euros will be tax-free
• Incorporation of companies is greatly reduced to one electronic document. In effect, deregulation.
• Tax deferral from 6 to 12 months (without delay interests or penalties), allowing more time to settle the tax.
• Removal of fractioned tax payment within the first two years with positive turnover.
• Removal of NIE number requirement for foreign investors, requiring only a tax number.
• In the event of failure (something natural in startups), winding up the company is greatly simplified
• The government wishes to attract foreign talent. To this end, it will introduce a digital nomad 5-year residency permit for non-residents that will significantly cut through all the red tape and which also has associated (very) attractive tax perks.
• Business angels may now apply for tax exemptions of 100,000 euros a year (up from the previous 60k threshold).
• Business angels tax deductions are expanded upon to 50% (was 30%).
• Business angels are exempt from paying tax on profit if they reinvest the sale proceeds in another startup.
• Suppression of double contribution to the Social Security for a three-year period in the event a worker is employed by multiple companies.
• Startup category increased from 3 to 5 years in general, and to 7 years for companies operating within certain key sectors the government wishes to incentivize (biotechnology, industrial energies and other strategic sectors).

Conclusion

This is a commendable initiative from our social-communist government; quite the capitalist move If I may (cheekily) say so.

Any law that contributes to deregulation (removal of unnecessary admin red tape) and lowering taxes is always greatly welcomed by the economy and society at large.

I will say it time and time again, if Spain only lowered its taxes – in line with fellow European countries – and also deregulated heavily, it would foster a huge boom in the economy, creating millions of jobs in its wake. This in turn would (paradoxically) greatly increase the tax office's revenue, reducing Spain's overreliance on public indebtment,  following the Laffer Curve economic theory.

Sounds fancy? Not at all. This is not science fiction, we are already witnessing this at play in both Andalusia and Madrid, two regions in Spain which have deregulated heavily and which have also dramatically lowered their taxation becoming de facto ultra-low taxation regions. As a result of pursuing liberal fiscal policies, they have attracted huge foreign investments (only Madrid attracts over 80% of foreign investments in Spain in 2021). Madrid has raked in billions in additional tax revenue and Andalusia borders over one billion euros. But most fundamentally, adopting liberal tax policies and deregulating has created thousands of new (well paid) jobs bolstering the middle class, the backbone of any strong western democracy.

In fact, the changes in Andalusia are deemed by non-residents so positive that in a 2021 survey, 12,000 expats, from 174 countries, voted Malaga as the world's second best place to work & live in. Make no mistake, high taxes only benefit politicians and their cronies.

Just give entrepreneurs the right tools in life and they will handle the rest. It will spur them on to fight & win, creating wealth and jobs benefitting society at large.

“Hay personas que se convierten en leyenda y que hacen grande a un país. Manolo Santana ha sido y será siempre una de ellas.” – Casa de S.M. el Rey

Loosely translated as: “There are people who become legends and make a country great. Manolo Santana was, and will always be, one of them.” – Spanish King Felipe VI

Manuel Santana Martínez (1938 – 2021). From a humble social Madrid background, Manolo would rise to become a world-class tennis champion, contributing to make it a popular sport all over Spain, not just a sport for the social elite. He’s credited as the Father of modern Spanish tennis. He won the Grand Slam in 1961 and 1964, the US Open in 1965, and Wimbledon in 1966. He married four times, from his first wife he had three children. Santana settled down in Marbella and, as an entrepreneur, founded and co-managed the Manolo Santana Racquets Club with his loving third wife Otti, a glamorous and kind Swedish model. The Manolo Santana Club initiative has created thousands of jobs over the years. Simply put, Manolo is the best Spanish tennis player in history (well, until Rafa came along, but he’s on a league of his own). In his own words: “I am an example of humility in an elitist world.”

At Larrain Nesbitt Abogados we can assist you buying & selling property in Spain and deal with its taxation. Ask us.

Larraín Nesbitt Lawyers, _small on fees, BIG on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyance, taxation, inheritance, residency, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

ver worked a day in his life in the private sector, devoting all his professional career to the public sector, paid for with our taxes.

