A NOTARY'S RESPONSE TO A RESIDENCY CERTIFICATE

My clients, who are residents, purchased a property in Andalucía.  When drawing up the purchase contract (escritura de compraventa) in a notary office.  The clerk was at first, not willing to inscribe in the document that they were residents in Spain.  As far as he was concerned, he had no proof of resident status.  He made the point that the A4 size green document which has replaced the previous resident card, (and even though accompanied by passports) was not proof enough.  He did have a point.  If they had been selling a property they would have been considered as nonresidents.  This would result in the couple having to abide by the rule that, a ‘nonresident tax’ would be applied.

Consequently; three percent of the total sale price would be legally withheld by the purchaser, purchasers lawyer or the banks gestor if, the purchaser had applied for a mortgage.  The funds would then be forwarded, with the relevant forms to the tax authority.  The gestor would also withhold a fee for the processing of this payment.  You would then have a time limited period to reclaim the amount retained, minus any taxes you may owe. IF you have made your annual tax declaration on a yearly basis, you would apply for the ‘Certificado de Residente Fiscal’ (tax resident) with this document, the three percent retention will not be withheld.

Consider that the rules are changing daily to safeguard against anyone selling a property and then leaving Spain owing taxes. If you are a nonresident vendor, take note that the ‘Plus Valia taxes’ due on the sale, will also be retained by the purchasers representative.

The resident document states, “La persona que a continuación se indica, ha solicitado y obtenido su inscripción en el Regisgtro Central de Extranjeros de la Dirección de la Policía y de la Guardia Civil, como residente comunitario en España” (The person indicated below, has sought and obtained registration in the Central Registry of Foreigners, of the address of the Police and of the Civil Guard; as a community resident in Spain) Translate and take this statement as you will, but there is no doubt, that there is conflicting and controversial recognition of resident status at present.

For this reason it is important to take further action to authenticate your resident status.

SOME BANKS CONTINUE TO ADD ABUSIVE CLAUSES TO THEIR MORTGAGE LOANS

Do you bank with Banco Sabadell?  Do you know that they are still including the 'Cláusula Suelo' into their mortgage loans?  They are disregarding the European courts and some Spanish judges who are in agreement that this clause is abusive.  Thousands of homeowners, who have discovered, that they already have this article inscribed into their mortgage contracts, are taking legal action.  They are asking not only have these clauses removed, but demanding a refund of the excesses paid to date.  Sabadell (Sol bank) states that they can add this clause (a minimum interest rate that financial institutions applied to many mortgages in order to insulate themselves from possible declines in the euribor has caused loans taken before the crisis to increase, in some cases, from anywhere between 1,000 and 5,000 euro’s) The bank feels it has the right to add this clause, as they are doing so with transparency!!. 

I was recently at a signing, where this was the case.  The clause was included, in the deed for the mortgage.  As if this was not an abusive by itself, both lawyer for purchaser and I, acting for the vendors, eyes met and widened in disbelief across the table, as the notary begun to expound on the legality of this action and that people had no right to complain after signing the “ground clause”.

Thank you to Kyero .com who unwittingly have allowed me to plagiarize, their excellent description of the ‘Cláusula Suelo’

REDUCTION OF THE IBI (COUNCIL TAX) IN THE PROVINCE OF MALAGA.

A spokesman of the deputation (county council) of the Malaga province has made a statement that, the IBI (rates tax) is to be decreased and to be applicable in all the municipalities.  This initially sounds like good news.  Apparently austerity measures have allowed the council to apply these savings which will come into effect in 2014.

 
Pleased as one should be with the news, the reductions of between ten to fifty percent will only benefit those home owners whose valor catastral is calculated at one hundred thousand euro or less.  What appears to be a relief on our local tax burden will only bring help out a minority.  Take into consideration that a VPO property (social or council housing) valor catastral is calculated in excess of this figure, and we can surmise that the reductions will not apply to most homeowners

ARE THE LAWS ON INHERITANCE TAX IN ANDALUCIA ABUSIVE?

