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Spanish residency permits and tax residency

Raymundo Larraín Nesbitt, January, 21. 2022

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 has 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 Lawyers
21st of January 2022

A common misunderstanding on applying for Spanish residency is the matter of tax residency.

I have witnessed how several companies and so-called ‘advisors’ are misselling residency permits in Spain without property explaining and disclosing to applicants the tax implications of their decision.

I’ve written this short article to cast some light on this and clarify once for all this topic.

Spanish residency and tax residency

Although – technically – it is true that admin residency and tax residency are two separate legal concepts, the fact of the matter is that eventually they go hand in hand in most cases.

As a general rule the following applies:

Spanish residency permit = Spanish tax residency

Without going into detail on the whys and whynot’s, the reason is because as a staple requirement all visas in Spain require on renewals you categorically prove you have lived in Spain long term; defined as spending over 183 days within a calendar year in Spanish territory. The tax implication of this is that it automatically triggers tax residency in Spain.

Example: Mr Smith applies and attains a Non-Lucrative Visa in 2021. On the following year (2022), he must file personal income tax in Spain because he has now become a Spanish tax resident.

If Mr Smith challenges the tax residency status on grounds that he did not spend over 183 days in Spain during 2021, on his visa renewal, he will be stripped of his residency permit.

In other words, they go hand in hand. You cannot have one without the other or you visa renewal will be turned down.

Are there any exceptions to this general rule?

Yes, it’s a special type of residency permit called Golden Visa (investor visa).

A GV allows its permit holder to bypass the 90/180-day rule. It also allows its holders unfettered access to Spain. They may enter and leave as they please (even circumventing Covid restrictions).

Attaining a Golden visa, unlike every other visa in Spain, does not automatically make you tax resident in Spain and the reason being is because renewals are not tied to proving you live in Spain (which triggers tax residency), but rather that you have maintained the investment over time in Spain.

This nuance is extremely important and goes on to explain why Golden Visas are so special and why they are so sought after by affluent applicants.

As a recap, Golden Visas allow you:

  • To bypass the 90/180-day rule
  • Unfettered access to Spain
  • Do not automatically make you tax resident in Spain (unlike every other visa)

 

LNA has a 100% track record attaining Spanish residency

 

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

At Larrain Nesbitt Abogados, we have assisted hundreds of EU and non-EU nationals to successfully attain a Spanish residency permit.

Interested? Come and speak to Larraín Nesbitt Abogados’ friendly staff who will be pleased to guide you through the different residency options, choosing the one that appeals to you most. Your family’s success is only one call away: (+34) 952 19 22 88.

Residency services available from LNA:

 

Related visa articles

 

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 delusional separatist politician was harmed on writing this article. VOV.

2.022 © Raymundo Larraín Nesbitt. All Rights Reserved.

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Malaga voted by expats as the world's second best city to live & work

Raymundo Larraín Nesbitt, January, 8. 2022

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
Lawyer - Abogado
8th of January 2022

In a 2021 survey carried out by InterNations, Malaga was voted by 12,000 non-residents, from 174 countries, as the world's second best city overall to live in as a foreign resident. Madrid was ranked number 10, and Barcelona a distant 29.

Malaga has become a very attractive place for foreign residents over the last decade for a number of reasons:

  • Its high quality of life
  • Its vast cultural offer (Picasso Museum, Pompidou Museum, Thyssen Museum, Saint Petersburg Russian Museum, etc)
  • Unmatched leisure & amenities options
  • Gorgeous weather (averages 330 days of sunshine a year with an average temperature of 17°C)
  • Great food
  • Friendly natives
  • And last but not least, ultra-low taxes. The steep drop in taxes spurred by its regional government (inheritance tax, income tax, property transfer tax, stamp duty, wealth tax, etc) making it de facto an area of ultra-low taxation

 

Málaga ranks third in the Getting Settled Index and first in the Friends and Socializing Subcategory, with 69 percent of respondents saying they find it easy to make new friends in the city (vs. 48 percent globally), and 78 percent saying they’re happy with their social life (vs. 57 percent globally). 

Málaga also came first in the world in the Local Cost of Living Index, with 86 percent of foreign residents rating this positive. Those surveyed described locals, known as malagueños, as friendly (86 percent vs. 69 percent globally) and towards foreign residents in particular (82 percent vs. 67 percent globally). 