Legal services available from Larraín Nesbitt Abogados:

• Conveyancing – Buying
• Conveyancing – Selling

Related articles

• Buying distressed property in Spain – 8th August 2011
• Let-to-Buy in Spain: The Smart Choice – 8th of April 2012
• Buying resale property in Spain – 21st February 2013
• How to buy commercial property in Spain – 4th July 2014
• How to buy rural property in Spain – 8th August 2014
• How to Buy Property in Spain Safely – 10th October 2014
• House Hunting in Spain – Interview with The New York Times. June 2015
• Buying property in Spain from a private seller (Resale Property) – 21st of February 2017
• Buying property in Spain – 10 reasons to hire a lawyer – 8th November 2016
• Selling property in Spain – 10 reasons to hire a lawyer – 8th December 2016
• How to inspect an off-plan property overseas – Q&A with The Sunday Times. July 2017
• 8 Tips on Buying Off-Plan in Spain – 8^th June 2018
• Tax advantages on becoming resident in Spain – The Address magazine (pages 358 - 373). December 2018
• Do’s and don’ts on buying property in Spain – 8th April 2019
• 8 tips on buying a home in Spain – 8th June 2019
• Home-Buyer's Checklist - OFFPLAN – 1^st March 2020
• Home-Buyer's Checklist - RESALE – 11^th March 2020
• 8 reasons to buy property on the Costa del Sol (Andalusia) – 8th April 2021
• Marbella’s high-end market is booming! – Idealista 30th June 2021
• Andalusia: now is the right time to buy property – 8^th October 2021
• Andalucia property tax reduction extended into 2022  – Kyero 9^th November 2021

Also published in Spanish Property Insight: Spain’s new Entrepreneur Law  – 8th January 2022

Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. No politician was harmed on writing this article. VOV.

2022 © Raymundo Larraín Nesbitt. All Rights Reserved.

Lawyer Raymundo Larraín gives us a gentle reminder on the tax obligations that residents in Spain must face (and in some cases, even non-residents).

Marbella-based Larraín Nesbitt Abogados (LNA) has over 18 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2021. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8^th of June 2021

I have written this short article as a gentle reminder for all taxpayers resident in Spain.

1. IRPF or personal income tax

Tax residents need to file income tax (IRPF, in Spanish) before the end of this month on their worldwide income & assets.

You are deemed tax resident in Spain if you meet one, or more, of the following points:

• You spend more than 183 days in a calendar year in Spanish territory.
• Your centre of financial interests is located in Spain.
• Your spouse and/or underage children live in Spain.

If you meet any of the above criteria, you should be filing taxes in Spain.

Scores of expatriates have filed for Spanish residency over the last two years, and now need to meet their newly-acquired tax obligations derived from their new tax status.

Deadline to file this tax is end of June 2021.

2. Wealth tax

In addition to the above tax obligation, affluent residents may need to file as well for wealth tax in Spain. As there is devolved competencies on this matter, I won’t go into details as each region is empowered to enact their own laws on this – please seek tax advice from us if it affects you.

Additionally, even if you are non-resident in Spain, but happen to hold a sizeable estate in Spain, you must file wealth tax in Spain.

In other words, and for the avoidance of doubt, wealth tax is paid by both residents and non-residents alike. The difference are the tax allowances at play.

The deadline to submit this tax is also by the end of June 2021.

“The income tax has made liars out of more Americans than golf.” – Will Rogers

William Penn Adair Rogers (1879 – 1935). Was an American stage and film actor, vaudeville performer, entertainer, cowboy, humorist, newspaper columnist, and social commentator from Oklahoma. He was a Cherokee citizen born in the Cherokee Nation, Indian Territory.

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

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, residency, inheritance, taxation, and litigation. You can contact us by e-mail at info@larrainnesbitt.com, by completing our contact form, or by telephone on (+34) 952 19 22 88.

