Law in Spain

            On 1 October 2020, the Second Section of the Administrative Chamber of the Supreme Court issued a ruling that reaffirms the criteria already established by the High Court in relation to the entry and registration of the homes of individuals or companies within a tax inspection.

            In the judgment in question, the Supreme Court annulled a court order authorising registration and entry, considering that it did not meet the necessary legal conditions. These conditions are those of necessity, adequacy and proportionality. In addition, the application and authorisation must of course take place within an inspection procedure that has already started.

            These requirements must govern both the application by the Tax Agency and the court order authorising registration and entry, all on the basis that the inviolability of the home as protected by Article 18.2 of the Constitution may only be broken in specific cases and in a very rigorous manner.

            The ruling develops the idea that mere suspicions are not enough to justify a request for entry and search but that this must be based on something more profound and studied. This support cannot be statistics or evidence, but something tangible.

            In our opinion, the Supreme Court is right to recall and reaffirm these red lines because the actions of the inspectorate must have the greatest guarantees and must not under any circumstances violate the fundamental rights of taxpayers.

Hacienda, the Spanish version of HMRS, is taking advantage of the COVID19 crisis mooring people in Spain to crack down on them. They are arguing that if you spend more than 183 living in Spain (regardless of the circumstances) then you are a Spanish resident and you are liable to do your tax return here (IRPF in Spanish).

Not only a foreign citizen would have to pay, according to the Hacienda interpretation of the law, their yearly tax returns but also Inheritance Tax if somebody dies while the heir has spent 183 or more days in Spain.

Furthermore, Hacienda will also make foreign citizens pay Wealth Tax (Impuesto del Patrimonio) taking into account their worldwide wealth. In order to do that, the 720 form needs to be filed in at the Hacienda offices informing all the rights, shares and ownerships one has that exceeds the €50,000.00.

The Organisation for Economic Co-operation and Development has urged national tax offices to follow the guidelines left by some of its members like Australia, United Kingdom or Ireland. These tax offices have decided to ignore the time spent in their countries by workers, agents, executives or administrators.

Here at Abad Abogados we believe that Hacienda should consider the unwilling extended stay in Spain of foreign citizens to be force majeure, and to not include that time in their calculations for residency. Particularly when the affected person has made efforts to return to their home country as soon as the travel bans are lifted.

If you have stayed in Spain during the COVID19 crisis unwillingly and would like advice regarding its impact on your tax obligations in Spain, the Abad Abogados bilingual team in Spain is ready to help you, as it counts among its ranks with legal professionals in Tax Law and litigators ready to fight for you.

Due to the current COVID-19 situation, plenty of people have seen their income decrease and paying their monthly instalments for mortgages and loans become an insurmountable obstacle. Here in Spain the Government has issued two new bills Real Decreto 8 and 11 / 2020 in order to open the door to delay payments on loans for those affected the most. Although at the beginning only mortgages were considered, now all kinds of loans are.

The requirements for this mortgage moratorium need to be all met by the applicant and they are:

• To have their status changed to unemployed or, if you are a freelance or business owner, to have your profit decreased in at least 40%.
• For your household income not to be higher than €1,613 in the month before the application.
• That the monthly loan payment plus the basic utilities rises up to be at least 35% of the household income.

If the loan is a mortgage, it is also required:

• That it is set upon your primary residence, upon a property that you use  for your business (i.e. your office) or upon a property that you let but whose rent you have not collected since the 14^th March 2020 for COVID-19-related reasons.

Banks and other financial institutions will offer you bank products that are not equivalent or do not have the same advantages as the ones contain on the recent bills. If you believe you meet the requirements abovementioned you could be benefitting of a moratorium or pay grace period. Abad Abogados has a team of English-speaking professionals that can help you in these difficult times. Contact us today!

Less than two weeks ago, Theresa May triggered what we all know as ‘Article 50’ which means that the two year separation process from the EU is now underway.

As with the Referendum in June last year, many expats, including several of our clients, immediately panicked thinking that their lives would be affected by all the changes that the UK leaving the EU would involve.

