Legal & Fiscal Advice

Where can I set up my business to improve the taxation of my company? What aspects do I have to consider? What are the pros and cons of fiscal havens?

One of the long unresolved matters in business is the optimization of taxation, which often when attempted without legal advice can seriously damage the company. It is for this reason that we shall focus on this issue for this article, focusing on the use of tax havens as a tax improvement tool.  

When we speak about tax havens we are referring to those territories in which their fiscal systems offer low or zero taxation, often especially favouring none-resident citizens and companies. They are characterized for the possession of flexible mercantile and financial legislation due to the legal, banking and commercial protection in place, as the fiscal havens deny informing and collaborating with many countries.    

One of the many advantages is the speed in which it takes to create businesses, banks, insurance companies, and many other legal forms – quite the opposite to the inflexible requirement driven legal processes in Spain. Other characteristics that Tax Havens provide include political, economical and social stability, a network of communications and a developing banking/financial sector to benefit Havens for both legal and natural entities alike.   

One of the most commons fallacies in international fiscal planning is that using fiscal havens presupposes illegal or fraudulent activity; however the reality is that the proliferation of money laundering or fiscal fraud is normally due to the bad communication between the countries.

Nationality and territory are basic aspects in setting up your company in a fiscal haven. In this sense, the relocation of the fiscal residence is an important point to take into account. That is to say that when a taxpayer is considered a fiscal resident of a particular territory, they must change fiscal status to another territory. This can be done by either individuals or companies and we must keep in mind that for each situation the law changes.

In Spanish law, corporation tax establishes the criteria to determine the residence of a legal entity with the purpose of determining their personal contribution obligations. The use of fiscal havens by companies occurs mainly through the establishment of new companies, as their does not exist a way in which to relocate the headquarters of an existing company. For individuals, they look for countries where there are no or low taxes, or territories in which the fiscal system is based on the principle of territory, with the purpose of only assessing income that is internally produced, and not those from outside of said territory. This works as a mechanism for tax avoidance, and is usually applied by people with high incomes such as elite athletes, international artists and shareholders of big companies.        

Nowadays relocation is common practice, so certain countries have normalized a set of measures to prevent/discourage the change of residence for possible elusive or evasive motivations.

Countries like Switzerland and Liechtenstein all permit non-resident to carry out operations (off-shore societies), as does Monaco who by not assessing the incomes or present exemptions helps to avoid assessments. On the other hand, countries like Honk Kong or Panama only bear in mind the incomes from the taxee’s principle territory.  

In short, the taxation of companies in particular is a difficult task that without professional help can be harmful; therefore if your goal is to invest offshore, set up a company, open a bank account abroad, or improve your taxation in Spain, don’t hesitate to contact a lawyer specialised in this field, you’ll certainly need their help! Contact us directly by comunicaciones@lexland.es or +34952778899 for assistance with your tax planning today!

Though the necessities of a Will are now widely understood, many are still ignorant to the advantages of a Living Will. Living Wills are becoming more and more popular in this day and age, as people live longer lives, and medical treatments advance. A living will is a legal document that a person uses to make their wishes known regarding life prolonging medical treatments. It can also be referred to as an advance directive, health care directive, or a physician's directive. This should not be confused with a Living Trust, which is a mechanism for holding and distributing a person's assets to avoid probate.

Generally, a Living Will describes certain life prolonging treatments. You, the declarant, indicate which treatments you do or do not want applied to you in the event that you either suffer from a terminal illness, or are in a permanent vegetative state. It does not become effective unless you are incapacitated; and until such a point you are able to change and state what treatments you do or don't want. It is very important to have a Living Will as it informs your health care providers and your family about your opinions and desires for medical treatments in the event that you are unable to speak for yourself.

At clearly a very difficult time for your family, a Living Will can smooth the process and reassure your family that they are acting with your interests. You may also choose to designate a health care power of attorney or health care proxy, which gives someone of your choice the authority to make health care decisions for you in the event you are incapacitated. The person you designate is supposed to consider what you would want, so be sure to talk with them about it. It may be a difficult conversation, but you're asking someone to take on a great burden for you - letting him or her know what you want lessens that.