Taxation services available from LNA

• Spanish Resident Income Tax (IRPF)
• Wealth Tax
• Wealth Planning

Related tax articles

• Spanish Wealth Tax (Patrimonio) – 8th November 2011
• Taxes on Selling Spanish Property – 8th December 2014
• Changes to Spain’s Inheritance and Gift Tax Law – 21st February 2015
• La Complementaria or ‘Bargain-Hunter Tax’ – 8th May 2015
• Taxes on Buying Spanish Property – 8th July 2015
• Non-Resident Taxes in Spain – 8th December 2015
• Spanish Inheritance Tax for Non-Residents (Part I) – 21st February 2016
• Spanish Inheritance Tax for Non-Residents (Part II) – 8th March 2016
• Non-Resident Income Tax – 8th December 2017
• Tax advantages on becoming resident in Spain – 8th March 2018
• Non-Resident Imputed Income Tax (Fiscal Representation Service) – 8th October 2018
• Taxes on Buying Spanish Property – 8th December 2018
• Capital gains tax mitigation on selling (or gifting) property in Spain – 8th May 2019
• Tax form 720 – Modelo 720 – 21st of February 2020
• Spanish Income & Wealth tax reminder – 8^th June 2021

Article originally published at Spanish Property Insight: Spanish Income & Wealth tax reminder

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.021 © Raymundo Larraín Nesbitt. All Rights Reserved.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 18 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2020, 2021 Plagiarism will be criminally prosecuted.

Inset photo: courtesy of Self Bank

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of January 2021

In 2013 the Spanish Tax Office implemented a new tax obligation whereby all tax residents in Spain, who hold over €50,000 in assets abroad, need to complete this tax return before end of March 2021 deadline.

By 2018, over 5,000 taxpayers had already been (heavily) fined on failing to disclose they held substantial assets abroad. This figure continues to increase year on year. We stress the fines for non-compliance are the steepest we’ve ever seen. In fact, so much so, they have been challenged at Brussels. The infamous modelo 720, despite being the object of heated controversy, remains very much an active tax obligation with which taxpayers must contend with. If you fall within its scope, I strongly advise you to comply or else face the risk of stiff fines.

It should be stated this tax form is only for reporting purposes; you do NOT pay any tax on submitting it. Resident taxpayers already pay income tax on submitting their annual I.R.P.F. tax returns once a year.

You also have Mark’s pungent article explaining it which, unlike mine, doesn’t pull any punches.

I have structured my article as a FAQ for ease of comprehension.

Who needs to declare?

All Spanish tax residents who own assets overseas on or over €50,000.

Again, and for the avoidance of doubt, if you are non-resident in Spain you do NOT need to submit this tax return; it is only for residents.

Who is considered tax resident in Spain?

The Spanish Tax Office applies – amongst many others – the following broad criteria:

• You spend more than 183 days within a calendar year in Spanish territory.
• Your centre of financial interests is located in Spain.
• Your spouse and/or underage children live in Spain.

Reporting categories

There are three reporting categories: bank accounts, investments and immovable property.

Obligation to report

You must report all assets in a particular category if the value of your total assets within it exceeds €50,000.

2021 tax submission period

From the 1^st of January until the 31^st of March 2021.

Can I file it after the submission period?

Yes, but hefty penalties apply. Ask us.

If you have already filed tax form 720 in the past

You only need to file it again if:

• The value of an existing asset grew by more than €20,000, or
• You sold an asset, or
• You obtained a new asset.

Penalties for non-compliance

The disproportionate fines levied are (very) stiff.

• Failing to file 720 or filing it incorrectly: €5,000 per infraction.
• Minimum fine of €10,000 for each group of assets.
• Penalty of 150% on unpaid income tax.

The Common Reporting Standard and you

Please take good note that with the advent of the Common Reporting Standard (CRS), signed by over 100 countries to combat tax evasion, as from the 1^st of January 2018, the Spanish Tax Office is being spoon-fed fiscal information by your home tax office.

For example, both HM Revenue & Customs and Ireland’s Revenue Commissioners are busy supplying the Spanish Tax Office with detailed information (and vice versa) on all your overseas assets and reported income derived abroad as from the 1^st of January 2018.

