Don't get caught out by new Spanish tax laws

Spain on the rocky road to nowhere ?
(Image: lagomera1.blogspot.com)

The following clipping from an article in The Telegraph was written some time ago for British expats, but it equally applies to all EU citizens living in Spain or intending to do so:

British expats living in Spain will have to be on their toes to keep up with the new Spanish tax rules

By Liz Phillips

''There are a number of changes afoot which could trip you up faster than a flamenco dance. These include:

· A new double tax treaty

· New disclosure rules

· New tax allowance bands

Before becoming too entangled in the new rules, you need to clear whether you are a resident for tax purposes. This applies to expats and homeowners. You are a Spanish resident if you spend more than 183 days (roughly six months) in Spain in one calendar year , and they don’t have to be consecutive days.

But you will also be presumed to be a Spanish resident if your “centre of vital interests” is in Spain. For instance, if your husband or wife lives in Spain and you’re not legally separated.

“The centre of vital interests was introduced to prevent fraud where individuals maintained their whole life in Spain, but made sure they remained under the 183 day barrier,” explains Jason Porter, Business Development Director at tax and wealth management firm Blevins Franks.

Double taxation

The UK and Spain have had a Double Taxation Convention for some time, but the new treaty only came into force in June with further rules covering income tax and other taxes kicking in on January 1 and April 6, 2015.

“The new treaty is especially relevant to individuals and companies who are tax residents in Spain, but who draw income from the UK, as well as those who split their time between the two, perhaps paying tax in both,” says Richard Way, Editor of the Overseas Guides Company.

“For example, the new treaty could affect the amount of tax certain expat pensioners’ pay.”

Government service pensions paid to retired members of the fire service, police, civil servants, armed forces and local authorities are exempt from Spanish tax. Under the new treaty the amount of the pension is still exempt but must be included when calculating how much tax is due in Spain. This could have the effect of pushing any other income - perhaps from investments and rent - into a higher tax bracket meaning you’d have to pay more tax in Spain....

The new Spanish ‘disclosure’ rules mean that Spanish residents and expats living in Spain will have to declare all relevant overseas assets worth more than €50,000 combined. This includes bank accounts, property and life assurance policies...

“Tax authorities are now openly sharing information about citizens’ taxable assets in order to claim unpaid tax,” says Rachael Griffin, head of technical marketing at Skandia.

''For Spanish residents who have been declaring their assets already, this should simply be an extra administrative burden. However, for those who have not been declaring assets up until this point there is a potential for a significant tax charge and fine. Individuals in this situation should seek professional advice as soon as possible”

And in a move that’s led to mutterings of a new Spanish Inquisition, the Spanish authorities have started automatically taking tax debts from people’s bank accounts.

...''

There is more information in a 'This Is Money' article - click below:

Huge fines await British expats who fail to declare overseas properties and savings as Spanish deadline looms 

More pain for those living in S-pain

Spanish bureaucracy  driving many expats 'around the bend' 

It is becoming increasingly frustrating to have your main residence in Spain and I for one have had enough of Spanish bureaucrazy and have long moved  my main residence back to Ireland, from where I write now. I'm in touch with La Gomera all the time and will continue to 'support and report' but I will only come to the Canaries for 'extended holidays' as a non-resident in the future, making sure that I am at least 183 days a year at home as required by European residency regulations. 
The new tax laws requiring expats to declare and tax at exorbitant rates all their combined foreign assets worth more than 50.000 Euros in Spain (even when they had been already taxed in the country where they are) with the threat of severe fines for non-compliance has driven more than 600.000 Europeans, most of them British and German, back to their home countries in just one year, rather than for example selling their family home in order to be able to pay the Spanish taxman.
More counter-productive measures
In January 2015 new traffic laws will complicate life in Spain even further for those EU  citizens who hold driving licenses from other European countries. Spain insists now that if you're a resident from another EU country in their lovely territory you must change your existing EU licence to a Spanish EU licence What's the point of having an EU licence when it isn't accepted by EU member Spain ?  Tenerife News reports:

Spanish driving licences 

There are impending changes in the laws regarding driving licences that are due to be implemented on the 20th January 2015. At present if you are stopped by either the Policia Local or Guardia Civil and fined for not having a Spanish licence you may appeal this fine and Tráfico have assured us this will be quashed.

However once the new laws have been imposed the whole situation changes and many will find themselves in a very difficult situation. If you hold a Green Certificado de Registro that shows you are resident in Spain you MUST after six months exchange your European licence for a Spanish one. You are not legally permitted to renew your UK licence as you are NOT RESIDENT THERE and this is stated quite clearly on the DVLA renewal form, although many people chose to ignore it. Many people hold a Residencia even though they are not actually resident here for example swallows or those people who come and go quite often and have in the past (before the change in the rules making it more difficult to obtain Residencia) obtained these in order to obtain reduced air or ferry fares and/or to register with a social doctor here whilst maintaining a GP in the UK and having seemingly the best of both worlds.