We had published several articles over the last years reflecting such changes:

Buy your dream home in paradise: Costa del Sol – 21st January 2020

8 reasons to buy property on the Costa del Sol (Andalusia) – 8th April 2021

Andalusia lowers taxes including Property Transfer Tax and Stamp Duty in move that will boost the market – 28th of April 2021

Malaga, Europe's Southern California – 5th June 2021

Malaga, it’s the quality of life.

 

 

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

Legal services available from Larraín Nesbitt Abogados

 

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.

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Merry Christmas!

Raymundo Larraín Nesbitt, December, 22. 2021

From Larraín Nesbitt Abogados, we wish all our clients and friends a Merry Christmas and a Happy New Year!

The law firm will now remain closed for the holiday season and will reopen for business on Monday the 10th of January 2022.

                                                                            ---

Desde Larraín Nesbitt Abogados, deseamos a todos nuestros clientes y amigos unas muy Felices Fiestas y un próspero Año Nuevo.

El despacho permanecerá ahora cerrado por vacaciones y nos reincorporaremos el lunes 10 de enero 2022.

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Spain’s new draft law for the Protection and Welfare of Animal Rights

Raymundo Larraín Nesbitt, December, 9. 2021

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 has 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.

Inset photo: Threatened Iberian lynx, only a few hundred remain now.

By Raymundo Larraín Nesbitt
Abogado - Lawyer
11th of December 2021


Animal rights, always a pet article of mine.

Spain’s social-communist government is in the last legislative stages of approving a new legal framework for the protection and rights of animals. I can only show my personal appreciation and gratitude for at (long) last having such a law enacted and enforced throughout Spain.

The new draft law can be browsed here.

Spain’s historical disposition towards animal’s rights has been somewhat hazy at best; to put it mildly and avoid ruffling feathers. This situation has changed dramatically post-Constitution as new open-minded generations, imbued by democratic ideals, seize power to shape laws in line with the core values that behove a modern society.

There is still much work to be done to lobby and push hard for an agenda that extends jail terms to those few who would abuse domestic or wild animal life. In any case, to my mind, it is a clear victory that animal’s rights in Spain have (finally) become a tenet of our society which will now be upheld legally.

Kudos to our government for making such a great effort to protect our animals and wildlife.

Credit where credit is due.

 

The greatness of a nation, and its moral progress, can be judged by the way its animals are treated.” – Gandhi. AKA Mahatma (‘Great Soul’) Gandhi.

Mohandas Karamchand Gandhi (1869 – 1948). From an impoverished and humble social background, he would rise to become the Father of the modern Indian Nation. Trained lawyer, author, journalist, editor, staunch human rights activist and founder of the non-violent movement. He would be wrongfully incarcerated and would suffer unjust persecution throughout most of his adult life. Ghandi's mindset would be for ever changed after reading the book The Kingdom of God is Within You, from the universally acclaimed Russian writer Leo Tolstoy, in which Tolstoy reinterpreted the teachings of our Lord Jesus coalescing his ideas of non-violent resistance. In what can only be described as an extraordinary feat at the time, he single-handedly managed to lead the country to a peaceful independence, on following a nonviolent resistance movement, breaking the heavy chains of oppression from the British Empire; the world’s greatest superpower of the time. He also oversaw the peaceful breakup from the Muslim population, thus avoiding the horrors of a fratricidal civil war, which would go on to form their own country (Pakistan). Through Ghandi's peaceful actions, in both South Africa and India, he would go on to influence civil right movements and freedom activists the world over, including historically relevant figures such as reverend Martin Luther King and Nelson Mandela, both awarded with the Peace Nobel Prize. In a dark century, full of giants and great historical figures, Ghandi towers above them all, a shining beacon of Humanity. He is arguably the greatest historical figure of the 20th century.

In his spare time, he was a career politician; nobody’s perfect.

 

At LNA we can assist you buying, selling or renting out your property in Spain. We have 18 years’ experience in conveyance & tax. We are also specialized in Immigration & Residency permits.

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

Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, 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.

Related articles:

 Animal Cruelty and the Law in Spain – 8th January 2016

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 animal, or politician, was harmed on writing this article. VOV.

2021 © Raymundo Larraín Nesbitt. All Rights Reserved.

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Non-Resident Imputed Income Tax end-of-year reminder (NRIIT) 2020

Raymundo Larraín Nesbitt, December, 1. 2021

The clock is ticking. If you are non-resident, and you own property in Spain, this is your last chance to file your Non-Resident Imputed Income Tax for year 2020. Even if you do not rent it out, you need to file this end-of-year tax. We file taxes online all over Spain.

