You have to pay it because, legally speaking, in Spain there is a property-owners’ imputed income tax charged on secondary homes. And yours is clearly the case since your principal dwelling is abroad. The same applies to residents in Spain who own more than one dwelling.
The Spanish 2010 Budget Law includes a rise of VAT rates, that applies from June 2010, from 16 to 18 per cent for the general VAT rate, and 7 to 8 per cent for the reduced VAT rate from the next July 1st. The super-reduced of 4% is maintained.
Apart from this, the “VAT Package” parliamentary procedure applies from 1st of January 2010,
Features:
- Services between business enterprises (B2B) will in general be taxable at the country where the recipient has its establishment or headquarter.
- When the customer is an individual (B2C), the services will be taxed at the country where the provider has its establishment or headquarters. There are numerous exceptions when services relate to real estate, transport, restaurant, rental property, electronically supplied services or telecommunications, building work services…
- It strengthens the rule of taxation at the place where the service is really used or enjoyed.
- It considerably expands the cases where the taxable person is legally inverted for transactions performed by non-established persons – a case where the invertion acquires the rank of general rule-, up to the point that permanent establishments of foreign companies lose all significance for operations performed directly from abroad and without their intervention.
- It increases the formal obligations: the number of intra-Community operator, inclusion of intra-community services in the 349 tax form model request.
- New formal procedure to request return of VAT charged at other E.U countries, to be issued through an electronic request in the host State and subject to new terms.
Yes, you can. Private contracts, as opposed to public contracts (the ones signed in front of Notaries) also have validity and completion force in what refers to any permissible condition they include and are perfectly binding for you and your seller.
However, according to the Spanish legal system these contracts have no legal effects for/against third parties not knowing that such contract exists, such as banks, creditors, tax authorities, claimants, etc. Bearing this in mind you would understand how important it is that a purchasing contract is made “public”, and in Spain this is only legally possible through a Notary’s “Escritura” jointly with the registry at the Property’s Registry of the town where the property is situated. By means of this Escritura and registry, there is no third party who can allege the contract has no effects for/against him.
(Google translation from Noticias Vlex.com)
The Congress of Deputies validated by a majority a number of fiscal stimulus initiatives aimed at the home rehabilitation sector that were included in the Royal Decree on Measures to Promote Economic Recovery and Employment, approved on Friday April 9 by the Council of Ministers.
The government expects that the tax package has a strong leverage effect on the construction sector, which together with other government initiatives, such as the reform agenda in public buildings to improve energy efficiency, “serve to contribute to employment generation.
These tax measures will help further the goal of efficiency and energy savings made by the Government in the framework of the Strategy of Sustainable Economy.
DEDUCTION FOR NEW CONSTRUCTION IN THE PIT
The first of these reforms is the new temporary income tax deduction for improvement works in the residence. This will be deducted up to 10% of the amounts to be invested between April 14, 2010 (date of entry into force of Decree-Law) and December 31, 2012 on actions to improve the residence, or building in which it is found, with a total limit of 12,000 euros per household. The annual limit per taxpayer is € 4,000.
To be eligible for this deduction the vast majority of taxpayers, with the exception of those with a higher tax base to 53007.20 euros, representing only 5% of the total. The deduction is most effective on taxpayers with taxable income exceeding 33007.20 per year, as they may apply the 10% deduction on the basis of the prescribed annual maximum of € 4,000 per taxpayer. As the income level of taxpayers go on increasing this limit, the basis of the deduction will be reduced to zero when it exceeds the taxable EUR 53007.20.
To optimize the effectiveness of tax incentives, will be allowed to the amounts paid by a taxpayer during a period that cannot be deduced by the application of the base annual maximum of 4,000 euros established, can be derived, with the same annual limit during the four subs.
In any case, the amount subject to deduction for all applicable tax periods that apply not exceed 12,000 euros per residence. In cases where there is more homeowners eligible for the deduction on a same property, the limit of 12,000 euros will be distributed among the joint owners according to their respective percentage ownership in the building.
