WEALTH TAX, LATEST INFO ( article was written 16th June 2008),

This was sent by someone's lawyers to them..

Last April, the Spanish Minister of Economy announced the implementation of several measures to help the reactivation of the Spanish Economy.

One of the measures, which has sought the most, is the abolishment of Wealth Tax.

This tax was created back in 1977 and regulated, as it is now, in 1991. Those owners of a real estate property located in Spain on 31st December of each year, regardless the value of the property, were obliged to pay a 0,2% on the highest of the following figures:

1 – The cadastral value, which is shown in the local rate demand.
2 – Purchase price.
3 – Re-assessed value given by the tax department.

To diminish the amount of the wealth tax, the owner can take into account any charges set up against the property (mortgages being the most common charges).

Every year, all non-resident owners of Spanish real estate are obliged to file and pay their wealth and income tax return (income presumed from ownership of urban real estate assets - irrespective of whether the real estate assets are rented out or not).

A standard individual owner of just one property may file both the Non resident Income Tax (for the imputed income) and the Wealth Tax return (corresponding to its ownership) on the simplified Form 214.

The filing and payment of this tax should be made anytime during the calendar year, but in the following year to which the tax refers.



So after this announcement, what is going to happen?

First of all, it must be explained that although the Minister declared the abolishment of the Wealth Tax, with effect from 2008, the Government still has to publish the corresponding legal provision to implement this measure. On the date this article was written (16th June 2008), the said provision had not been produced yet, but it seems that the Government will set up a 100% allowance for both resident and non-resident tax payers.

This means that the tax will still be there but with a “zero” quota, so no money will have to be paid.

It is still to be ascertained, whether there will be a declaration duty or not. Do not forget that one of the reasons for this tax to be created in the first place, was to control the ownership of assets which sometimes remained “unknown” for the Tax Department and also to give the authorities an extra way to facilitate the crossing of different data.

Nowadays, our computerised world allows the Tax Department to have a very accurate knowledge of all assets owned by anybody.



Am I obliged to pay my Wealth Tax this current year?

The answer is YES. Please do not forget that the Spanish Tax Year runs from the 1st January until the 31st December and that the tax is paid in arrears. So up until the 31st December 2008, we should pay our wealth tax corresponding to 2007 (In the case of owning more than one property, the deadline is June 2007).



Will the abolishment of the Wealth Tax mean that non-resident owners will have no taxes to pay on their properties?

Not at all. Non-resident owners are still obliged to pay tax on the income presumed from ownership of urban real estate assets:

Non-resident tax payers titleholders of urban buildings, which are for private use by themselves, and not involved in economic activities or that are left empty, are subject to non-resident income tax. To this effect, the owner must calculate as income, an amount of 1.1% of the building’s assessed value or “valor catatral” (2% if the assessed value has not been revised or modified since the 1st January1994). The tax rate applicable to the calculated income is 24% (up until the 31st December 2006, the rate was 25%).

Owners of rented or sub-let buildings will continue to be obliged to pay tax on their earnings as usual.

Of course, the yearly payment of local rates (council tax) also continues for both resident and non-residents alike.



Is it still necessary to appoint a fiscal representative then?

Although is not compulsory for non-resident owners of just one property to appoint a fiscal representative, it is very sensible to do so, especially when you are immersed in a totally different legal system.

In fact, most non-resident taxpayers voluntarily appoint a representative - who must be a resident in Spain - who serves as a communications liaison with the Tax Administration. Please be aware that within the new objectives of the Spanish Tax Administration, one of them is to pursue the collection of taxes from different sectors, which had traditionally not been very well controlled. It is within this selection that we could find the non-resident owners group. Needless to say, the Tax Administration has considerably improved its network so they are able to reach everybody now. Long gone are the days when a non-resident could have a property for decades without having paid anything towards their taxes!

But this new objective must not be understood as something negative. It is fair though, that now the taxes are lower, all individuals pay their share - which after all, is being reinvested back in to the communities.

So to sum up, having a professional representative is not a waste of money, quite the opposite in fact. It proves to be the best guarantee of being accurately and promptly informed of any new developments in the ever changing world of taxation.

Interesting & encouraging. Thanks.

Hi again Morerosado

Looks like its?% then.