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                                        15 years of experience support us                                 Pellicer & Heredia we are a law firm in Alicante assigned to ICALI Alicante Law Society. We offer our clients comprehensive legal advice with an oriented outcome and personalized service. «Our goal: total customer satisfaction.» Our offices are multilingual, can serve you in English, Spanish, German, French, Russian and Swedish. We are specialized in international law, visas and residence.

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EVERYTHING YOU NEED TO KNOW ABOUT WEALTH TAX IN FIVE MINUTES

 

Am I required to pay wealth tax? Yes, both residents and non –residents who own property in Spain are eligible to pay Wealth Tax. The larger your estate the more you are taxed. The rules vary depending on if you are resident or non-resident and on where you live.

Many Spanish autonomous regions including the Comunidad Valenciana have their own tax laws.

 

RESIDENTS

  • Pay tax on worldwide assets

  • Have a substantial tax allowances

  • Are entitled to a 600,000 euros deduction per person in the C. Valenciana (700.000 euros in Murcia)

  • Are entitled to a permanent home deduction of 300,000 euros.

  • Are required to submit the wealth tax declaration if 1) it results in a fee and 2) holders of goods valued in excess of 2 million euros.
     

NON-RESIDENTS

  • Pay tax only on Spanish assets

  • Are subject to national law, not the law of the region their assets are located.

  • Are entitled to a 700,000 euros deduction per person

  • Are required to submit the wealth tax declaration if 1) it results in a fee and 2) holders of goods in Spain valued in excess of 2 million euros.
     

How is wealth tax calculated?

To calculate this tax all of the taxpayers assets are valued according to the valuation rules depending on the type of asset. For example, homes are valued at the highest value be it the purchase price or value given by the administration, if it has been declared proven; Bank accounts shall be valued by the highest of the balance between December 31 and the average balance of the last quarter.

Once valued the assets of the taxpayer, a tax benefit of 600,000 euros in C. Valenciana or 700,000 euros in the Region of Murcia will apply.

In addition, certain things will be exempt from taxation, among others, the primary residence up to a limit of 300,000 euros in value or shares in entities that hold more than 5% to those entities not engaged in the management of property assets or furniture.

The tax rate is between 0.2% and 2.5% according to the following table for C. Valenciana, which can vary considerably according to the rules of each Autonomous Community

 

Which of my assets are taxable?

Taxable assets include:

  • Property (houses, buildings, plots…)

  • Bank accounts

  • Insurance and short-term income

  • Luxury items (luxury cars, jewelry, planes..)

  • Art and antiques

  • Royalties

  • Contractual options

 

 

What are the assets exempt from Wealth Tax?

  • Household contents (excluding luxury items)

  • Small businesses or family run businesses

  • Pension

  • Business assets

Those required to submit a wealth tax declaration form will have from April 6 to June 30 of each year, coinciding with the income tax period using the 714 form the Tax Agency.
 

At Pellicer & Heredia we can assist you to submit your tax declaration in Spain even if you are abroad.

 

Some legal tips about the Spanish Tax system

When I am supposed to lodge my income tax in Spain?

If you are resident in Spain for 183 days or more, you are considered a Spanish Tax resident. As such, you are required to submit an annual Spanish resident tax return know as a “Declaración de la Renta) as long as you comply with certain levels of income.

Some people however have more complex personal situations and they spend their time between a few countries or / and have property or business interests in other countries. In these cases there are International Double Taxation Treaties stating where the person subject to the tax should declare their income for tax purposes.

What is the minimum income to be liable for income tax?

If you have one source of income, not taxed at source, and you earn over 12.000 euros in pensions, you are obliged to file a tax return. However, that does not mean that you will end up paying taxes since it depends on your personal circumstances as we explain below.

 

What happens if I file my tax return late?

  • If there is no tax payable but you are obliged, there will be a fine of around 100 euros for filing a late tax declaration.