In line with the provisions of the State Housing Plan and Rehabilitation 2009-2012, allowed to benefit from this new tax incentive works aimed at improving the energy efficiency of the home (installing solar panels, improved insulation of windows, change …), shower bath by consolidating security and sealing of buildings (replacement of facilities of electricity, water or gas), to improve the accessibility (lifts adapted to the needs of people with disabilities, installing ramps. ..) and install new telecommunications infrastructure to provide access to the Internet or digital television services in the homes of taxpayers.
On the contrary, works carried out in parking lots, gardens, swimming pools, sports facilities and other similar items shall not be entitled to deduct, nor will change of furniture of the kitchen cabinets do or wear, replace tiles, paint , throwing bricks or change soils.
It is important to note also that the incentive can be applied only on the amounts paid by credit or debit card, bank transfer, check or income accounts of credit institutions, not when the services are paid in cash. This caution has as main objective to collaborate in the prevention of tax evasion and labor.
Taxpayers may not get the benefits of this new tax relief from the Income tax Statement, 2010 (to be made in 2011) and therefore they cannot apply that in this exercise. It is therefore important to retain the invoices received by the work involved to justify the investment.
In this regard, it will be retained as proof of payment method chosen as the invoice, which shall contain the following information: number and number of the same, the date of issue and date of completion of the operation if two do not coincide, name and first name of the consignor and consignee, NIF and address of the consignor and, where appropriate, the consignee detailed description of the action taken, type or VAT rates and tax charged VAT.
REDUCED VAT RATE FOR REPAIR WORKS
The second major tax incentive is the reduced rate of 7% (8% from July 1) of the VAT for all types of renovation and repair of private housing to be made between 14 April 2010 31 December 2012. So far, the scheme only applied to the masonry, and the rest were applied to 16%. With this new framework, it will also benefit from the actions of plumbing, carpentry, installations and fittings, electricity or painting and, in general, all the reforms made in housing, whatever their purpose.
The Royal Decree establishes three requirements to qualify for the new tax scheme. First, the recipient is an individual and that the works are directed towards a particular purpose, and not a business or professional. This requirement will also operate when the recipient is a community of owners and the works are made in the building where is the private dwelling. Second, the construction or rehabilitation of housing where the works are finished at least two years before the start of the renovation or repair.
The third requirement is that the incentive applies to those who do not provide material works costing more than 33% of the taxable amount of the transaction. For example, if the work in question was the placement of the floor of a house and the same total cost amounted to $ 10,000, you may apply the reduced rate if the material used does not exceed 3,300 euros. If the materials provided exceed that amount, the rate applicable to such work is the normal 16%. Until the present Decree Law, the limit of the material was 20%.
The invoice must state the cost of materials supplied or the condition that this cost does not exceed 33% of the tax base.
EXTENSION OF THE CONCEPT OF REHABILITATION IN THE VAT
The other axis of action to promote the activity in the area of housing rehabilitation is extending the concept of structural rehabilitation for VAT purposes, through the definition of similar works and related to structural, which will reduce tax costs economic activity associated with rehabilitation.
The old law already took these concepts, but did not give them an adequate definition, which prevented, in many cases, the application of reduced rates in certain actions related to rehabilitation. The definition of these concepts in the decree law that goes into effect now will not only improve legal certainty for businesses, but will significantly reduce your tax costs.
So, since last April 14 and remain in force indefinitely extending the concept of structural rehabilitation, which applies the reduced rate of 7% (8% from July 1) to the works of rehabilitation of buildings, including premises attached garages, additional facilities, provided that more than 50% of the building is intended for private homes.
To be considered for rehabilitation, the cost of works should not exceed 25% of the purchase price of the building (if it was made in the two years prior to rehabilitation) or market value, less in both cases land value. Also, over 50% of the actions envisaged in the project will include reconstruction of the building or in carrying out similar works or related to those.
Consideration will be given to works like structural adjustment actions that serve to ensure stability and mechanical strength of the building, the reinforcement of the foundations, the expansion of built-up area, the reconstruction of facades and patios of interior and installation of elevators. Related works will be considered, for their part, masonry, plumbing and carpentry, measures to improve facilities and enclosures or energy rehabilitation works.
The decree provides, finally, the reform of the Canary Islands General Indirect Tax in the same sense that the VAT on materials which are appropriate to state regulation, so that the tax benefits resulting from these changes reach the entire territory.
