SPECIAL TAX ON PROPERTIES OWNED BY NON-RESIDENT COMPANIES IN TAX HEAVENS COUNTRIES

• What are the basic characteristics of the special tax on real estate owned by non-resident entities?

Entities residing in a country or territory considered a tax haven that own or possess real estate in Spain are subject to Non-Resident Income Tax through a special tax that is due on December 31 of each year and must be paid in the following January. It is declared through the form 213.

The tax base is made up of the cadastral value of the real estate and a 3% tax rate.

• Is there any exemption?

The following entities are not liable to pay this special tax:

• States, foreign public institutions and international organisations
• Entities that carry out economic exploitations different from the simple possession or lease of real estate
• Companies listed on officially recognized secondary stock markets

• Why should I pay this special tax?

The Spanish Tax office (AEAT) is sending notifications to all those entities that own real estate in Spain that have not submitted this tax.

The payment and submission of the last 4 years which has not prescribed is being claimed along with penalties and interests.

• How can I pay this tax? Can the entity tax situation be changed?

In Andalucia Lawyer we can assess the pros and cons of continuing with an opaque structure that perhaps made sense years ago, but that can be questioned today. Get in touch!

MASSIVE REQUIREMENTS FROM THE SPANISH TAX OFFICE TO POTENTIAL SPANISH TAX-RESIDENTS

The Spanish Tax office is sending requirements with regards to their annual tax return to many citizens that are considered as potential tax residents in Spain. They are sending letters requesting to those who may be liable to submit their tax return of all the years that are still in force (i.e. from 2015 on).

Some of the letters state the following: “from to the data provided by the Administration of the United Kingdom, it is deduced that you have received a pension subject to taxation in Spain according to the double taxation agreement signed with that country. Thus, it turns out that you are obliged to file a Personal Income Tax return corresponding to the 2015, 2016, 2017 and 2018 financial year, form 100, since there are not records proving the aforementioned obligation has been fulfilled”.

1. How does the Tax Office know if I am a tax resident in Spain?

There are different ways by which the Tax Office may know that:

• If you live more than 183 days of the calendar year on Spanish territory
• If your main activities or economic nucleus or base reside in Spain, directly or indirectly
• If your (non-legally separated) spouse or minor children live in Spain
• If you have applied and obtained a Spanish residency permit
• If you have used the Spanish public health system

2. What happens if I am a tax resident and I have not submitted my tax return?

• You are still in time to submit your tax return for 2019 between the 1^st of April and the 30^th of June 2020
• If you have not submitted it for the previous years, the sooner you do it, the fewer surcharges will be applied
• It is always better to submit the tax return out of time than waiting to receive the Tax office requirements as this implies penalties and higher surcharges
• Heirs of the taxpayers are obliged to fulfil the outstanding duties for this tax return (except for the penalties).

3. How can I ensure if I am liable to submit my tax return?

Very easy! You just need to contact us! Each country’s tax system is different and so it is very important to hire tax experts (especially in double taxation) to ensure you are meeting your tax duties and avoid unpleasant surprises even 4 years after!

GRANTING A SPANISH WILL IN PANDEMIC TIMES

Coronavirus pandemic has activated and rescued the article 701 of the Spanish Civil Code from oblivion for the first time after 131 years.

This article allows granting Wills before 3 witnesses, even at the hospital, in the event of a pandemic (regardless the testator is affected or not) without doing so before a Public Notary.

• How must I do it?

There are some requirements so that the Will is valid:

• It must be signed by 3 witnesses over 16 years old with full legal capacity and speaking the same language as the testator. The witnesses must also personally know the testator and being able to judge is s/he is sound of mind and memory to grant the Will. Those to be named heirs or legatees cannot be the witnesses, nor their spouses or relatives to the fourth degree of consanguinity or second degree of affinity.

• It must be written, preferably by the testator or if this is not feasible, by any of the witnesses. However, if this in not possible, it would be enough with the memory of the witnesses, or through analogic or digital means where the last will of the testator may be recorded for its later playback. It would be also possible to grant the Will by providing the witnesses with a note or memory of his/her last Will.

• This Will must be eventually formalised in a Public Deed before a Public Notary so that it is fully valid. For that, the testator’s death certificate as well as any document proving there are no later Wills granted must be provided.

• Is the Will valid forever?
• It will be valid is this is formalised in a Public Deed within 3 months after the testator’s death (even if the death is not caused by the pandemic).
• It will remain ineffective 2 months after the risk of death or the pandemic have ceased.