  • If there is tax payable there is a charge to be paid. This is generally a percentage of the amount owed; it also depends on how late the tax declaration was submitted.

Are there any tax deductions for living in Spain? Yes, some of the main deductions are:

  • A personal tax-free allowance.

  • Married couples allowance for joint declarations.

  • Employment allowance.

  • Child tax allowance.

  • Deductions for private pension plans.

  • Taxation regime for income from annuity pensions.

 

Have there been any changes to the Spanish tax system recently that I should be aware about? Yes.Here are a few of the most important changes:

  • Double Taxation: This treaty affects individuals and companies who are tax residents in Spain, but who have income from the UK too. Please note that Income on the Civil Servant pensions needs to be included from the 1st of January of 2015.

  • Disclosure Rules: Spanish residents must declare all overseas assets worth over 50.000 euros.

 

What is the Income Tax Calendar for the year 2016?

  • 1st of January until the 31st of March:

  • Declaration of Overseas Assets (Form 720).

  • 6th of April until the 30th of June:

  • Personal Tax Declaration (Form 100).

  • Personal Wealth Tax Return (Form 714).

  •  1st of January until the 31st of December:

  • Non-Residents Income Tax (Form 210).

 

Can I pay the Tax in stage payments?

Yes. The first payment (60%) will be taken on the 30th of June if you pay it by direct debit. The second payment (40%) will be taken on the 1st of November. If you would like to make the payment in more stage payments you will need to submit an application to the Tax Office.

 

Calle San Fernando, 46-1º izda

BUYERS WHO LOST THEIR MONEY IN AN OFF-PLAN PROPERTY IN SPAIN HAVE A CHANCE TO RECOVER THEIR MONEY BACK NOW

 

The Supreme Court in Madrid has recently made very clear the interpretation of the Bank Guarantees Act of 1968. Banks will be responsible to pay the money back to buyers of off plan, for not issuing the compulsory individual bank guarantees, if the money was paid into the Developers segregated account.

Buyers who received a Bank Guarantee or Insurance Policy to cover the payments made towards their property, or even those who never had it due to the developer or Bank failing to comply with the Law, will be in luck today due to a very well received Judgment from the Supreme Court of Spain, which has ordered that these entities be paid back to the buyers of off plan properties, all the money they invested, plus legal interests from the time they made the payments.

The imperative and unalienable rules contained in Law 57/68 are compulsory to developers, banks and insurance companies. The breach of these obligations by developers and financial institutions, can never be to the detriment of the buyer. This Law 57/68 requires Banks to guarantee all deposited amounts but its wording was interpreted in different manners. However, now the Spanish Supreme Court has made clear recently that:

  1. if other buyers of the same resort received individual bank guarantees then all buyers should have received them and the fact of not having an individual bank guarantee would not stop them from claiming the money from the bank.

  2. if the amount covered by the bank guarantee is lower than the money actually paid to the developer the bank should pay back the full paid amount plus interest.

  3. if there is not an individual bank guarantee but there is a general bank guarantee this should cover all buyers as if they would have received an individual bank guarantee.

  4. there is no need to sue the developer before suing the bank.

  5.  The bank receiving up front payments in the developer segregated account must request the existence of those Bank Guarantees under its own responsibility. Otherwise they will be held responsible for that.

Many buyers of off plan properties who put a deposit down some years ago, before the credit crunch or even made stage payments to buy a property in Spain, whether they received the compulsory individual bank guarantee or not, could enforce today their rights through art. 1.2 of this Act and ask for compensation if they paid through the Bank and they never received a Bank guarantee.

Unfortunately, the Bank Guarantees Act 57/1968 was amended on the 1st of January 2016 and buyers now only have 2 years to claim against the Bank, from the time the contract was cancelled.

Please feel free to contact us with whatever questions you may have. Call us on 965 480737 or 606056282 or e-mail us at info@pellicerheredia.com

 

Consequences of Brexit for the UK

What implications could the UK leaving the European Union have on other European countries?

