Andalucia gets tough on holiday rentals

 

Over the last few days the Junta de Andalucia has signalled new legislation that will have a massive effect on owners of Spanish property who rent it out.  The legislation, which is technically an update of legislation from 2010, Decree 194/2010 on Tourist Apartments, will oblige property owners to register their rental activity with the Junta de Andalucia within three months of publication of the new legislation, which is expected to be made in May.

Big fines are proposed for property owners who contravene the new legislation, up to 150,000 Euros for serious offences.

The authorities are expected to target local real estate agencies and internet portals through which a high proportion of Spanish rental bookings are made. It is not clear how the new legislation will affect websites such as Airbnb who have no physical presence in Spain, however any property whose actual address is published on the internet is open to investigation.

There is currently a rise in demand for Spanish holiday rental property, for instance from certain markets such as Russian clients who have are moving away from destinations such as Turkey because of the political outfall from the war in Syria, and Egypt because of terrorist attacks on Russian citizens.

Spain is a safe go-to tourist destination in times of global turmoil and the Spanish Authorities realise that now more than ever, they are missing out on massive amounts of revenue because most property owners are not declaring their rental income.  Forcing property owners to register is likely to be a very effective way of ensuring that they pay tax on their income.

Properties can be registered in the Registro de Turismo de Andalucia on the Junta de Andalucia website at the following link: https://ws072.juntadeandalucia.es/ofvirtual/auth/autnocertjs .

If you are the owner of a property in Andalucia and would like further details in English on the legislation and requirements for the properties to be rented out, then a recommended website is Rental Tonic at www.rentaltonic.com .

If you would like any assistance in the preparation and filing of your rental tax returns then please visit our website at www.spainaccountants.com or contact us at info@spainaccountants.com .

Changes in Spanish tax for the year 2016

 

2016 is the second half of a two-year tax project which was published last year, so there are no surprises from a tax point of view. In this post we am looking at the rates for the year 2016. The tax rates have decreased further this year,

In our blog this time last year we commented that the cut in tax rates was to be expected for an election year. Well although the governing Partido Popular won the general elections in December, it was not enough to gain an absolute majority and Spain is, at this point in time, still without a permanent government. Clearly tax cuts will only take you so far ….

As always, you will find the full updated tax rates and allowances on our tax database starting www/spainaccountants.com/tax.html

Income tax

Tax bands (rates valid for Madrid)

Tax rates have decreased across the board, as follows:

From (EUR) To (EUR) State Tax % Regional Tax % Total Tax %
0 12,450  9.50  9.50 19.00
12,450 20,200 12.00 12.00 24.00
20,200 35.200 15.00 15.00 30.00
35,200 60,000 18.50 18.50 37.00
60,000 + 22.50 22.50 45.00

 

Personal allowances

The 2015-2016 tax project has seen big increases in the personal allowance and children’s allowances:

 Personal allowance

Under 65 years old 5,550 Euros
65+ 6,700 Euros
75+ 8,100 Euros

Children’s allowance

First child 2,400 Euros
Second child 2,700 Euros
Third child 4,000 Euros
Each further child 4,500 Euros

 

The system for calculating the employment-related personal allowance has been changed, as follows:

For taxpayers with salaries of less than 14,450 Euros and other income less than 6,500 Euros, there are the following deductions:

Earnings not more than 11,250 3,700 Euros
Earnings 11,250 to 14,450 3,700  –  1.15625 x (Earnings – 11,250)
Earnings 14,450 + 0

In addition, there is also a general allowance of 2,000 Euros applicable independent of the income of the taxpayer.

Tax on capital gains, savings and dividends

This has been reduced across the board, and in 2016 is as follows.

Capital gains

Residents

First 6,000 Euros:           19%
6,000 – 50,000 Euros:  21%
50,000 + Euros:               23%

Non-residents:                  19%

Savings and dividends

Residents and non-residents

First 6,000 Euros:           19%
6,000 – 50,000 Euros:  21%
50,000 + Euros:               23%

Tax credits and deductions

The tax credit for payments to rent a property, which was applicable to low-earners, was abolished from 2015 onwards.

The  1,500 Euros tax free amount on dividends was also abolished.  Further to the previous abolition of the proportionate tax credit on dividends which was much more beneficial, there is now no tax credit at all given for dividends received from Spanish companies. Although the tax on dividends has been reduced, this is rather harsh from a tax point of view, especially for companies owned by the taxpayer- as there is no compensation for the underlying company tax alread paid- so dividends are actually taxed twice.

