ANTI-MONEY LAUNDERING

Lawyers, Notaries, Estate agents, Builders and Banks are required to obtain evidence of identity Money Laundering for both existing and new clients. In certain circumstances they will be obliged to reveal information to the appropriate authorities in relation to suspicion of money laundering or the proceeds of crime.

In 1993 the Executive Service of the Commission for Monitoring Exchange Control Offences – created by Royal Decree 2391/1980 of 10 October 1980, as the operating arm of that Commission and assigned to the Banco de España – received its current name of Executive Service of the Commission for the Prevention of Money Laundering and Monetary Offences (Servicio Ejecutivo de la Comisión de Prevención del Blanqueo de Capitales e Infracciones Monetarias – known by its Spanish abbreviation SEPBLAC). It has progressively focused on the prevention and investigation of money laundering.

The Executive Service is a body supporting the Commission for the Prevention of Money Laundering and Monetary Offences. Law 19/1993 of 28 December 1993 established the functions of the Service and of the Commission.

The functions of the Executive Service as set forth in Article 15.2 of Law 19/1993 are as follows:

· Rendering assistance to the judicial bodies, the Public Prosecution Department, the criminal police and the competent administrative bodies.

· Reporting to these bodies and institutions on the conduct giving reasonable indications of a criminal offence or, as the case may be, an administrative infringement.

· Receiving the communications and information that subject persons are obliged to send concerning any event and transaction with regard to which there is reason to believe or certainty that it is related to money laundering. These reports may be submitted at the initiative of the subject persons or they may be required by the Executive Service.

· Analysing the information received and taking the further action called for in each case.

· Carrying out the instructions and following the guidelines given by the Commission, and submitting to it the reports that it requests.

· Monitoring the suitability of the internal control and communication procedures and bodies established by the parties subject to anti-money laundering law and proposing the necessary corrective measures.

· Providing such support to the Commission for Monitoring Terrorist Financing Activities as is required to enable it to properly exercise and perform its functions, execute its orders and guidelines and ensure that the law regulating this Commission is applied in accordance with the instructions received from it.

· The other functions provided for in Law 19/1993 or assigned to it by the legal provisions in force.

In addition to the foregoing, it also carries out the functions referred to in Article 12 of Law 19/2003 of 4 July 2003 on the legal system for capital movements and foreign economic transactions and on certain measures to prevent money laundering.

CORONAVIRUS CRISIS

What will happen to your foreigner status in the Spanish territory during quarantine? Is there any foreigner office available to attend all those expats living in Spain? Can you leave the country? How will all the expats in Spain be affected by Coronavirus?

With the current uncommon situation, you may have tons of doubts. The covid-19 is completely affecting your life as an expat.  But this article tries to bring updated information to make your stay easier.

We are going to extensively explain all the effects that coronavirus is producing on foreigners living in Spain. Furthermore, we will outline all the info you need in order to stay legally protected and act now in case you have to.

The current situation with the Coronavirus in Spain (Update)Spain’s Alarm state: What the Lockdown is all aboutHow long will it last? Spain’s Lockdown ExtensionHow is the coronavirus going to affect me as a foreigner in Spain?Ask anything to our lawyers and get an answer in just a few minutes!Impact of Coronavirus on Spanish immigration procedures for foreignersAre the immigration or police offices open?But what happens if I had an appointment already scheduled?Appointments that have been canceledProcedures you can’t undertake right nowCan I get an appointment with the immigration or police office?What should I do if my residency card is about to expire and I need to renew it?My tourist visa is about to expire and I can’t leave the country. What should I do?How to apply for your residency card renewal or citizenship NOW (without waiting)I appealed to a specific procedure and haven’t gotten any response yet. Is it normal?And what happens now with the nationality exams?What happens with my application that is in process?Coronavirus and the current cross-border situationCan I travel and enter Spain if I am abroad?Can I leave Spain during Coronavirus If I am a foreigner?For any doubt you may have… Seek online assistance from our lawyers

The current situation with the Coronavirus in  Spain

Spain is now one of the first countries in the world suffering from the virus. Over 100.000 cases have been registered, and the number doesn’t seem so stop growing. Hence, a great part of the country has been shut down.

Restaurants, coffee shops, movie theaters, schools, gyms and many other places have been closed. That is what an Alarm State is all about.

And this has important implications for all those expats who are living in Spain.

Not only you are not going going to be able to enjoy traditional festivities like Valencian Fallas or Andalucia’s Semana Santa, which have been cancelled.

