June 2007 Newsletter
Welcome to this month's Numerological newsletter.
Remember if you do have any tax related topics or issues that you would like explained or discusssed, please drop us an email and we can include them in future editions.
In this issue:-
Spanish wealth tax or "patrimonia " is an annual tax in Spain which is payable by all non-resident people who own a property in Spain.
It is therefore one of the Spanish taxes that every Spanish property owner needs to pay each year
.
Spanish wealth, for the majority of people, essentially involves just your property, and the wealth amount will be the amount that you paid for the property - i.e. the value on the deeds or escritura. If you also have a mortgage on the property, the amount of the outstanding mortgage is deducted from the purchase value, in order to calculate your net Spanish wealth - i.e. your asset value less any liabilities.
Your wealth position is calculated at the 31st December
each year - therefore it is not based on your wealth over a 12 month period, it is effectively based on your wealth on one day - the 31st December.
Remember, in Spain, your property ownership is essentially a "tenants in common" arrangement, whereby each of you effectively own a proportion of the property - i.e. 50% for a couple - as you do not own the whole property jointly, as many UK people do with their UK home property.
The effect is that each property owner in Spain, needs to declare their individual wealth each year - for example, a couple with a €200,000
property and a €140,000
mortgage, will declare wealth of €60,000/2 = €30,000
each.
Once you have your wealth figure a progressive tax rate structure is in place which ranges from 0.2% to 2.5%
as your wealth figure rises.
The tax is then due to the Spanish tax office by the end of the following year - i.e. for wealth on the 31st December 2006, the tax is due by 31st December 2007.
Please note that many people believe that wealth tax is not applicable if your property is less than a certain value - this rule only applies to residents in Spain, who do have an allowance before any wealth tax would become due. Unfortunately for non-residents there is no such allowance.
The only way that you can end up paying no wealth tax is if you have a mortgage on the property which exceeds the purchase value of the property - something that can be applicable if property valuations are rising - which means that liabilities exceed your assets and therefore you, in theory, have no Spanish wealth!
Contact us to submit your annual tax returns
You may have seen something in the press around opting to use your Spanish home as your "principal private residence " (PPR), in order to reduce your capital gains tax in the UK.
Your UK home would normally be classed as your PPR, and therefore when you come to sell your PPR, you will not pay any capital gains tax on the gain that you may have made on the property.
There have been recent articles suggesting that you could opt to choose your Spanish property as your PPR, shortly before you may wish to sell it, as you could then take advantage of a clause which says that the final 3 years of ownership would be tax exempt from the calculation of a capital gain.
We have looked into this and are not yet convinced that such a tactic would be acceptable with the Revenue & Customs,
unless in very specific circumstances - we will however look to pursue how it may work on a wider scale and will report back later.
Welcome to Roser Coll
, a Spanish solicitor now based in the UK, who works for BCP Abogados.
Roser will now be joining us as a monthly contributor to our newsletter, so if you have any legal questions about your property in Spain, please drop us an email, and Roser will answer these questions over future editions.
As you may be aware, the Revenue & Customs in the UK are currently holding a tax amnesty for those who wish to report any previously unpaid taxes, especially for overseas transactions. The key dates are:
- Make the disclosure - by 22nd June 2007
- Quantify the disclosure - by 26th November 2007
- Pay unpaid tax plus 10% fixed penalty - by 26th November 2007
You are also required to provide information on offshore bank accounts and offshore assets.
Remember
- if you have a Spanish property that you use as a holiday home, and you have a Spanish bank account that does not generate interest, and you do not generate any other income in Spain, then the likelihood is that you are not required to report anything to the Revenue, and therefore the amnesty is not applicable.
If you are in any doubt, then please let us know.
Click here for the relevant Revenue & Customs site
Numerological is now looking to expand our tax related services for the non-resident property owner into other European countries - and the first one we are now working on is Portugal .
We are following the process we adopted with Spain, in ensuring that we can provide a comprehensive tax service for the UK property owner in Portugal, which will inform, manage and minimise
all their Portuguese tax issues and requirements.
And, unique to Numerological, is to continue to bridge the gap between the UK and overseas tax requirements.
Once we have thoroughly completed our research process and how our services will be delivered, we will let you know, and in the interim, if any of you currently have Portuguese property, or in the process of buying, then please let us know.
Click here to register your interest
Remember if you still have not received our FREE Spanish Tax Guide
, then please click the link below and give us your details.
The guide provides an overall view on the potential taxes relevent to the non-resident property owner, and has an easy to read format in the style of questions and answers.
Click here for your Free Spanish Tax Guide
Remember as reported last month for those of you who own more than 1 Spanish property
, the annual tax system is slightly different, and there is a requirement to submit 2 separate tax returns for each property owner - one for your income tax and one for your wealth tax.
Also, these returns need to be submitted by the 30th June each year, and not the 31st December as for those who own 1 property.
Therefore for the 2006 tax year, your returns will be required by 30th June 2007.
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