Company tax

As of 1st January 2015, the general rate of company tax in Spain has been reduced from 30% to 28% in 2015 and 25% in 2016.

For small and reduced-sized companies, up to 2014 there were which have now been eliminated (as the reduction in the general tax rate renders them meaningless), except for a transitory period in 2015, when the rate is 25%, except for the profit over 300k Euros for medium-sized companies where the tax is 28%.

A company is defined as small if the turnover in the previous year was less than 5 million Euros and the company has between 1 and 24 employees.

A company is defined as reduced-sized if the turnover in the previous year was less than 10 million Euros.

As of 1st January 2015, there has been introduced a new lower tax-rate for newly-formed companies which applies to the first two years in which it obtains a taxable profit. The rate is 15%.

You can find further information on our services on our website www.spainaccountants.com .

Filing of the 2015 income tax returns – Renta

The Agencia Tributaria has now published their calendar for the year 2016. The key dates for filing the 2015 income tax declarations- La Renta, are as follows:

6th April: Tax return software (PADRE) available for download online. Tax returns can be filed online from this date.

25th June: Deadline for filing tax returns where tax is due and to be paid by direct debit (domiciliacion).

30th June: Deadline for filing of all returns.

You can find further details on our tax return filing services on our website www.spainaccountants.com

 

La Renta- 2015 tax calendar (for the tax year 2014).

The Agencia Tributaria has now published their calendar for filing the 2014 income tax declarations- La Renta. The key dates are as follows:

7th April: Tax return software (PADRE) available for download online. Tax returns can be filed online.

25th June: Deadline for filing tax returns where tax is due and to be paid by direct debit (domiciliacion).

30th June: Deadline for filing of all returns.

 

 

 

 

 

Non-residents: subtle changes to the taxation of non-rented property

New starting the tax year 2015 (i.e. declarations to be filed by 31st December 2016):

The lower percentage rate of 1.1% to calculate imputed rental income applies to properties whose valor catastral has  been updated in the ten years previous to the declaration. Otherwise the full rate of 2% must be used.

Previously the cut-off point was 1994, so taxpayers whose property has has its valor catastral last revised between 1994 and 2005 will find themselves having to pay more tax.

 

2015 tax changes- a summary

Well finally I have found some time in between client tasks to summarise the 2015 tax changes here !  There have been several significant tax changes and in general, and in general it looks good for the taxpayer. As I said, what else can you expect in an election year !

The tax reforms are a two year project, with stepped changes in 2015 and 2016. On this page I am looking at the immediate changes for 2015.

As always, you will find the full updated tax rates and allowances on our tax database starting www/spainaccountants.com/tax.html

Income tax

Tax bands (rates valid for Madrid)

Tax rates have decreased across the board, as follows:

From (EUR) To (EUR) State Tax % Regional Tax % Total Tax %
12,450 20,200 12.50 12.50 25.00
20,200 34.000 15.50 15.50 31.00
34,000 60,000 19.50 19.50 39.00
60,000 + 23.50 23.50 47.00

 

Personal allowances

There have been big increases in the personal allowance and children’s allowances:

 Personal allowance

Under 65 years old 5,550 Euros
65+ 6,700 Euros
75+ 8,100 Euros

Children’s allowance

First child 2,400 Euros
Second child 2,700 Euros
Third child 4,000 Euros
Each further child 4,500 Euros

 

The system for calculating the employment-related personal allowance has been changed, as follows:

For taxpayers with salaries of less than 14,450 Euros and other income less than 6,500 Euros, there are the following deductions:

Earnings not more than 11,250 3,700 Euros
Earnings 11,250 to 14,450 3,700  –  1.15625 x (Earnings – 11,250)
Earnings 14,450 + 0

In addition, there is also a general allowance of 2,000 Euros applicable independent of the income of the taxpayer.

Tax on capital gains, savings and dividends

This has been reduced across the board, as follows:

Residents

First 6,000 Euros:           20%
6,000 – 50,000 Euros:  22%
24,000 + Euros:               24%

Non-residents

First 6,000 Euros:            19%
6,000 – 50,000 Euros:   21%                                                                                       24,000 + Euros:                23%

Tax credits and deductions

The tax credit for payments to rent a property, which was applicable to low-earners, has now been abolished.