For those people who hold ONLY a white NIE form then they do not have to exchange their licence but could be obliged to have a medical periodically here if there licence doesn’t have an expiry date (age dependent on how frequent that would be) in order for their licence to be valid for driving in Spain. This information would then be recorded and registered on Tráfico’s system to validate said licence.

As you can see this is going to cause complications for some so we suggest if you are in any doubt to please contact me at emma@motorworldtenerife.com with your exact circumstances so that you can be advised on an individual basis.

I am being advised that those holding Spanish licences and trying to insure a car in the UK (something that many people do) is becoming increasing difficult.

Emma & Graham Swain

Expats leave Spain in large numbers

The number of foreigners living in Spain keeps falling rapidly. Besides the  economic crisis, many returning to their countries of origin cite the new tax laws which oblige expats to declare all their assets (including property) at home worth over 50.000 Euros as a reason to leave. This law was introduced by the current Madrid government last year. The Local reports:

''The number of Brits living in Spain fell by over a fifth in 2013 as the exodus of Spain's foreign residents brought the country's total population down for the second year in a row, data released on Tuesday shows.

The number of UK citizens officially registered as living in crisis-hit Spain dropped nearly 90,000, or 22.8 percent in 2013, the preliminary figures from Spain's national statistics institute (INE) show.

The total number of Brits on Spain's town hall registers was 385,179 on January 1st 2013, but that population had plummeted to 297,229 a year later.

And while the actual number of UK citizens who make Spain their home could be much higher — the British Embassy in Madrid predicts as many as 800,000 Brits could live in Spain for all or part of the year — the new INE figures reflect a clear trend: foreigners are saying goodbye to Spain.

In fact the number of foreigners resident in Spain fell by 545,980 or nearly ten percent to hit 5,000,028 in 2013. For citizens of other European Union countries the slide was even steeper at 13.3 percent.

Germany was the only country to see a bigger drop than the UK, with the numbers of Germans registered as living in Spain coming down 23.6 percent to 138,917 people.French people also left, with that population down 12.7 percent to just over 100,000.

This decline in Spain's foreign population also saw the country's total population come down for the second year in a row.

While the total population of native Spaniards inched up by 141,361 people, the departure of foreigners saw the country's total population slide from 47,129,783 to 46,725,164.    

At the same time as Spain's expats head home, Spaniards are also leaving the country to look for work. Some 51,000 registered with the UK's national insurance scheme in 2013, making them the second largest group of arrivals after Poland.

Spain's unemployment rate is currently 26 percent, while youth unemployment is 55 percent.''

Spanish bureaucracy (- or bureaucrazy ?)

Here's an example of the sometimes maddening experiences with the authorities in Spain, which I found on an interesting site called Red Queen Musings from Tenerife:

Confused? – You will be.
''Yesterday OH and I went to the Ayuntamiento in Arona to get a Certificado de Viajes; this is the document that allows discounts to European nationals who are resident in the Canary Islands.  After taking a ticket and waiting for half an hour we were seen by a man who said he could not issue one because we had the A4 green form and needed the new wallet sized one.
Our Spanish isn´t that good and I was probably looking suitably dumbfounded as our residencia document supposedly never expires!  But this also shocked the couple who were standing behind us and questioned the man at the desk.  After a bit of toing and froing the man confirmed, No he says you definitely need the small green form not the one you have.
Today we decided that we would go to the police station in Las Americas and get the new paperwork.  Before we could do this we needed an up to date Empadronamiento (these only last 6 months).  It is the paperwork that proves that you have been registered on the Municipal Padron as living at your current address.  So again armed with a book to fill in the hours we would probably be killing until our number was called we headed off to the Culture Centre in Los Cristianos.
Now this is where it gets interesting and makes it extremely difficult to advise people on what they should and shouldn´t do in order to survive living in Tenerife.  We told the lady at the desk when our number 121 was called after an hour, that we wanted the paperwork to renew our Residencia.  She shrugged and asked why and when we told her she shook her head and said rubbish.  Our paperwork was all correct, it did not have an expiry date and she could issue us with the Certificado de Viajes, which she proceeded to do.
I am now convinced that Tenerife is the place where the term not knowing your arse from your elbow originated.
So this was our experience, I would hesitate to tell anyone else how to do it because they could have a totally different experience depending on the location of their town hall or even the mood of the employee, on a particular day...''