The transfer tax, or Impuesto de Transmisiones Patrimoniales (ITP), applicable to private real estate property sales, is for the time being in Andalucía a 7% of the value declared in the contract for private sales. However, as from March 19th, 2010 the tax has been raised to 8% for the stretch of the value of the real estate property that exceeds the amount of 400,000 Euros. The same new rate will apply to garages (except for those annexed to houses with a maximum of two units) for the stretch of the value of the real estate property that exceeds the amount of 30,000 Euros.
Concerning to the Income tax of Individuals, the percentages of general tax scale stay the same but the rate applicable to savings in personal income tax has increased. The applicable rate will be 19% for the first 6,000 Euros of yield, and 21% on the excess. These tax rates, in harmony – this time – with the EU rules, are applicable to non-residents income tax payers in the case of dividends, interests and economic gains obtained in Spain, which shall be taxed at the flat rate of 19%.
The retention rate in personal income tax rises up to 19% in order to equal the new tax rate in what refers to:
a) The capital formation yields.
b) The capital gains arising from transmissions or refunds of shares and participations on collective investment enterprises.
c) The income from lease or sublease of urban real estate.
This new type of retention will also apply to retentions and advanced tax payments relating to corporation tax.
Equally controversial than when it was approved has been the removal of the 400 Euros tax deduction applicable to income from work performance and economic activities for those taxpayers with taxable amount exceeding 12,000 Euros. The effect we have seen in the payroll of Spanish workers from last January.
To encourage recruitment, the new rules in the area of personal income tax and only for the 2009-2011 tax periods bring a tax reduction on the NET performance of economic activities in case of creation or maintenance of job. This measure has retroactive effect as of 1 January 2009. In order to qualify, the next requisites are needed: I) exercise of an economic activity, II) business total turnover for all economic activities performed of less than EUR 5 million, III) less than 25 employees, IV) maintenance or creation of employment in such exercises. The new rules implement a reduced type of tax charge for 2009 to 2011 periods if the above requirements are met. The scale of tax applied to these entities is as follows:
I) Tax base between 0 and 120,202.41: 20%
II) Excess: 25%
Could the Spanish Football League still attract the best in the world once the special legal arrangements for Inpatriated people or “Beckham law” has been modified with effect 1 January 2010? In this respect the novelty is that those workers whose predictable fees will exceed 600,000 Euros per year shall not be eligible for the special scheme of taxation (flat rate of 24%).
It is provided that with effect from 1 July 2010, despite criticism emanating from all sectors, an increase in the rate of general Value Added Tax from 16% to 18% is taking place. On the other side, the reduced tax rate will raise from 7% to 8%.
The Spanish Council of Ministers adopted a Royal Decree to complete the transposition of Community directives known as ‘VAT package’ referred to in the new system of ‘one-stop shop’ to enable the return of VAT quotas to European businessmen, announced the Executive in a note. The new system applies to employers established in the peninsula and the Balearic Islands when they supported VAT charges in other EU countries.
No, you will not, I am afraid. From January 20, 2006 there is no exemption from capital gains tax for property sellers. Those long-term proprietors who bought before 1986 had privileges of reduction which reduced their tax to zero after 10 years. At the present, however, they must pay capital gains tax on the part of their profit calculated since January 20, 2006. Therefore, all sellers of property can now apply only a coefficient of reduction that approximately matches the inflation rate, but then again no matter how long you have owned your property, you will certainly have capital gains tax to declare when you sell it.
As becoming a resident in Spain makes that you are tax-liable for any worldwide income, first of all it depends on whether you have income earnings from other country than Spain and whether or not your non-Spanish income is taxed at the country of origin that may or may not have a double taxation treaty signed with Spain.
This being said, in most of the cases taking out an official residence permit in Spain will cost foreigners who own property less money in taxes than staying non-resident, as there are tax exemptions to residents that do not apply to non-residents. For a detailed analysis, you can contact us in Emilio Pino – Abogados in order that all your aspects are contemplated.
I am afraid it does not. This exemption, made to the first €175,000 when passed to direct family members, applies only to residents of Andalucía, and both the deceased and inheritor must be residents in Andalucía. The same rule applies to Spaniards.