The  1,500 Euros tax free amount on dividends has now been abolished.  Further to the previous abolition of the proportionate tax credit on dividends which was much more beneficial, there is now no tax credit at all given for dividends received from Spanish companies. Although the tax on dividends has been reduced, this is rather harsh from a tax point of view, especially for companies owned by the taxpayer- as there is no compensation for the underlying company tax alread paid- so dividends are actually taxed twice.

 Company tax

As of 1st January 2015, the general rate of company tax in Spain has been reduced from 30% to 28% in 2015 and 25% in 2016.

For small and reduced-sized companies, up to 2014 there were which have now been eliminated (as the reduction in the general tax rate renders them meaningless), except for a transitory period in 2015, when the rate is 25%, except for the profit over 300k Euros for medium-sized companies where the tax is 28%.

A company is defined as small if the turnover in the previous year was less than 5 million Euros and the company has between 1 and 24 employees.

A company is defined as reduced-sized if the turnover in the previous year was less than 10 million Euros.

As of 1st January 2015, there has been introduced a new lower tax-rate for newly-formed companies which applies to the first two years in which it obtains a taxable profit. The rate is 15%.

 

The 2015 tax changes have just been published

The new tax rates and allowances for the year 2015 have just been published:

1. Ley 26/2014, de 27 de noviembre for income tax for residents and non-residents.

2. Ley 27/2014, de 27 de noviembre.  for company tax.

There will be significant tax changes across the board and, from our first brief glance at least, it looks to be good news for the taxpayer. What else would you expect in an election year ?!

We will be reviewing the law in detail over the next few weeks and will publish the detailed changes on our website starting http://www.spainaccountants.com/tax.html and a summary here on our blog.

Agencia Tributaria update: Hacienda gets unreasonably tough.

The Spanish Tax Office, La Agencia Tributaria (colloquially known as Hacienda), has never been known for being helpful or approachable to the taxpayer, however in the last few months things seem to have taken a turn for the worse. They seem to be looking for any excuse to punish the taxpayer with fines for even the smallest unintentional errors, or to disallow perfectly legitimate tax deductions and leaving the taxpayer in a “guilty before proven innocent” situation.

Here’s a couple of examples that we have come across recently:

Unintentional error in tax return- sanctions payable even after the error has been corrected

In this case, there was an unintentional error in an autonomo‘s annual tax return, where the payments on account of income tax during the year were overstated. The Agencia Tributaria, as is routine, checked the figures on their system and identified the error. They issued a corrected assessment, and added late payment interest. All of this is perfectly reasonable of course. However the letter also mentioned that penalty (known as sancion) proceedings had been opened.

The autonomo paid this bill straight away, we wrote to the Agencia Tributaria stating that it was not justifiable to charge a penalty because the error in the return had been unintentional. They did not accept this, and a month later the client received a bill for the penalty of more than 200 Euros. The client had no option but to pay this, or face an increased penalty,

Our assessment: the penalty was entirely unfair, and this new policy whiffs of an effort by the State to make money at the expense of the honest small businessperson.  They cannot argue that there is any tax evasion taking place because all the data for the payments on account made during the year are on their system and any errors are picked up systematically.

Our conclusions:

1. The taxpayer and their accountants need to be even more vigilant from now on that not even the smallest error is made in tax returns.

2. The Agencia Tributaria is even less of a friend of yours than it was before.

 

Disallowed pension contributions- payments made in another EU country

In Spain, there is a generous tax allowance whereby private pension contributions are deductible for income tax purposes, up to 10,000 Euros per annum. Tax Law states that contributions made to pension funds in other other EU countries can be included.

One client of ours made payments into a French pension fund which exceeded 10,000 Euros, so we claimed the maximum in his annual Spanish income tax return (Renta).  A year or so later, he received a letter from the Agencia Tributaria with a revised assessment based on the premise that the pension payments were not deductible because they were not in their database (which is, of course, only for Spanish pension funds).  

The taxpayer had just ten days to appeal and we did so on his behalf, stating the relevant Spanish tax law and attaching proof of payment of the pension contributions. The Agencia Tributaria accepted our argument and cancelled their revised assessment.