Marbella-based Larrain Nesbitt Abogados has over 18 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.

Blog post copyrighted © 2021. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
1st of December 2021

 

The end of 2021 fast approaches.

One of our last blog posts for this year, is a gentle tax reminder.

All non-residents, who own property in Spain, need to file by the end of this year a tax called Non-Resident Imputed Income Tax (NRIIT, for short), even if you do not rent out your Spanish property. You are taxed on the previous year (2020).

We offer the following taxation service for a flat fee of 100 euros plus VAT/year.

We file your tax online within 24 hours.

Our last day to file this tax in 2021 is Wednesday the 22nd of December.

 

We offer the most competitive fees in the market.

Non-Resident Imputed Income Tax (Fiscal Representation Service) €100/year

We are specialized in taxation

 

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

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyance, immigration & residency, 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.

Legal & tax services available from Larraín Nesbitt Abogados (LNA):

 

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. VOV.

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Now is the right time to buy property in Spain

Raymundo Larraín Nesbitt, November, 21. 2021

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 has 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
Abogado - Lawyer
21st of November 2021

 

As we have been pointing out over the last year, a series of factors have built up to create excellent buying opportunities. Real estate experts share a general consensus that now is the right time to buy property in Spain, specifically in Andalusia.

  1. Ultra-low taxation. As we’ve covered in previous articles (Andalusia lowers Property Transfer Tax and Stamp Duty), early on this year Andalusia drastically reduced the taxes on buying property, to the point we have never seen such low taxes in this region. Furthermore, the tax breaks on buying property have now been extended indefinitely, so they are no longer time-gated. The Junta de Andalucia has also approved a batch of measures to also cut down several other taxes (Inheritance Tax, IRPF, Wealth tax etc) turning Andalusia de facto into an ultra-low taxation area, along with Madrid. In plain English, Andalusia and Madrid are now the two areas where you pay fewer taxes in all of Spain. And last I checked, Madrid had no beach, so the choice is easy. To sum up, the continued landmark tax changes implemented by the new regional government since April 2019 (lowering, negating or supressing them) are so eventful they have ushered in a new era of wealth-planning in Andalusia.
  2. Ultra-low interest rates. Interest rates are sitting now at an all-time low, which enables would-be buyers to secure cheap loans (fixed interest is your best bet if the ECB hikes the interest rate in the future to offset a spike in inflation). Bank loans become ‘cheaper’ as inflation rises, as you actually owe less money to your lender (in real terms).
  3. Pandemic & Brexit induced price reductions. The ongoing pandemic and Brexit have forced sellers to reduce their asking price creating once-in-a-lifetime buying opportunities for savvy investors.
  4. Bull market. In Andalusia, we are undergoing since April 2021 a property boom that has prompted a rise in property prices, specifically in coastal areas. Property is appreciating an average of 8% p.a. in coastal resorts and rising YOY. In some exclusive locations, such as Marbella, property prices have risen by over 30% over the last two years.
  5. Spike in inflation. In a financial context of a sharp rise in inflation, having your money stuck in a bank is a losing proposition. In an inflationary environment, money depreciates fast losing its value day-to-day. Finance experts agree that a smart way to hedge your savings against rising inflation is to take on a mortgage loan and invest in real estate to avoid losing purchasing power over the long run as bank deposits devalue over time with high inflation. This was the key strategy that many savvy investors followed in the 70’s, during a time of high inflation, which in hindsight made them very rich.
  6. Buy-to-rent. Annual rental yields are over 5% net. If you also add on top the capital appreciation (point 4 above), you are looking at a safe investment that is netting you over 10% p.a. risk-free. No other safe investment offers you such yields in a context of an underperforming bond market. In addition to this, the Spanish Tax Office offers lenient tax breaks which on average reduce landlord’s tax bills by 70%, or more (if EU-resident). A landlord can offset most, if not all, of their property-related expenses, vastly reducing their income tax on buy-to-lets (i.e. holiday rentals). More on this topic in my articles: Rental prices soar for 5th consecutive year in Spain! and 8 Tips for Buy-To-Let Success in Spain.
  7. Pound rally vs. Euro. Following up on point two above, expectations are high the BoE will raise the interest rate to combat the pernicious effects of inflation. In anticipation of this move, the pound rallied, since April this year, appreciating significantly against the Euro. This translates into UK buyers having greater 'purchasing power' on buying euro-denominated property. In plain English, any property in euros becomes much cheaper for sterling pound purchasers.