A living will does not become effective until certain certification is provided. Your doctor would be required to declare you as terminally ill, or permanently unconscious, this opinion would then need to be seconded by another doctor. This means that if you suffer a heart attack, for example, but otherwise do not have any terminal illness and are not permanently unconscious, a living will does not have any effect. You would still be resuscitated, even if you had a living will indicating that you don't want life prolonging procedures. A living will is only used when your ultimate recovery is hopeless.

Saying all of this, these documents will be on no good if no one knows about them. Though difficult, communication is essential with your family and loved ones about your wishes. Many people feel that creating a Will is depressing, and put it off until a tragedy triggers its need, and the consequential unnecessary stress. Advance planning need not be gloomy, but instead a stitch in time that allows you and your loved ones a sense of security and understanding. It is important to discuss the options over with your doctor and any person you wish to designate as your health care proxy. By talking about these subjects, you can better understand what you want and have your questions answered. Once you've decided what it is you do or don't want, you can make your wishes known, and maintain a peace of mind, knowing that they will be respected.

If you're interested in learning more about the possibilities of a Living Will contact us today by comunicaciones@lexland.es or +34952778899. After all, they say a stitch in time saves 9.

The Lexland Team

We are once again in the midst of the Income Tax Campaign for 2011, running from May 3rd to July 2nd. With only 2 weeks left to submit your returns, have you completed your tax draft?

Every year the Tax Agency estimates the amount of tax that you will be liable for based on the data relating to you that they have access to.  In our experience many tax returns are filed incorrectly, and there are often changes needed to ensure that the right deductions have been represented. It is for this reason that we always recommend that you always have your draft tax return reviewed by a professional, as it is your best interests to file your taxes in an efficient manner. You may even be eligible for a full reimbursement of your taxes paid!

Who needs to apply?

All those who have applied for deductions for property investments, company savings accounts, double taxation benefits, social security mutual benefits, or reductions to the contribution base of pension plans or protected assets of disabled persons, are obliged to file a tax return even if they have earned less than €22.000,00 as a yearly income.

How to apply?

Taxpayers may apply for a copy of their tax return for individual Income Tax for the year 2011, from April 10th until July 2nd 2012; they then may confirm this draft from that date until July 2^nd of the same year. The draft can be obtained online via the Tax Agency’s website (www.agenciatributaria.gob.es), although the Tax Office will post the draft to taxpayers whom have not applied for it online as of May 3rd, which is the official start date for the Income Tax Campaign in 2011. Any necessary amendments must be carried out prior to July 2^nd, so with the deadline soon encroaching, time is of the essence! 

If the results of your tax return infer that you are entitled to a reimbursement, you must confirm your account details no later than June 27^th to receive them via a direct debit.

A few changes this year

• The maximum base for the deduction of investment in a primary residence in the cases of the purchase or rehabilitation of a primary residence has increased to €9.040,00. As it has done also for the amounts deposited in a home savings account. 
• The base for installations and adequacy of a main residence on the grounds of disability has also increased to €12.080,00
• Main residence improvements will no longer be limited to the taxpayers primary residence and as such will have a larger group of potential beneficiaries due to its increased annual limit from €53.007,20 to €71.007,20
• There is an improvement on the amount deductible having been increased from 10% to 20% and increasing from €4.000,00 to €6.750,00 the maximum annual deduction base.
• Deductions for double taxation have been abolished on dividends pending application, as over 4 years has passed since the imposed limit in 2006.
• The deduction for the birth of a child or an adoption has been repealed as of January 1^st 2011

It is highly recommended that you always have your draft tax return reviewed by a professional, as from experience we can guarantee you that many of them are filed incorrectly and as such do not represent the right deductions! We´d like to remind you that our team of specialized members remain at your disposal for any queries or representation in this matter so contact us today.

T: +34 952778899

Email: Comunicaciones@lexland.es

We realise that we've been quiet for quite some time, so for those of you that don't already know who we are, here's a glimpse into our History, Philosophy and capabilities!

We're a leading firm of lawyers in Marbella offering high-quality legal services for both private clients and businesses alike, as much as financial institutions and the Spanish public sector. Lexland Abogados is renowned for its capabilities as a multidisciplinary firm capable of providing a comprehensive and flexible service, with specializations spanning practically all areas of the law.

Founded in 2005 from a collaboration between Bermúdez de Castro y Lobato Asociados, De Pasqual y Marzo Abogados, D&C Abogados y Carretero Internacional, our background provides over 40 years of experience in the legal world; bringing the best of the old, and incorporating the best of the new!