But now like then, the bottom line is BE PATIENT. Nobody actually knows as yet what the negotiations will arrive at during the next two years. So we just don’t know what changes will be made in respect of us ; living here/residency in Spain, working in Spain, receiving health care or education in Spain, receiving UK pensions here and owning property. All of these issues will of course need to be addressed in due course. But as for now, everything stays as it was prior to the start of negotiations.

The first meeting post triggering the Article for all the remaining 27 member states will take place on 29th April – the UK will not be able to take part in the negotiations.

It is very much a case of ‘wait and see’ as no one actually knows how this process will ‘pan out’. After all, there are 43 years of treaties, covering thousands of topics to unravel. And as this is the first time the Article has been triggered the process will pretty much be made up as they go along it appears!

It could even take more than the prescribed two years to reach an agreement but only if this were to be agreed by all 28 members (i.e. including the UK).

Following the ground-breaking Supreme Court Ruling towards the end of 2016, making banks as guarantors responsible for amounts paid up front to developers who subsequently don’t complete the project, the Caixa bank has received yet another blow: it has to return 402,350 euros to the fifteen buyers in Trampolín Hills Golf Resort in Murcia.

The ruling, which can still be appealed, forces the bank to respond as a guarantor for the bankrupt construction company.

The buyers paid money on account of the Trampolín Hills development, which was promoted in 2006 in Campos del Río, Murcia, but never came to fruition.

The judgment was made by the Court of First Instance number 1 of Murcia, where the amount payable was estimated as a result of the lawsuit filed on behalf of the British buyers.

The fifteen British clients joined together to make their claim for the money they had paid up front for the purchase of their future homes that were never built. As in previous cases, the amounts paid in the bank by these clients were not entered into the required special account, opened for the exact purpose in favour of the promoter, but in another account of a different nature.

The Murcian promoter has been in bankruptcy since 2010 and there are numerous claims in process against them for fraud and civil claims in courts throughout  Murcia and other Spanish provinces as well as in other parts of Europe,  with allegations of fraud that are estimated to  exceed 62 million euros.

We at Abad Abogados have filed numerous lawsuits against financial entities for the recovery of payments made to bankrupt promoters, so if you or anyone you know have suffered as a result of a similar situation then please do not hesitate to contact us so that we may review  the legal feasibility of your case.

The Supreme Court Judgment 705/2015 of December 23rd declared the clause by which BBVA imposed on borrowers the payment of all expenses, taxes and commissions related to mortgage loans to be abusive.

By virtue of this, they will be able to reclaim:

 Notary's and Land Registry’s invoices- The expenses corresponding to the formalisation and registration of notarial deeds, necessary for the constitution of an effective guarantee i.e. of the mortgage

Stamp Duty. The Supreme Court understands that the taxable person is the Bank or Lender, and not the borrower.

The same as what happened with "floor clauses" (cláusulas suelo), the content of the Judgment opens the door to considering similar clauses of other entities as equally abusive and void.

The first step to recover the amounts would be the filing of a claim with the Bank itself. If they do not answer within two months or reject the request, then the case may go to court.

The term of the claim, for those mortgages in force, is four years from the day following the date of the said Judgment. Therefore, the deadline would be the 24th of December 2019.

For those mortgages that have been fully paid, the claim can still be made, if the total payment was made within the four years prior to 23rd of December 2015.

As this is a complex legal issue, we advise you to contact expert lawyers.

The EU Court of Justice ruled on the 21^st December 2016 in respect of floor clauses (Cláusulas suelo): Spanish banks will have to return to customers the total amount of what they received in relation to floor clauses.

The Spanish Supreme Court, in the famous 2013 judgment on floor clauses, ruled against the banks, but limited the compensation to May 2013, due to the country's then financial situation.

However, as of today, all amounts irregularly paid since the signing of the contract can be claimed back The judges of the EU Court of Justice considered that "the judicial declaration of the abusive nature of a clause should have the effect of restoring the situation in which the consumer would be found in the absence of such a clause." Those affected by floor clauses cannot be limited in time.

This is a huge blow for banks, since they must now decide what to do with the claims that they will receive. Although some entities consider that the amount is lower, the Bank of Spain indicated in a report that the financial institutions will have to pay around 4,200 million euros.

In the event that a claim against an entity is unsuccessful, it must be taken to court.