In plain English, your home country’s tax office will likely have already informed the Spanish Tax Office of the assets you hold abroad. It is in your best interests to be pro-active and come clean before you are served with a legal notice imposing humongous fines on you; as it’s happened already to over 6,000 unsuspecting taxpayers. The tax office likes waiting till the last moment before imposing fines to rake in as much interests as is legally admissible before the statute of limitations kicks in. Fines on non-compliance start at five figures and often are six-figures, or higher.

Brexit and attaining Spanish residency

Scores of UK nationals applied for a Spanish residency permit in the run up to Brexit. Unbeknownst to them, many will be now regarded as tax residents in Spain. Any UK national who is tax resident, and holds over 50,000 euros in assets abroad, must file tax form 720.

If you want peace of mind, you should sort out your tax affairs and submit this tax return to avoid humongous fines.

The last word

We strongly advise you to submit tax form 720 if you are (tax) resident in Spain to avoid steep penalties. If you plan to submit it, please contact us well ahead of the submission deadline (31^st of March 2021) as it takes days to prepare and process. If you are unsure if you qualify for it, just give us a buzz and one of our friendly staff will answer your queries to allay your fears.

“Si vis pacem, para bellum.” – Vegetius

Loosely translated as: “If you want peace, prepare for war.”

Publius Flavius Vegetius Renatus (4th Century A.D.). Writer of the Later Roman Empire. Nothing is known of his life or station beyond what is contained in his two surviving works: Epitoma rei militaris (also referred to as De re militari), and the lesser-known Digesta Artis Mulomedicinae, a guide to veterinary medicine. The quote comes from his military tract. It mainly focuses on military organization (legion) and how to react to certain occasions in war.

Larraín Nesbitt Lawyer’s taxation service:

Tax form 720

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, inheritance, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Related tax articles

• Tax form 720 – 20th April 2018
• Tax form 720 – 21st March 2019
• Spanish Tax Office to fine 5,000 taxpayers over tax form 720 – 1st September 2019
• Tax form 720 – Modelo 720 – 21st of February 2020
• Modelo 720 – Tax form 720 – 8th of January 2021

Article also published at Spanish Property Insight:  Modelo 720 – Tax form 720

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.018, 2.019, 2.020, and 2.021 © Raymundo Larraín Nesbitt. All Rights Reserved.

Are you fed up with your partner? Did you know there is a special procedure in Spain to terminate property co-ownership which saves you up to 86% in taxes? Solicitor Raymundo Larraín explains to us how to re-arrange asset holdings in Spain between family and friends without attracting a great deal of taxes. Interested? Read on.

Marbella-based Larraín Nesbitt Lawyers has over 17 years' taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2007, 2010, 2011 and 2020. Plagiarism will be criminally prosecuted.

Original article from 14th of November 2.007

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of June 2020

Introduction

Covid-19 has brought in its wake a host of nasty effects, both direct and indirectly.

Directly, by infecting and killing hundreds of thousands of vulnerable people the world over, from all ages.

Indirectly, by drastically changing our lifestyles as we struggle to cope and adjust to our new reality. Governments, in order to protect the most vulnerable elements of our society, are forced to curtail our fundamental rights and limit our ability to move freely, even forcing non-essential businesses to shut down. But more fundamentally, it has forced people into a seemingly never-ending lockdown, trapped within the walls of their own homes. As a result of these necessary draconian government-imposed measures, it has led to Depression-era levels of unemployment and having developed economies in free fall.

We have gone from Greta’s ‘save the planet’ to save ourselves in the span of only two months.

And we thought Australia’s wildfires, from early on this year, which ravaged the land and devastated wildlife, destroying in its wake thousands of homes and taking the lives of hundreds was going to be the major highlight of 2020. How little did we know. Does anyone remember when this was a thing?

Amid this dire financial context of millions of workers being laid off, myriad companies filing for bankruptcy, property price drops of 40%, or more, stock markets plunging into the red wiping whole family’s life savings, couples are forced to live 24/7 under the same roof - with kids. Understandably, this sparks great tensions or even drives a rift, putting relationships under severe strain.

Not everyone has what it takes to come out on top. Escaping from this ordeal unscathed is proving quite the challenge for most couples and as a result we are sadly witnessing more and more couples filing for divorce.

