Law in Spain

Luck has become Región de Murcia in one of the luckiest Communities in Spain due to the Christmas National Lottery 2014. But, are you aware of the tax implications to earn money with lottery tickets?

We have asked to the expert in tax law Mr. Isaac Abad, a lawyer and economist representing the Law Firm Abad Abogados, which are his recommendations regarding the collection of earned money in lottery tickets in Christmas Lottery 2014.

It is interesting to earn the money before the New Tax Law comes into force?

This is one of the most worrying issues for those who has earned money with the lottery.

To be honest, it is indifferent, due to the fact that it is a right of collection, so it must be consigned in the Patrimony tax of 2014 from the day you earn that money. The income from liquid capital, which have been got these days, will pay tributes a little bit higher, reason why it is better to contract products whose interest deployment takes place in the year 2015.

Which is the taxation of these prizes?

In December 2013, the awarded lottery tickets, were for the first time taxable, and for 2014, continues the same. Nevertheless, this only affects to those amounts over 2.500€. If the amount is under 2500€ the gain will be tax exempted.

From that amount, lottery prizes tribute 20%, which means that those who have been lucky, receive directly 80% of the amount of the prize, due to the fact that the National Lottery is obliged to retain 20% and deposit it in the Tax Agency.

What happens when the décimo is shared between different people?

When the awarded lottery ticket has been bought and shared between various people, the exemption limit of 2500€ is applied to those who bet, and moreover for every prize. It means, that if a lucky person has several lottery tickets, the exempt limit applies to each of them. It is advisable, therefore, that the prize is received by every lucky person individually, because if one person gets all and after give it to the others, it would be additionally subject to the Donation Tax.

And if the owner of the décimo is a Company?

In this case, the exempt minimum is not applied and the prize must be added to the taxable base of the Companies Tax. Due to the fact that décimos are to the bearers, it would be advisable that before you get the money, you contact a tax specialist to study the special circumstances regarding the case.

Which is the deadline to collect the awarded lottery tickets?

There are 3 months, from the following day after the Christmas Lottery.

Where can you get the money?

For prizes under 2500€ in the own Lottery Administrations. For prizes over 2500€ you should go to the official financial entities.

And if I have a participation, where should I collect the money?

The payment of the participations in décimos must be done at the emitting entity, you cannot go neither to the Lottery Administrations nor to financial entities.

What is your advice to those who have earned money with lottery tickets?

I certainly recommend them to contact with experts in tax law, due to the fact that taking the right decisions in tax planning will mean an important saving. In our case, we have one office in Mazarrón, where we will be happy to attend to all those who need support.

Further information about tax in Spain at: www.abadabogados.com

You may be aware that due to a new European Regulation (EU 650/2012), the Inheritance rules have been amended and this could mean that you will need to amend your Will in Spain.

Under the new European Regulation 650/2012, when a person dies resident in an EU country but is a national of another, their inheritance will be governed by the rules of the country expressly stated in their Will and not by the International Norms of the country where they died or were resident, which may be in conflict.

This is good news for British nationals living in Spain as they can establish that they wish UK Law to govern their inheritance and this will avoid any possible risk of claims from children against the spouse on the basis of the system of obligatory heirs laid down by Spanish law, which has always been a concern where there are children from different marriages etc.

The change means that when someone dies after the 17^th of August 2015, their inheritance will be automatically governed by the rules of their final country of residence.  This is of upmost importance for British people living in Spain, because under Spanish law you cannot leave everything to your surviving spouse, as 2/3rds of the estate has to be left to the children or any other descendant.

In summary, if you are resident in Spain and have children and you do not establish in your will that you want UK Law to rule your inheritance, your Spouse will not be entitled to inherit everything as it would be contrary to the  Spanish rules of obligatory heirs, which would automatically apply under the new regulation.

If you signed a Spanish Will and you want to double check whether these changes affect you, we highly recommend that you contact your lawyer who will be able to tell you if you need to make any changes to the wording of your Will.

For further details about inheritance in Spain, visit: www.abadabogados.com

Included in the Draft Tax Reform of Income Tax in Spain for Spanish Tax Residents is a significant modifying rule that could be described as a "second chance" to allow those spanish tax residents who have not declared foreign pensions received to rectify the situation.

The arrangement will allow the submission of additional returns without surcharges, interest or penalties for late payment to spanish resident taxpayers who file the corrective returns within 6 months of the date on which the Act comes into force, effectively from 1^st January 2015.

According to tax office sources this grace period has been granted due to the existence of interpretive discrepancies which have now been properly clarified and that for those non-resident taxpayers who do not rectify the situation voluntarily, it is quite possible that they will be subjected to a campaign of subsequent inspection and may be faced with a substantial tax bill.

Furthermore, if during these months a return is made after its deadline which rectifies foreign pensions received before the date on which this arrangement came into force, no surcharges, interest or penalties arising from it will be charged.

If you have already received a settlement by the Spanish Tax Office in this regard, you should contact your tax advisor, as it is possible that if such a settlement is not final, you may be able to benefit from this provision.

If, however, you have received a tax assessment in this regard, which has already been paid prior to this arrangement coming into force, you may be able to request the cancellation of default interest, penalties and surcharges which have been charged, so we recommend that you contact your tax advisor to assess the most appropriate action for you to take.