Law in Spain

The Spanish Tax office has given six months to retirees living in Spain who are resident at Tax Purposes with pensions from abroad to regularize without penalty.

As a result of the strengthening and effectiveness of international mechanisms of information exchange between tax organizations, the Spanish authorities have discovered that there are many residents in Spain at tax purposes (they stay more than 183 days per year in Spain) receiving pensions from abroad of the country and they are not correctly declaring their annual personal income taxes.

Due to the characteristics of these people: elderly pensioners, who have greater difficulty in knowing the Spanish legislation, living many years abroad and, in general, not having great fortunes; the Government has approved for these groups an extraordinary period of grace of six months from January 2015, to rectify the situation.

This measure affects foreign pensioners that live in Spain and are residents at tax purposes and who claim their pension from abroad, or Spanish pensioners who have returned to Spain after many years working in another country and receive a pension from that country.They will have 6 months from 1 January 2015 to regularize their situation, during this time no sanctions will be applied.

The new disposition includes two special measures for cases of regularization in income tax than income from pensions paid from abroad:

• An extraordinary period of legalization: no surcharges, interest or sanctions to pensioners will be applied who voluntarily regularize their fiscal status by filing from 1st January to 30th June 2015 statements IRPF of exercises not prescribed (from 2010-2014)

• A cancellation of interest, surcharges and penalties required by this concept. The cancellation must be requested by the applicant from 1^st January to 30th June.

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During this time, these pensioners should visit a tax adviser who will help them with this year’s declaration, as well as those from previous years that have not been declared, and ensure that they are completely up-to-date with their fiscal affairs from this point.

Futher information about Residency in Spain at: www.abadabogados.com

Expats are being warned that the Tax Office are claiming additional transfer tax, which in some cases can amount to thousands of pounds, on properties purchased during the last four years.

Expats who bought their homes in Spain at ‘rock-bottom’ prices are facing shock tax bills due to the tax office’s opinion that they are worth more than what they paid for them.

In their quest to raise much needed finance, the regional tax offices are looking into tens of thousands of property sales which took place during the past four years. (Click here to see more information about Property Sales Taxes in Spain)

Since the property market crash in 2008, Spanish house prices have plummeted by up to 50% per cent in certain areas of Spain and the country is still trying to recover from the deep recession which followed.

In Spain, as in the UK and other parts of Europe, the buyer has to pay sales tax on the property. In Spain this is known as Impuesto de Transmisiones Patrimoniales (ITP) and is paid as a percentage of the value of the house. The amount payable will vary depending on the type of property in Spain and its location.

Obviously, since the crash, and its downward affect on house prices, the amount of this tax received by the Government has reduced dramatically which has forced them to review the situation and think of a newfangled way of raising extra money!

The regional tax authorities are in the process of ploughing through all home sales throughout the past four years and comparing the declared sales price to that which they believe should have been the market value at the time. If the price declared varies from the taxman’s own official valuation of the property, the owner will be sent a bill for the extra tax payable on the difference - which in some cases can amount to thousands of pounds.

To give an example, Mr & Mrs Simms, who bought their dream retirement home in Murcia in 2012 were billed for an extra 5,356 euros in sales tax ,almost three years after buying it. The couple who had searched for over two years to find the right property were delighted when they managed to find the home that they wanted and even more so when they managed to negotiate the price down to 95,400 euros.

A few weeks later, they paid the tax (ITP) over to the authorities, which amounted to 6,678 euros.

Then about four months ago, out of the blue, they received a letter from the local tax office claiming that in their view the house was actually worth £171,927 and that the couple should pay the extra 5,356 euros.

The couple went to the tax office as they presumed that there had been a mistake, but they were told that they had no other choice but to pay it.

That is when they came to see us at Abad Abogados. We appealed against the initial decision made by the tax office, and continued to a second and finally a T.E.A.R appeal before their decision was overturned, resulting in no further tax being paid by The Simms.

If you have received a letter from the tax office and are unsure of what you should do, or if you are just concerned about your situation knowing that you bought during the period under review, then we at Abad Abogados can help you. You can contact us on www.abadabogados.com for further infotmation about buying a property in Spain.

Savings of up to €48 million thanks to new rules for cross-border judgments

On January 10, the Regulation (EU) 1215/2012 adopted by the European Parliament and of the Council on 12 December 2012 which replaces Regulation (EC) 44/2001 on jurisdiction and recognition and enforcement of judgments in civil and commercial matters (Brussels I Regulation), began to apply.

The aim of this revision is to facilitate and accelerate the circulation of judgments in civil and commercial matters within the European Union. Removing bureaucratic obstacles, extra costs and the legal uncertainty of having 27 different and often contradictory systems make the single market more attractive.

The principal objective of this Regulation is to facilitate the free circulation of judgments and to enhance access to justice. This means that citizens and companies will be able to recover the money in a quicker, easier and free way.

The most important change is the abolition of the exequatur procedure. The exequatur is the procedure for the declaration of enforceability of a judgment given in another Member State. With this Regulation, a judgment given in a Member State which is enforceable in that Member State shall be enforceable in the other Member States without a declaration of enforceability being required, upon production of a copy of the judgment which satisfies the conditions necessary to establish its authenticity and a certificate to be issued by the court of origin (Article 37).

An enforceable judgment in civil and commercial matters in one Member State will be automatically enforceable anywhere in the EU. The rules abolish the cumbersome intermediate procedure – the "exequatur" procedure. This procedure typically costs €2,000 to €3,000 depending on the Member State, but could cost up to €12,700 including lawyers' fees, translation and court costs. In almost 95% of cases, this procedure was a pure formality.

Pursuant to the new provisions, in the event of a dispute with a company outside the EU that sells products in a Member State, European consumers can access the courts of your country of residence and not have to go to the country outside the EU. The regulation also allows employees who work in the EU to initiate legal proceedings against their employers located in a country outside the EU before the courts of the Member State where they ordinarily work.

This reform will save time and money for businesses and consumers because judgements from one EU Member State will be automatically recognised in another EU Member State. It is a small revolution for the European area of justice which brings us closer to the model of the U.S. Single Market. It is expected that this simplification will allow a saving of 48 million euros.

"This is very good news for Europe's citizens and SMEs", Věra Jourová, the EU's Commissioner for Justice, Consumers and Gender Equality said. "These new rules could bring savings of between €2,000 and €12,000 per individual case. It is a successful delivery on the promise to cut red tape and strengthen the EU's Single Market. Such action will make a significant difference in particular for small and medium enterprises and will open up many more opportunities for business across Europe".

More information about business in Spain at www.abadabogados.com