In this article, we explain a special legal procedure that can be followed in Spain to re-arrange property holdings which saves buyers a considerable amount in taxes. On buying resale property in Spain, a buyer is normally subject to 8% Property Transfer Tax (ITP), or even more, on the sales proceeds. However, on following what is known as a ‘Dissolution of Joint Property Ownership’ (or DJPO, for short) a buyer attracts only 1.5% Stamp Duty.

In plain English, this procedure saves you 86% in tax, or more.

Interested? Read on.

Definition

A Dissolution of Joint Property Ownership allows joint owners to re-arrange their share on a property in a tax-efficient manner as it enables the outgoing joint owner to transfer his share to an existing co-owner legally waiving the extreme Property Transfer Tax and paying in lieu 1.5% Stamp Duty (or less).

DJPO requirements

• Both buyer and seller must be pre-existing owners of a property i.e. a married couple who own a property under joint names.
• One of them wishes to terminate the situation and sell his/her share to the other joint owner.
• If there is an outstanding mortgage on the property, a lender’s permission may be required to release the outgoing borrower/owner from his commitments.

Applicable cases

A DJPO is suitable in a number of cases involving joint property ownership:

1.- In a divorce or separation. Couples owning property jointly may decide to split up. Taking for granted they own a property in equal shares, one of them decides to sell their 50% to his ex-partner. The ex-partner will pay him/her his quota and this transaction.
2.- Re-arranging inheritances. Beneficiaries of an inheritance transferring their quota on a property to a fellow heir. E.g. Sisters who inherit property transfer a share between them.
3.- Re-arranging property holdings between family and friends. Stakeholders such as family, friends or investors co-owning a property may decide to re-arrange their holdings.

Associated taxes & expenses

Both buyer and seller are subject to pay taxes on transferring ownership of the asset.

Buyer:

• Pays 1.5% Stamp Duty on the outgoing share.*
• Lawyer’s fees
• Notary fees
• Land Registry fees
• Pays the % of the property’s value

*In some regions of Spain, due to devolved competencies, it is in fact well-below this quoted tax rate.

Seller:

• Pays Capital Gains Tax on the outgoing share.
• If the seller is non-resident, a 3% retention may be practiced on the outgoing share.

Forced Dissolution of Joint Property Ownership

What happens if one of the co-owners refuses to sell? This is when a contentious DJPO comes into play. It involves litigation.

There may be cases in which one of the joint owners may wish to terminate the joint ownership for good and sell the property. Fellow co-owners, for whatever reason, may turn down the proposal to sell the property as a whole and likewise may refuse to buy him out. This will result in a bitter gridlock that will erode personal relations.

To bypass the deadlock, any joint owner is entitled to force a DJPO through a competent law court (Arts 406 and 1062 of the Spanish Civil Code). The court’s ruling will overrule any dissent and the asset will be disposed of regardless of opposition from fellow co-owners. The property will then be auctioned off publicly to the highest bidder.

However, a forced dissolution through a law court is only advisable as last resort wherein the disagreement is serious resulting in a protracted stalemate. The reason is that all joint owners stand to lose significantly on following it. Sadly, at times, this may be the only legal solution to bring an end to an ongoing co-ownership quarrel.

In conclusion

A Dissolution of Joint Property Ownership is optimal to mitigate a buyer’s tax burden. In fact, you save 86% in taxes, or more, in a legal manner.

However, a DJPO may not apply in all cases. Seek legal advice on the matter.

A non-contentious DJPO works almost like a conveyance and can be arranged within a few days providing both parties agree to it. It can be arranged without any need to fly over to Spain by way of granting your appointed Spanish lawyer a specific Power of Attorney. The new re-arranged ownership will then be lodged at the Land Registry after the associated taxes are settled.

A DJPO neatly puts to rest the financial side of couples’ ongoing marital disputes, legally saving them a great deal in taxes. It’s a win-win.

At LNA we can represent you following a DJPO for a very competitive fee, regardless of the property’s location in Spain. We act nationwide. Ask us free of compromise.