For more information, you can contact “Abad & Asociados”: mortgage@abadabogados.com

The official name for what we sometimes call ‘Council Tax’ in Spain is IBI – Impuesto sobre Bienes Inmuebles, which simply translates as Tax on property/real estate.

By law, the person who owns a property on the date on which the IBI starts to accrue is the one who is responsible for the payment of the tax for that whole year.  In Spain the tax/fiscal year runs from January to December and IBI starts to accrue, although doesn’t need to be paid by, the 1^st of January each year.

When you are buying a property, the Title Deed will usually state that the IBI is all paid up to date by the vendor and it’s quite uncommon for the vendor to demand a proportional part of the tax back from the buyer relating to the part of the year which remains once the sale has taken place. For example: If the sale takes place on the 30^th June, the vendor could  try and negotiate with the buyer that 50% of what he has paid should be borne by them, but this isn’t common.

A RECENT JUDGEMENT TO BEWARE OF!

Be aware that the situation has changed as a result of a recent judgement by the Supreme Court.

Now, when buying a property, buyers need to ensure that in the title deed it states that the vendor be responsible for the entire payment of IBI in the year which the sale takes place. If this isn’t expressly stated, the vendor has the right to demand the proportional part of the tax from the buyer for the remaining days in the year, post-sale.

The Court found that even though the owner on the 1^st of January should pay the tax, this repercussion is possible – that the vendor has the right to demand the proportional part back.

Furthermore, it found that this right exists even if the Title Deed hasn’t made mention of it. In fact, this judgement arose in a case where the Title Deed hadn’t made any specific reference to it and where the sale took place ‘free from liens and charges’.

So our advice if you are buying:  Make sure that the deed expressly states   that the vendor assumes the responsibility for paying the IBI in full that year and that they will not demand any part from you for the remaining part of the year.

 And our advice if you are selling: Why not use your right of demanding the proportional part of the IBI post sale as a negotiating factor when agreeing a selling price?

We at Abad would be happy to assist you in buying or selling your property so please do not hesitate to contact us via our web page shown in the links to the right.

Do you need a Visa to travel to Spain?

People holding passports issued in the European Union*, Iceland, Liechtenstein,Norway or Switzerland do NOT require any type of Visa to visit Spain. This applies to visiting, living, working or studying in Spain. This is because of the Freedom of Movement Act.

 If they  plan to stay in Spain for more than three months, they would however need to apply for residency.

In addition, Spain allows entry to many other countries without a Visa, as long as their stay is for less than 90 days in any 180 day period. For example: Argentina, Australia  ,Brazil , Canada , Chile , Colombia, Japan , Mexico , New Zealand , Peru , and USA to name but a few.

A Visa is required for other visiting citizens from some South American countries (for example Bolivia), most parts of Africa (including Morocco),  Asia including China and India and Russia.

*Obviously, noone knows how ‘Brexit’ will affect the requirements for British citizens in the future, but as nothing has changed since the vote and won’t until the exit from Europe is underway ( if at all) then all information contained here applies equally to the UK.

Different Types of VISA.

There are three types of visa for entry into Spain:

• Airport transit visa – this allows you into the international transit zone in a Spanish airport if a stopover is required. The airline should be able to advise you prior to travel of the requirements for this type of Visa.
• Short-stay Schengen visa
• Long-term visa

The Schengen Area/ Visa

In addition to free movement amongst EU/EEA member states, there is also an area known as ‘Schengen’ . The Schengen Area operates very much like a single state for international travel with external border controls for travellers entering and exiting the area, and common visas, but with no internal border controls. Spain is a member country of the Schengen Area.

A short-stay Schengen visa (visado de corta duración) allows you to stay in Spain – but not work – for up to 90 days in a 180-day period.

The requirements for this type of VISA are quite extensive and can take anything between 2-4 weeks to obtain. So you should ensure that you allow yourself enough time before travelling to obtain one.

Long-term Visa (Visados de larga duración)

This type of Visa is required to live, work, study or carry out research in Spain.

Again, the requirements are extensive so obtaining the help of a legal advisor like Abad is highly recommended. Applications take approximately one month.

If your application is turned down, you can present an appeal within two months at the Court of Appeal in Madrid (Tribunal Superior de Justicia de Madrid).

We at Abad can help you obtain the required Visa so please do not hesitate to contact us.