A couple of years later, the client received a similar letter from them querying his latest tax return, and only after we wrote another letter to point out that they had already accepted the deduction for him two years previously, did they accept that the client’s return was correct.

Our conclusion:

1. When there is an Agencia Tributaria query into a tax return which has been correctly prepared, the taxpayer is guilty unless proven innocent and the lack of a prompt reply to them will result in the overpayment of tax.

2. The Agencia Tributaria conveniently do not look into past judgements made in favour of the taxpayer when there is the opportunity for them to overtax them again.

 

 

 

 

 

 

 

 

Foreign companies: registering for VAT in Spain

 

Foreign companies wishing to offer their services or goods here in Spain are generally required to register for Spanish VAT here: known as IVA – Impuesto sobre el Valor Añadido.

Compared to setting up a free-standing Spanish company, this process is straightforward and quick.  On presentation of all of the required documents  at a local tax office in Spain, your company’s Spanish tax/ VAT number is issued immediately.

The key, therefore, is to ensure that you prepare the correct documentation at your end. This is as follows:

1. A certificate produced by the Company Registry in the country where your company was incorporated. This document should state the registered address of the company and a list of directors.

The certificate must be issued recently as the Spanish Tax Authorities will wish to have evidence that the company is still in good standing.

2. Two notarised representation documents:

a) A Power of Attorney to your Spanish representatives to obtain your company’s Spanish tax code on your behalf.

b) A letter authorising them to represent you in future communications with the Spanish tax authorities.  This letter is, in general, required at the outset, however it is a simple process for you to change representatives at a later date.

All of these documents should be legalised in your country with the Hague Apostille and then translated into Spanish by a sworn translator.

Registered Office in Spain

From a tax point of view, it is not necessary for you to have your own registered office here, as all Tax Office correspondence will automatically go to your representatives.

Of course, as you expand here and wish to have your own people on the ground in Spain, you will most likely require your own office. This will be considered as a Permanent Establishment for Spanish tax purposes, and your company will be required to submit annual company tax declarations.

If your company wishes to take on Spanish employees, it will need to be registered at the Spanish Social Security Office, by presenting Form TA6 along with supporting documentation.

For further information and assistance, please visit our website at www.spainaccountants.com . 

2014 residents tax returns

The Agencia Tributaria system for filing the 2014 annual residents’ tax returns opens in late April, so now is a good time to start to prepare ! Here’s an overview of the Spanish online tax filing system for residents, including how to pay your tax bill and claim any refunds due.

The tax year to be filed is 1st January – 31st December 2013, and returns must be filed by 30th June 2014.

Spanish tax returns are prepared using a software known as PADRE, which is produced by the Agencia Tributaria and can be downloaded from their website,  www.aeat.es  from late April onwards.  This is an offline program into which you enter details of your taxable income, which creates a file to be submitted online via the Agencia Tributaria website.

The return consists of the following principal sections:

1. Work-related income (Rendimientos de Trabajo): Employment, occupational pensions;

2. Savings income (Rendimientos del Capital Mobiliario): Interest, dividends, annuity pensions;

3. Rental income (Rendimientos de Bienes Inmuebles);

4. Self-employment income (Actividades Economicas);

5. Capital gains and losses (Ganancias y perdidas patrimoniales);

6. Reductions in taxable income (Reducciones de la base imponible): pension contributions.

7. Tax credits (Deducciones en cuota):  For tax withheld on all sources of income and tax paid abroad.

Tax for married couples

The PADRE software  has very useful function which calculates the tax due if spouses claim separately and jointly, and allows you to choose the option which gives the least total tax payable.

Tax payments

Where there is tax due, you have the option of paying all of it at once, or to make split payments (pagos fraccionados): 60% on 30th June and 40% at the beginning of November. There is no interest charged for this option.

The tax can be paid by presenting the return at your bank, or by specifying direct payment in the actual tax return. The latter option is very convenient but note that in order for it to be accepted, you need to file your return at least one week before the 30th June deadline.

Tax refunds

If the return shows that a tax refund is due, you simply need to enter your bank account number into the program before filing online. No supporting documentation needs to be included at the time of filing of the return, however this may be requested later in writing by the Agencia Tributaria. Tax refunds in Spain, especially where there are multiple sources of income, can be very slow to arrive.

For further information and assistance, please visit our website at www.spainaccountants.com .