In short, it’s never been safer and more profitable to buy property in Andalusia than today. Don’t fight the current and move with the flow; take full advantage of Spain’s real estate property boom.

Are you really going to miss out?

At LNA we can assist you buying, selling or renting out your property in Spain. We have 18 years’ experience in conveyance & tax. We are also specialized in Immigration & Residency permits.

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

Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, 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.

Related services:

 

 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. VOV.

2021 © Raymundo Larraín Nesbitt. All Rights Reserved.

 

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Is age a thing on requesting a Spanish residency permit?

Raymundo Larraín Nesbitt, November, 18. 2021

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 has 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
11th of November 2021

Officially no, in practice there are some snags.

The reason being is that all visa permits, including a Golden Visa, have as a staple requirement in Spain that an applicant must hire private health insurance from a Spanish-based company.

Most Spanish health providers do not insure applicants over the age of 70 years old. None insure over the age of 75 years old full cover, at least to our knowledge.

This in practice translates indirectly to vetting any applicant over the age of 75 y.o. In effect, no candidate over 75 is eligible for Spanish private healthcare which in turn means your visa application is simply thrown out and you fail one of the core requirements common to all visa permits in Spain.

So, if you are thinking of making the move to Spain, at some point in your life, please, for your own sake, make sure you do not leave it until it is too late. Always apply for Spanish residency permits under the age of 75 y.o.; I would even go further, recommending the age of 70 to be on the safe side.

 

LNA has a 100% track record attaining Spanish residency

 

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

At Larrain Nesbitt Abogados, we have assisted hundreds of EU and non-EU nationals to successfully attain a Spanish residency permit.

Interested? Come and speak to Larraín Nesbitt Abogados’ friendly staff who will be pleased to guide you through the different residency options, choosing the one that appeals to you most. Your family’s success is only one call away: (+34) 952 19 22 88.

Residency services available from LNA:

 

Related visa articles

 

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 delusional separatist politician was harmed on writing this article. VOV.

2.021 © Raymundo Larraín Nesbitt. All Rights Reserved.

 

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Plusvalia tax reinstated in Spain as from 10-11-2021

Raymundo Larraín Nesbitt, November, 11. 2021

Lawyer Raymundo Larraín briefly walks us through the new revamped plusvalia tax law.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 18 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 © 2021. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Lawyer - Abogado
11th of November 2021

As readers may recall, Spain’s Constitutional Court overturned plusvalia tax last 26th October 2021. We published a detailed article at the time. The legal effects would come into force as from the next day this landmark ruling was published in Spain’s Official Law Gazette (BOE, in Spanish), as with any other law. We advised at the time that it was highly likely a new law would be approved soon (days or weeks), so chances to wriggle through scot-free were slim at best.

Yesterday 9th November 2021, in an absolute record-time that would even make Usain Bolt blush in shame, the Spanish Government published the new revamped plusvalia tax which came into force yesterday 10th of November 2021. Gosh, I wish tax rebates were processed so fast! This new law, despite what was initially claimed by Spanish Tax Authorities, has in fact no retroactivity to the 26th October. Yay.

However, we are still awaiting the High Court’s ruling of last 26th October to be published in the BOE … and two weeks on we are still waiting and waiting. Aww.

The jaded me would say the key ruling has been ‘hijacked’ by the powers that be, but surely this cannot be the case in a Western EU Democracy under the Rule of Law, right? Certainly not, God forbid! I’ll slap myself on the wrist for having such dark thoughts.

Anyway, before I digress further into a rabbit hole, the point being is that plusvalia tax is reinstated as from today.

So, if you are:

  1. Selling property
  2. Gifting property
  3. Inheriting property

You need to pay plusvalia tax as from today.

Everything done and dusted, yes? Well, no.

Because, what happens with all the transactions that took place between the 26-10-2021 and the 09-11-2021? Had the Hight Court’s ruling been published, it would be clear cut that no plusvalia tax was to be paid in those two weeks. But then, the landmark ruling was never published in Spain’s BOE.

Also town halls need months to adapt their own local bylaws to this new tax law which brings into question what happens in the interim with all ongoing transactions?

Finally, questions are being raised on whether it's constitutional to approve a law that creates a tax as a Real Decreto-ley (such as yesterday’s) because, in strict accordance with the hierarchy of our laws, this is reserved only to a higher-ranking law (Art 133.1 of Spain’s Constitution, our Supreme law) approved by Congress itself. A Real Decreto-ley is just a law passed by the Government, but it is not enacted or ratified by our Congress. This, from a legal perspective, has huge legal implications. Which leaves the door ajar for lawyers to challenge yesterday’s law on grounds of being unconstitutional.