Your relationship with the Immigration office may also be affected while the impact of coronavirus is still present.

Spain’s Alarm state: What the Lockdown is all about

The first thing we must do is understand what the alarm state is bout, so you can grasp the main implications that it will generate for you as a foreigner.

The government, with the main aim to stop and prevent the extension of the virus, has declared this special situation.

It basically implies that the Spanish army has the right to act, and some of your main rights are suspended.

Basically, you cannot leave your house unless you are going to the supermarket, pharmacy, going where you work, or to take care of one of your relatives.

You are required to stay home during the whole length of the alarm state. Right now that is 2 weeks, but it will probably be extended.

How long will it last? Spain’s Lockdown Extension

We do not know for sure. Initially, the alarm state had to just take two weeks. But the Spanish government recently announced an extension of an additional 2 weeks.

Therefore, a total of 1 month.

However, this period could be extended depending on the virus situation.

How is the coronavirus going to affect me as a foreigner in Spain?

That is what we are going to answer throughout this article.

There are two different areas in which the coronavirus will affect your life as an expat in Spain:

First of all, the virus will affect your options to deal or contact with the foreigner’s immigration office, any police station, or the civil registry.

All the administrations that link the foreigner with the country are completely closed. There is nobody who can attend you as a foreigner right now face-to-face.

This means that any immigration procedure you had programmed or you needed to undertake is now on hold.

Furthermore, the current situation with the covid-19 will impact your possibility to enter or leave the country.

Many borders are locked down, and you may no be able to enter Spain if you are abroad, or leave the country to go back to your main residency.

We will now explore those two areas into greater detail.

Impact of Coronavirus on Spanish immigration procedures for foreigners

If you had an appointment with the immigration office to renew your TIE or residency card, or any other kind of scheduled activity, those are now canceled.

No return authorizations are being issued, no fingerprints are being recorded. The same with any kind of interview appointment, like those required for arraigo. Those are all suspended.

For the duration of the alert state, all immigration procedures will be paralyzed. You can’t process any file or have an appointment in person.

Furthermore, all deadlines suspended, both in procedural and administrative matters. And that is also true for the time deadlines regarding appeals and court processes that were active.

However, pending applications will be resolved, and renewals are possible if done online.

Many procedures were done online even before the start of this crisis, those are still possible.

But let’s answer all the specific questions we are receiving from our clients.

Are the immigration or police offices open?

No, every immigration office, police office, or civil registry is now closed.

Furthermore, the Ministry of Foreign Affairs, in charge of legalizations, has also closed. Nevertheless, they are sending files via post mail, accompanied by an envelope prepared for express return.

There is just one exception. The civil registry will be just opened for marriages and childbirths that were scheduled.

But what happens if I had an appointment already scheduled?

If you had an appointment with any public administration institution, it is now suspended.

Therefore, any appointment for fingerprinting, return authorization, European Union certificates, or pledge of allegiance for nationality procedures are temporarily canceled.

This does not mean it is canceled forever. Once the situation is normalized again, you will recover your appointment and proceed with your immigration file.

Even though we do not know exactly how it will finally work out, people who had an appointment and that has been now cancelled due to the coronavirus will have preferential treatment and will be able to get their appointment earlier.

Make sure to check your mail in order to find a notification stating the cancelation of your appointment.

Appointments that have been canceled

Under the current situation, the appointments for all the residence permits that were presented at the foreigner’s office have been canceled:

ArraigoFamily reunificationFamily member of an EU citizen visa

However, an exceptional authorization has been created for the application of residences. You will have to present a number of specific documents and some personal ones.

With the digital certificate, your residence will not be affected.

Procedures you can’t undertake right now

To make things even clearer,here is a list of the procedures that you CANNOT do right now:

NIE , Fingerprint, registration Return authorization,  EU certificate

In other words, all the paperwork and procedures that were carried out at the police.

Can I get an appointment with the immigration or police office?

You can still get an appointment for any immigration procedure that must be carried out face-to-face.

But bear in mind that the soonest you can get that appointment is September. And all those who had a canceled appointment have now preferential treatment, so the delay to formalize your file will be notorious.

In order to book your appointment with the immigration or police office, you must do that online.

What should I do if my residency card is about to expire and I need to renew it?

This can seem dramatic at first. Your TIE or residency card can be about to expire, and you cannot renew it, as any immigration procedure is paralyzed. Hence, you would become illegal in Spain.