"Toute nation a le gouvernement qu'elle mérite." – Joseph de Maistre

Joseph-Marie, comte de Maistre (1753 - 1821). Was a Savoyard lawyer, diplomat, writer, and philosopher. Together with the Anglo-Irish statesman and philosopher Edmund Burke, Maistre is commonly regarded as one of the founders of European conservatism.

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

Legal service Larraín Nesbitt Abogados (LNA) offer you:

• Dissolution of Joint Property Ownership

Related DJPO articles

• Lifetime Loans or Reverse Mortgages in Spain Explained – 21st February 2011
• Advice to Struggling Mortgage Borrowers in Spain – 8th March 2011
• Dissolution of Joint Property Ownership – 8th of May 2011
• Spanish Mortgage Loans: Beware of Abusive Clauses – 8th January 2012
• Spanish Mortgage Loans: An Overview – 21st February 2012
• Mortgage Collar Clauses Revisited (‘Cláusulas Suelo’) – 8th December 2013
• Bank Repossessions in Spain – 21st February 2014
• Bad Debtor’s List (‘Fichero de Morosos’) – 8th April 2014
• Spanish Creditors Pursuing Debts Abroad – 8th May 2014
• Dación en Pago Explained or How to Hand Back the Keys – 8th December 2014
• Dissolution of Joint Property Ownership (blog post) – 8th of September 2017
• Spain’s Supreme Court rules that in Dissolutions of Joint Property Ownership Stamp Duty is only paid on the outgoing share – 14th of November 2018
• Dissolution of Joint Property Ownership in Spain – 8th of June 2020

Article originally published in Spanish Property Insight: Dissolution of Joint Property Ownership in Spain

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.007, 2.010, 2.011, and 2.020 © Raymundo Larraín Nesbitt. All Rights Reserved.

Lawyer Raymundo Larraín gently reminds us of the tax obligation to submit tax form 720 (modelo 720, in Spanish) over the next weeks if you qualify. Last day for submission is the 31^st of March 2020.

The following tax article has been summarised to avoid unnecessary tax technicalities. The quoted tax rates are subject to change from one year to the next. Seek professional legal advice on your matter – see disclaimer below.

Copyrighted © 2018, 2019 and 2020. Plagiarism will be criminally prosecuted.

Photo credit: courtesy of Self Bank

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
21^st of February 2020

In 2013 the Spanish Tax Office implemented a new tax obligation whereby all tax residents in Spain, who hold over €50,000 in assets abroad, need to complete this tax return before end of March 2020 deadline.

By 2018, over 5,000 taxpayers had already been (heavily) fined on failing to disclose they held substantial assets abroad. This figure continues to increase year on year. We stress the fines for non-compliance are the steepest we’ve ever seen. In fact, so much so, they have been challenged at Brussels. The infamous modelo 720, despite being the object of heated controversy, remains very much an active tax obligation with which taxpayers must contend with. If you fall within its scope, I strongly advise you to comply or else face the risk of stiff fines.

It should be stated this tax form is only for reporting purposes; you do NOT pay any tax on submitting it. Resident taxpayers already pay income tax on submitting their annual I.R.P.F. tax returns once a year.

You also have Mark Stucklin's pungent article explaining it which - unlike mine - doesn’t pull any punches.

I have structured my article as a FAQ for ease of comprehension.

Brexit and the new wave of British residents in Spain

Unless you have been living under a rock for the previous four years, you will know the UK vowed to leave the EU by the 31/01/2020. As a consequence, thousands of non-registered expats (who were effectively living in Spain under the radar, whether purposely or not) have now stepped forward into the limelight and rushed to apply for Spanish residency over the last year.

Applying for Spanish residency is a self-admission that you are in fact tax resident in Spain; the residency procedure is monitored continuously by the Authorities to ensure you retain your resident status (i.e. so they can turn down renewals when the applicant no longer complies with the residency requirements).

As scores of new residents will be entirely oblivious of their new tax obligations, i.e. submitting tax return 720, it has prompted me to write this short article to shed some light on the matter and act as a gentle reminder on their newly-acquired tax obligations with the taxman.

Who needs to declare?

All Spanish tax residents who own assets overseas on or over €50,000.

