Taxes
property investment - property for sale - legal services spain

Taxes in Spain

Pursuant to Spanish law and the international treaties to which Spain is party, natural persons who are not resident here but who own real estate property within Spain are obliged to submit an annual tax return for Personal Income Tax solely in relation to the property.

Non-compliance with this obligation may give rise to sanctions being imposed by the Spanish tax authorities and the demand for payment of unpaid taxes incremented with surcharges and interest.

In particular, during the sale process, the existence of any unpaid taxes may seriously compromise the right to any refunds that may be due. In order to receive any such repayment, it would be an essential condition that the vendor's fiscal situation be regularised and all unpaid taxes plus any surcharges and interest would have to be paid.

Another important question is that of the period of residence within Spanish territory, given that any person who remains here for 183 days or more is deemed to be resident in Spain for tax purposes.

A natural person who is resident in Spain is bound to present an annual Tax Return with respect to all his or her income received globally from any source around the world. This duty need not necessarily be prejudicial. It is important to carry out an analysis of the person's tax situation and compare the consequences of being resident for tax purposes in Spain or not, with a view to determining the repercussions that fiscal residency may have and thus making an informed decision and taking such measures as may be required.

Furthermore, being resident for tax purposes here in Spain can give rise to certain benefits, such as, for example, when selling a property that is one's habitual residence. Liability for Succession Tax may also be radically affected, depending on the Autonomous Region concerned.

Applications for the Foreigner's ID card (NIE)

The Foreigner's ID code number, better known by its initials, NIE, is a code used in Spain to identify non-Spanish people. In terms of Article 101 of the ancillary regulations under the Spanish Law on Foreigners, those foreigners who have a connection with Spain on financial, social or business grounds are under the obligation to apply for a unique, exclusive personal ID number - the NIE - with a view to identifying them correctly. This application may be lodged in Spain by the legal representative of the foreign person concerned, as long as a special or general power of attorney in that respect is duly authorised.

Spanish Will

Your last Wills are a very important issue. An English Will is valid under Spanish law in accordance to the Spanish Civil Code and the dispositions of the Hague Convention on recognition of Wills. However it is very advisable to execute a separate Spanish Will for assets in Spain. In case of decease if a Spanish Will has not been settled and registered in the Last Wills Central Registry in Madrid, your beneficiary would pass through a long, highly bureaucratic and expensive process in order to take control of your assets in Spain. In this case, the beneficiary could be stuck with multijurisdictional problems and pay legal bills for a few thousand Euros in order to execute an English Will.

The main reasons to execute a separate Spanish Will are:

• The English Will requires obtaining a Grant of Probate in order to be valid in Spain. Please note that the said Grant of Probate is not required in England when the assets left in England are low, however the said probate will be still necessary in Spain.
• The English Will and Grant of Probate require translation and legalisation at the foreign and commonwealth office.
• If the testator/trix died being resident in Spain with no assets in England, Grant of Probate is difficult to obtain and special procedure should be requested to the corresponding English Court.
• The drafting of some English Wills may include in some occasions complicated concepts of trust which may be difficult to adapt or to understand under Spanish law and certificates of English law may be required for the benefit of the Spanish Notary Public and registrar.

All the above complications together result in a very large difference in costs and consumption of time that can be easily avoided by executing a separate Spanish Will.