We pay taxes when we buy, inhabit, and sell our homes.  There is the, transmission taxes, tax on transfers and on documented legal acts signed at notaries.  Then there is the ‘plusa valia’ tax, (capital gains) Taxes on home improvements and on the invoices for the costs and assistance to purchase a property.  Add to this Inheritance and gift tax.  We also will pay annual rates bills (IBI) and the nonresident and resident annual taxes.  We pay for our right to circulate the roads in our vehicles, and also, if you use a toll road.  There are excise taxes for consumption of fuel, tobacco, alcohol and other items.  There are the taxes on our water usage and electricity supply.  Taxes on the privilege of being in employment or personal taxes for the self employed. Corporation taxes.  Taxes when setting up a business or closing one.  We are taxed on our pensions and savings.  There are even taxes on unemployment benefits.  Remember to include for all residents, taxes on all overseas assets.  Taxes on our food, our medication, our phone bills, internet, and now, twenty one percent tax (IVA) on most purchases.  Add to this the surcharges on any taxes not paid due to lack of notification.  Custom duties for goods imported from outside the European Union. Taxes, to import your vehicle, if not imported within the time limit set down by law.

Benefactors will pay inheritance on all assets, vehicles, savings, jewelry, and even the furnishings in the inherited home, no matter the condition or age.  (The authorities will not accept the ‘it is unfurnished’ If the property is inhabited, they are taking this into account that as a resident, you must be living there)  Heirs are allowed up to six months to pay these taxes.  An extension can be applied for to include a further six months.  Take into account that they will be paying five percent interest for this extended period.  If this petition is not made, you will be charged ten to twenty percent accruing interest for the period your taxes are not paid after the initial six months.  Make sure the application is made to the relevant tax authority.  Recently a lawyer, acting for three heirs, one a resident and the other two nonresidents, applied for this extension to the central tax authority, this has meant an enormous surcharge for one of the inheritors with resident status.  The application for her extra six months should have been submitted to the Andalucían tax authorities.  To complicate matters, resident heirs pay their taxes to their regional government’s tax office and nonresident’s successor taxes are paid to the central government.  When acting for inheritors of varying statuses, you need to present the funds to differing banks and the documents to the relevant tax authorities.

We all know that there are capital gains taxes to pay on the sale of a property, but, the local town hall will also charge this tax on succession.  This does not end there, if there is ‘uso fructo’ given to a spouse or other, they will also be charged, extra on the plus valia, for the pleasure of basically, being allowed to stay in their property.  Please note that a spouse is paying taxes on fifty percent of the property if bought with equal shares by both partners. It is important that as with the inheritance taxes, this tax should be paid, within a six month period.  In this case there is no charge for an extension which must be made in writing, and presented with a photocopy to the department of ‘patronato’ at your town hall.  Do not leave without your dated stamped copy.

Being a resident with your copy of the resident certificate or the residency card will not now be sufficient for the authorities to allow you the reductions; you must be a fiscal resident and have the proof.  Any resident, who cannot show fiscal residency status, will be treated as a non resident.

Common law couples should take note; A resident British couple went to visit a consultancy bureau on the Costa, to have their wills drawn up, unfortunately for the couple, the staff did not have adequate knowledge on the laws on inheritance taxes, if they had, they could have advised this couple, to register at the town hall as ‘pareja de hecho’ (common law partners) Not having done so meant, that, instead of receiving a tax bill for around one thousand four hundred euro, the partner ended up paying almost twelve thousand euro tax. The law does not only take into account residency of the beneficiary, but more so, the relation to the deceased.

Are you leaving your share of your property to your spouse and will your spouse then be leaving the property to children or family?  Consider allowing your spouse ‘uso fructo’ only, and leave the property to the younger heirs.  For those who are leaving their property to grandchildren or nieces and nephews, do not be alarmed, even if they are not residents of Andalucía, the government will ensure that discounts, be applicable to family members.

It would be cost effective when purchasing a property in Spain to take all the above into consideration.  You may wish to add your heirs to the title deeds when purchasing, by doing so, you will be lessening the tax burden later on.  Consider that every time a property is passed down the government is claiming payment of inheritance tax, and capital gains tax.  This will be taken from you, your children, grandchildren and so on.  I believe it is time this abusive tax is abolished altogether.

Written by; Myra Azzopardi.