E.g. Mr. and Mrs. Smith live all year round in Mijas Costa, Spain. They own two houses in Berwickshire, England, have open bank accounts in the UK and receive UK-based pensions.

Mr. and Mrs. Smith are in fact tax resident in Spain and they both need to submit tax form 720.

Again, and for the avoidance of doubt, if you are non-resident in Spain you do NOT need to submit this tax return; it is only for residents.

Who is considered tax resident in Spain?

The Spanish Tax Office applies - amongst many others - the following broad criteria:

• You spend more than 183 days within a calendar year in Spanish territory.
• Your centre of financial interests is located in Spain.
• Your spouse and/or underage children live in Spain.

Reporting categories

There are three reporting categories: bank accounts, investments and immovable property.

Obligation to report

You must report all assets in a particular category if the value of your total assets within it exceeds €50,000.

2020 tax submission period

From the 1^st of January until the 31^st of March 2020.

Can I file it after the submission period?

Yes, but hefty penalties apply. Ask us.

If you have already filed tax form 720 in the past

You only need to file it again if:

• The value of an existing asset grew by more than €20,000, or
• You sold an asset, or
• You obtained a new asset.

Penalties for non-compliance

The disproportionate fines levied are (very) stiff.

• Failing to file 720 or filing it incorrectly: €5,000 per infraction.
• Minimum fine of €10,000 for each group of assets.
• Penalty of 150% on unpaid income tax.

The Common Reporting Standard and you

Please take good note that with the advent of the Common Reporting Standard (CRS), signed by over 100 countries to combat tax evasion, as from the 1^st of January 2018, the Spanish Tax Office is being spoon-fed fiscal information by your home tax office.

For example, both HM Revenue & Customs and Ireland’s Revenue Commissioners are busy supplying the Spanish Tax Office with detailed information (and vice versa) on all your overseas assets and reported income derived abroad as from the 1^st of January 2018.

In plain English, your home country’s tax office will likely have already informed the Spanish Tax Office of the assets you hold abroad. It is in your best interests to be pro-active and come clean before you are served with a legal notice imposing humongous fines on you; as it’s happened already to over 6,000 unsuspecting taxpayers. The tax office likes waiting till the last moment before imposing fines to rake in as much interests as is legally admissible before the statute of limitations kicks in. Fines on non-compliance start at five figures and often are six-figures, or higher.

The last word

We strongly advise you to submit tax form 720 if you are (tax) resident in Spain to avoid steep penalties. If you plan to submit it, please contact us well ahead of the submission deadline (31^st of March 2020) as it takes days to prepare and process. If you are unsure if you qualify for it, just give us a buzz and one of our friendly staff will answer your queries to allay your fears.

Larraín Nesbitt Lawyers offers the following competitively-priced taxation service:

Tax form 720

"No one is too small to make a difference.” – Greta Thunberg

Greta Thunberg (2003). Pronounced ‘tOOn-bairyeh.’ Swedish 16-year-old climate change activist. Known for her forward speaking manner which does not hold any punches addressing world leaders. She has successfully led an international campaign to fight climate change, galvanizing the interest of the young (and not so young!) which has garnered much media attention. She is the youngest person to date to hold the prestigious Time Person of the Year 2019, sorry Trump.

If only we had more Greta’s and less dumps, what a wonderful world this would be.

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, inheritance, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Related tax articles

Tax form 720 – 20th April 2018
Tax form 720 – 21st March 2019
Spanish Tax Office to fine 5,000 taxpayers over tax form 720 – 1st September 2019

Tax form 720 – Modelo 720 – 21st of February 2020

Article originally published at Spanish Property Insight: Tax form 720 – Modelo 720

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Voluntas omnia vincit.

2.018, 2.019 and 2.020 © Raymundo Larraín Nesbitt. All Rights Reserved

Are you selling (or gifting) property in Spain? In this taxation article we explain how our law firm can assist you bring down your seller’s taxes significantly, even negating them.