But things are not that bad.

A Royal Decree has been approved, talking about the interruption of time limits for processing public sector procedures (including any public administration, without exception).

What does this mean? That you can still submit your renewal application, and you can do that online.

And for the renewal to be valid, you must start it before the expiration of your card (60 days before) or 90 days later. The renewal process can be carried out without any problem. The only thing you won’t be able to do now is the registration of your fingerprints.

So our recommendation is that you contact our lawyers and let us be in charge of everything. You just need to send us your documents scanned, and we will present them online so you are legally covered.

My tourist visa is about to expire and I can’t leave the country. What should I do?

Chances are that as a foreigner visiting Spain, your tourist visa is about to expire.

As the borders are closed, you will not be able to leave the country, which will mean that you will become an illegal person in Spain. What to do in this situation?

Good news. We can help you. We recommend you to send a letter to the competent institution requesting that your visa be extended for the duration of this situation.

And what happens if you don’t get an answer? In that case, there is no problem either. By sending the application, we understand you will get a valid justification that will avoid future legal problems.

If you want us to guide you on how to proceed in this case, our team of lawyers is at your complete disposal.

Again, once the alarm state is over, we understand that you will have a reasonable period of 15 days to voluntarily leave the country.

These are the advice that we recommend you do. For official information, consult the press release issued by the Directorate General of Migration on Royal Decree 463/2020 of 14 March.

How to apply for your residency card renewal or citizenship NOW (without waiting)

However, even though all procedures have been suspended, the administration does work remotely. Therefore, you can still submit your application or renewal telematically.

So ho to proceed?

You just need to contact us on solicitorspain@hotmail.com  or call (96) 3325959 and we will manage the application for you.

You just need to send us by email a copy of your passport, residency card, census or padron if you have it, and we will pay for the fee online and submit the application.

Hence, everything will be done as usual.

Once you submit your application, you’ll get a receipt. With that, you are legal in Spain. Then, no matter how long the immigration office takes to proceed that application, you would have already done your homework and would be legally covered.

I appealed to a specific procedure and haven’t gotten any response yet. Is it normal?

Yes, that is completely normal.

As we have already mentioned, all the immigration and legal procedures are now paralyzed, so government clerks will start working on your appeal once the coronavirus crises vanishes.

And what happens now with the nationality exams?

As we have seen throughout this post, the exams to obtain Spanish citizenship are also cancelled.

The CCSE tests organized for March and April have been postponed to May and June.

On the other hand, the DELE exams for April and May have been canceled. They will be relocated as soon as possible.

What happens with my application that is in process?

All procedures or requests what are being processed will be resolved. The idea is that they get resolved quickly during the upcoming days.

Thus, if you submitted your application before the start of the alarm state, you will receive a favorable (or negative) response in the next days.

We cannot guarantee how long will that take, but you will still get a response.

Coronavirus and the current cross-border situation

You may now have a clear understanding of the current situation with all the legal procedures any foreigner has to undertake while in Spain during coronavirus times.

Yet there is another crucial aspect we must also tackle: your ability to leave and enter the country.

Can I travel and enter Spain if I am abroad?

No. If you are a non-resident foreign citizen, you are not allowed to enter Spain now.

Only those who are Spanish nationals (or residents) will be able to come back to their origin country, where they will be attended.

Furthermore, we find the situation of those residents who went back to their home country with a return authorization, and it expired.

Can they travel back to Spain?

Yes, if your authorization to come back has expired during the state of alarm, it is still possible to enter the country.

Can I leave Spain during Coronavirus If I am a foreigner?

If you are under your tourist status, yes, you can leave the country. In any other case, you are not allowed to.

But you must also understand your origin country situation and laws. Because they may have forbidden your entry.

Nevertheless, you will always be able to enter the country you have the nationality from.