This would mean the new revamped law of yesterday - that was approved precisely to replace a law that had been overturned on grounds of being unconstitutional - could be yet again overturned by Spain’s Constitutional Court on grounds of being unconstitutional in a Kafkian turn of events. Are you still with me? You really couldn’t make it up.

I think I need a drink.

 

Legal services available from Larraín Nesbitt Abogados:

 

Related articles

 

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 Thu'um was used against Skyrim's dragons on writing this article. VOV.

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Plusvalia tax overturned by Spain's Constitutional Court

Raymundo Larraín Nesbitt, November, 2. 2021

Lawyer Raymundo Larraín briefly explains the high court’s landmark ruling.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 18 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 © 2021. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Lawyer – Abogado
27th of October 2021

Yesterday 26th October 2021 it was announced that Spain’s Constitutional court declared null and void a series of articles which in practice translated into eliminating plusvalia tax. The exact details of the ruling remain unknown as it has still not made public but is expected to be released within the next days.

  • Plusvalia tax is one of two taxes owners pay on selling property in Spain (along with capital gains tax). We explain this in detail in our taxation article: Taxes on selling property in Spain – 8th December 2014
  • Plusvalia tax is also paid on inheriting property in Spain (along with inheritance tax). We explain this in detail in our taxation article: Spanish Inheritance Tax for Non-residents (Part I) – 8th March 2016

 

Plusvalia tax had been under flak over the last 4 years by the Constitutional Court which had declared in no less than four occasions that some parts of the law were annulled. The most prominent ruling was one which basically declared it void when seller’s sold property at a loss in Spain. In such a case, sellers could file a tax rebate on it. We published a detailed article at the time: Selling property at a loss in Spain: ‘Plusvalía’ tax no longer payable – 18th May 2017

However, the significance of this week’s ruling is simply groundbreaking. On this occasion the articles that have been annulled are of such relevance, that in practice make it impossible to calculate the tax; and therefore, to all intents and purposes, plusvalia tax has been suppressed.

Plusvalia tax raises every year over 2.5bn euros in revenue and municipalities (read town halls) are heavily reliant on it to finance themselves. The elimination of this tax will no doubt endanger the finances of thousands of town halls across Spain.

The tax office has wasted no time to announce that it will review the tax urgently, in light of the Constitutional’s Court ruling, and reinstate it as soon as possible.

Where does this leave us?

It means that if you are selling property or inheriting in Spain – and only for the time being – you do not need to pay plusvalia tax, at least in theory.

However, in practice, as we still have no access to the ruling itself, I strongly recommend plusvalia tax is paid. Once the ruling is out and made public, your appointed lawyer can then file a tax rebate clawing it back. I think it is only prudent. Bear in mind the tax itself has not been annulled; what has actually been declared void is how to calculate it, which is different. So, in purity, the tax obligation is still very much in force by local administrations but it cannot be calculated in practice. I know, clear as mud.

The bottom line is to pay first and then file a tax rebate on the back of this week’s high court ruling. I hope that clarifies.

Retroactivity?

This ruling has no retroactive effects.

However, that said, I’m pretty confident some colleagues will fight their corner and try to force retroactive effects on it.

But as of right now, it has no retroactive effects. Meaning that anyone that sold property or inherited prior to this ruling being published needs to pay this tax.

However, all those selling or inheriting after the ruling is published, will be exempt from paying plusvalia tax, at least for the time being.

Is this tax change permanent?

Not by any means. Town halls are hugely dependent on this tax to finance themselves, so it must be reinstated or else a new tax needs to be urgently approved to replace it and plug the budgetary void its absence will create.

As stated above, the Spanish Tax Office is already busy working to reinstate the plusvalia tax as soon as is possible. The window of opportunity to be exempt from paying this tax is slim. Perhaps only a matter of weeks, or months at most.

Legal services available from Larraín Nesbitt Abogados:

 

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Article originally published in Spanish Property Insight on the 27-10-2021: Spain’s Constitutional Court eliminates Plusvalia Tax on property

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. VOV.

2.021 © Raymundo Larraín Nesbitt. All Rights Reserved.

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Happy Halloween!

Raymundo Larraín Nesbitt, October, 31. 2021

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