Marbella-based Larrain Nesbitt Lawyers has over 16 year’s taxation & conveyancing experience at your service. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

The following article has been summarised to avoid unnecessary tax technicalities. The quoted tax rates are subject to change from one year to the next. Seek professional legal advice on your matter – see disclaimer below.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of May 2019

Introduction

Congratulations, you have found a buyer for your Spanish property!

On selling (or gifting) property in Spain, you are liable for two taxes: plusvalia and capital gains tax (CGT, for short). For a more detailed take on both, please read our in-depth tax article: Taxes on Selling Spanish Property.

In this short article, we will focus on four strategies to mitigate a seller’s exposure to CGT; which range from completely negating it, to reducing it significantly.

4 strategies to mitigate a seller’s CGT liability

1. Absolute relief

All tax residents over 65-years-old are exempt from paying CGT on selling their main abode (vivienda habitual, in Spanish legal jargon).

2. Rollover relief

Any resident seller under 65-years-old is exempt from paying CGT on selling their main home providing the following conditions are met:

• Seller is under sixty-five year-old.
• Seller is (tax) resident in Spain.
• Dwelling must be his main home (main abode and must have dwelled in it permanently for the 3 previous years). It may be less than three years under exceptional circumstances i.e. job change, marriage or separation.
• Sales proceeds reinvested in a new main home (in Spain or in the Union, including the United Kingdom in a pre-Brexit world). Any sales proceeds not reinvested will be taxed on a pro rata.
• 2 year deadline to reinvest the sales proceeds (on a new main home). 

3. Pension annuities

This third tax relief is in addition to the above two main home tax reliefs. Applies to residents.

Any capital gains made by resident taxpayers over 65-years-old will go untaxed provided the following are met:

• Sales proceeds reinvested in pension annuities.
• Capped at €240,000.
• Six-month deadline as from sale.

4. Traditional method

Your lawyer can offset from your CGT liability on selling, all expenses that went towards buying the property plus any refurbishment costs, provided you have VAT invoices to back them up. Applies to both residents and non-residents.

• Lawyer’s fees (on buying).
• Notary fees (on buying).
• Land Registry fees (on buying).
• Taxes (on buying).
• All property-related improvements (not maintenance costs) i.e. glass curtains, refitted kitchen, roof retiling, wood flooring, A/C installation, house alarm etc.
• Estate agent's commission (on selling): VAT invoice.
• Lawyer’s fees (on selling): VAT invoice.

We offer the most competitive fees in the market.

Conveyancing in Spain – Selling

We are specialized in conveyancing

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

Article originally published in Spanish Property Insight: Capital gains tax mitigation on selling property in Spain

“Notre-Dame de Paris est en particulier un curieux échantillon de cette variété. Chaque face, chaque pierre du vénérable monument est une page non seulement de l’histoire du pays, mais encore de l’histoire de la science et de l’art.” – Victor Hugo. Notre-Dame de Paris, livre troisième.

Vitor Marie Hugo (1802 – 1885). Was an outstanding French novelist, poet, and dramatist ascribed to the Romantic literary movement. He is widely regarded as one of the greatest French writers to date. Amongst his many famous novels are Les Misérables and The Hunchback of Notre-Dame (Notre-Dame de Paris).

Conveyancing-related articles

• How to Buy Property in Spain Safely – 10th October 2014
• House Hunting in Spain – Interview with The New York Times. June 2015
• Buying Property in Spain – 10 reasons to hire a Lawyer – 8th November 2016
• Selling Property in Spain – 10 Reasons to Hire a Lawyer – 8th December 2016
• Buying Property in Spain from a Private Seller (Resale Property) – 21st of February 2017
• Buying Property in Spain from a Developer (Off-Plan Property) – 8th March 2017
• How to inspect an off-plan property overseas – Q&A with The Sunday Times. July 2017
• 8 Tips on Buying Off-Plan in Spain – The Address Magazine (pages 358 - 373). December 2018
• 7 reasons on why you need legal representation on selling in Spain – 7th March 2018
• Home Seller's Checklist – 11th September 2018
• Save taxes on selling your Spanish home!– 1st March 2019
• Capital gains tax mitigation on selling (or gifting) property in Spain – 8th May 2019

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.019 © Raymundo Larraín Nesbitt. All rights reserved.