SPANISH COMPANY TAX AND MERCANTILE CALENDAR

DATE SUBJECT DETAILS
JANUARY
20 January Tax form type 110 4th quarter 2007 withholdings on professional activities income
30 January Tax form type 303 4th quarter 2007 VAT tax return.
Tax form type 390 Annual summary of VAT tax returns during 2007.
31 January Tax form type 390 Annual summary of withholdings on professional activities income during 2007.
MARCH
01 March Rubbish collection Until the end of March.
30 March Book keeping Provide us all invoices, bank statements and all kind of documents corresponding to the 1st quarter 2008 necessary to keep the accounts.
31 March Tax form type 347 Annual summary of transactions with third persons for a global amount of more than 3.005,06 euros.
Approval and signing of annual accounts. The company’s annual accounts for Nombre de la Empresa shall be approved by the board of directors and signed on behalf of the board by the director.
APRIL
20 April Tax form type 110 1st quarter 2008 withholdings on professional activities income.
Tax form type 202 1st payment on account of Corporation Tax 2008.
Tax form type 303 1st quarter 2008 VAT tax return.
JUNE
30 June Book keeping Provide us all invoices, bank statements and all kind of documents corresponding to the 2nd quarter 2008 necessary to keep the accounts.
Accounts Last day to celebrate the General Meeting of Shareholders.
JULY
20 July Tax form type 110 2nd quarter 2008 withholdings on professional activities income.
Tax form type 303 2nd quarter 2008 VAT tax return.
25 July Tax form type 201 Corporation Tax 2007.
30 July Accounts Laying and delivering of the annual accounts.
SEPTEMBER
01 September IBI The town Hall local Rates until end of september.
30 September Book keeping Provide us all invoices, bank statements and all kind of documents corresponding to the 3rd quarter 2008 necessary to keep the accounts.
OCTOBER
20 October Tax form type 110 3rd quarter 2008 withholdings on professional activities income.
Tax form type 202 2nd payment on account of Corporation Tax 2008.
Tax form type 300 3rd quarter 2008 VAT Tax return.
DECEMBER
20 December Tax form type 202 3rd payment on account of Corporation Tax 2008.
30 December Book keeping Provide us with all invoices, bank statements and all kind of documents corresponding to the 4th quarter 2008 necessary to keep the accounts. Please provide us also with all information corresponding to the whole year 2008 not provided before.

GOLDEN VISA

Non EU nationals who make a significant investment in Spain may apply for a visa or residence authorization for investors.

Candidates who are abroad must apply for a one-year residence visa.

Candidates who are legally in Spain, i.e. who have a residence or stay permit or an investor visa, must apply for a two-year residence authorization.

Once this time period has expired, the authorization may be renewed for successive five-year periods, provided the conditions that generated the right are mantained and they have visited Spain at least once during the period of residence.

  • A single authorization for living and working valid anywhere in Spain including relatives if they meet the expected age labour regulations.
  • Free movement within the Schengen member states.
  • Streamlined processing: 10 days for visas and 20 days for residence authorizations, procedures can be arranged through a representative.
  • Combined processing for family members.
  • The awarding of this residence permit does not require actual residence in Spain; the only requirement is to visit Spain once during the period of residence.
  • The application for a residence permit will extend the validity of the residence or stay of the permit holder in Spain until the end of the procedure.

REQUIREMENTS

PROCESS

DEADLINES

REQUIREMENTS

General requirements

  • Not be in Spain in an irregular situation.
  • Be over 18 years of age.
  • Have no criminal record in Spain or in the countries where they have resided for the past five years, for offenses defined in the relevant Spanish legislation.
  • Not be subject to an alert issued for the purposes of refusing entry in the territorial space of countries with which Spain has signed an agreement in this regard.
  • Have a public or private health insurance policy with an insurance company authorised to operate in Spain.
  • Have sufficient financial resources for themselves and their families during their residence in Spain.
  • Have paid the visa or authorization processing fee.

The spouse or common-law partner and any children under 18 years of age or those of legal age who cannot provide by themselves and have not constituted their own family unit and parents who are dependent, who accompany or join the foreigner, may apply jointly and simultaneously or successively for their authorization and, where appropriate, their visa. In this case, evidence must be provided of being in compliance with the requirements listed in the preceding paragraph.

Specific requirements

Having made a significant investment in Spain either directly or through a company owned by the investor which is not registered in a tax haven. The investor must have the majority of the company’s voting rights and be able to appoint the majority of the Management Board.

  • Initial investment of at least:

– €2 million in Spanish public debt.

– €1 million in shares or equities of companies with a real business activity.

– €1 million in investment funds.

– €1 million in bank deposits.

  • Acquisition of real estate assets of at least €500,000 net of charges and taxes.
  • Business projects in Spain considered being of general interest by fulfilling at least one of these conditions:

– Creation of jobs.

– Socio-economic impact in the region where the project is located.

– Significant contribution to scientific/technological innovation.

A representative appointed by the investor to manage a business project of general interest may obtain the investor visa or residence authorization.