The answers depend heavily on the political approach. But leaving ideology to one side, Britain brings each year 1,000 million euros to European reserves, which could disappear, warns Mathew Bessley, head of Equity Henderson. Although the math’s are not that simple, because a number of things are not reflected, for example, benefits the country receives from Brussels and what offsets that amount. The fall of British GDP, which AXA IM estimates to range between 2% and 7%, will also have an impact on trade relations with its current partners on both sides of the border. If demand decreases in the UK, exports fall and companies that trade with each country also have fewer transactions. According to data from the UK´s National Statistics Office, Britain's trade deficit with EU countries reached highs of 89.000 billion pounds in 2015. That means that purchases of French wines, German cars, Spanish vegetables or Italian clothes exceeded what Britain was able to sell to its neighbors, while exports to EU countries fell by 8%.

 

Do I have to renounce British citizenship to acquire Spanish nationality?

Yes. Except for citizens of countries with whom there is agreement of dual nationality (which is not the case of the UK). When you complete the process of acquiring Spanish nationality, the regulations require, that when you swear loyalty to the constitution, you renounce your nationality in order to obtain Spanish nationality.

 

If I renounce British citizenship, will I still be entitled to a pension from the UK?

Yes, of course. For the right to a retirement pension you do not have to be a British national but you have to have contributed to the British Social Security. You are required to contribute at least 30 years to collect a full basic pension. Those who do reach this period will receive a basic pension proportional to the amount contributed, with the minimum requirement of one year of contributions.

If the UK leaves the European Union, will I still have the right to use the Spanish health service?

Yes, provided you are registered in Spain and have requested healthcare cover because of limited income, if you are not working.

 

Will pensions be frozen if the UK leaves the EU?

No not at all. The system for calculating pensions will remain the same:

• Basic pension: Consisting of 113.10 pounds (144.53 euros) per week, which equals approximately 16% of the average wage. This pension is currently revalued in line with the consumer price index.

• Pension linked to income: It is calculated based on the average salary of the professional life of the taxpayer, updated being based on rates of economic growth salaries initial years, and being updated from the calculation based on consumer price index. The average rate in the UK is around 40%, compared with 75% -80% of Spain. This means that public pension is normally about 40% of the last salary of an individual. Therefore, we see is a fairly low coverage rate and left to the private savings to supplement retirement prior to the same levels.

• Pension credit: This is a welfare pension; tax free, for people most at risk of exclusion. It is based on income and not what has been contributed over the period of your working life and it aims to cover a minimum income for those who have reached retirement age and cannot survive with their own resources and other pensions.

If the UK leaves the European Union, I will lose the right to stay in Spain?

No not at all. British citizens remain entitled to the right to enter and move freely throughout the territory of the European Union, either because they are considered "similar" to EU citizens or because they pass the general arrangements for foreigners in Spain.

What about Spaniards living in United Kingdom?

It is still to be decided that in the case that the Brexit is approved, that EU citizens may no longer have benefit or ability to enter UK simply with a passport, and so to enter the country in search of work may not be easy.

 

Would Spaniards in the latter case need work visas?

Yes, If this scenario were to take place a work permit for professionals who want to develop their career in the UK would be necessary. Authorization for a work permit would be obtained and governed by the rules established in this regard by the British domestic law. Logically, the principle of reciprocity would mean that a British work permit in Spain would also be necessary.

Would the British need a passport / visa to enter EU countries?

In the case that no agreement between the EU and the UK is reached, that has been signed with the integrated EEA block, then yes, since this scenario would not be included within the space of European free movement.

 

What will happen to Gibraltar?

If the UK leaves the European Union it threatens access to their territory. According to negotiations the gate of the “Linea de la Concepcion” could resealed with the havoc that entails for daily transit workers on either side of the border.

For any queries or assistance in any of the things memtioned contact our friends at Pellicer & Heredia