PROCESS

APPLICATION FOR AN INVESTOR VISA OR AN INVESTOR RESIDENCE AUTHORIZATION

WHO: Application may be submitted by a representative.

– Candidates who are abroad must apply for a one-year residence visa.

WHERE: The Spanish consulate in the applicant’s country of residence. Select the Spanish office of representation of your place of residence.

DOCUMENTATION: Information regarding documentation and application form at the Consulate.

– Candidates who are legally in Spain, i.e. who have a residence or stay permit or investor visa, must apply for a two-year residence authorization.

WHEREThe Large Business and Strategic Sectors Unit [Unidad de Grandes Empresas y Colectivos Estratégicos (UGE-CE)]. Application must be made online through the electronic site of the Ministry of Employment, Migrations and Social Security. Click here to apply online (in Spanish)

DOCUMENTATION (translated into Spanish):

Criterios de aplicación de la sección de movilidad internacional de la Ley 14/2013, de 27 de septiembre, de apoyo a los emprendedores y su internacionalización

Application forms:

  • Application form for the investor.
  • Application form for family members, if it is the case
  • Fee.

General documents: 

Specific documents for investors

Specific documents for the representative of the investor to manage a business project of general interest

Documents for family members

APPLICATION FOR A FAVOURABLE REPORT FOR BUSINESS PROJECTS OF GENERAL INTEREST AND FOR LEGAL ENTITIES

Prior to applying for a visa or authorization for business projects of general interest or for investments made through a company, the Directorate General for International Trade and Investments must certify the compliance with the requirements established by law for these cases:

– Candidates who are abroad must apply for the report at the Economic and Commercial Office of the Embassy of Spain in the country where they are going to apply for the visa. Select the Spanish Economic and Trade Office

– Candidates who are legally in Spain must apply for the report to the Directorate-General for Trade and Investment at any public registry. Application can be made online through the electronic site of the Ministry bt submitting the application form together with the documentation required at the «Generic Instance» procedure: Click here to apply online

Reports are usually issued within 10 to 20 working days from the date of official entry in the appropriate issuance authority’s register, unless the process is stopped due to legal cause.

APPLICATION FOR A RESIDENCE CARD FOR FOREIGNERS

WHERE: Police station. Select the police station nearest to your address.

WHO: The residence authorization holder in person.

DOCUMENTATION:

RENEWAL OF RESIDENCE AUTHORIZATIONS

The renewal may be applied for 60 calendar days prior to the expiration of the permit or within 90 calendar days thereafter, without prejudice to the initiation of the corresponding sanctions proceeding.

WHO: Application may be submitted by a representative.

WHEREThe Large Business and Strategic Sectors Unit [Unidad de Grandes Empresas y Colectivos Estratégicos (UGE-CE)]. Application must be made online through the electronic site of the Ministry of Employment, Migrations and Social Security.

DOCUMENTATION:

Application form:

Documentation required for renewalsClick here to download information.

– Model of sworn statement of maintenance of the family bond: Click here to download model

  • Business projects of general interest: prior to applying for the investors residence authorization renewal, the Directorate-General for Trade and Investment (Subdirección General de Inversiones Exteriores, Dirección General de Comercio Internacional e Inversiones) must issue a report certifying that the business project is still of general interest.

Application for this report must be submitted at the Registry of the Ministry of Industry, Trade and Tourism

Once you obtain the report you may proceed to apply for the renewal of the residence authorization.

DEADLINES

Decisions on visa applications will be made and notified within 10 working days, except in the case of applicants subject to prior consultation as provided for in Article 22 of the Visa Code, in which case the decision time period will be that provided for as a general rule in the mentioned Code.

Residence authorizations will be processed by the Unit for Large Companies and Strategic Economic Sectors in a maximum time delay of twenty days from the filing of the application. If after this time period, a decision has not been adopted, the authorization will be deemed to be granted due to administrative silence.

TAX INFORMATION FOR RESIDENTS IN SPAIN

1.- To assess whether you are resident in Spain or in UK.
2.- To gather the information and documents required to prepare your Spanish Income Tax Return.
3.- Resident Tax Calendar.
4.- Who is obliged to provide the Spanish Income Tax return.
5.- Menu of Sources of Income.
6.- General Tariff.

1.- To assess whether you are resident in Spain or in UK.
When you are deemed to be resident for tax purposes in Spain and in the UK, Article 4 of the Double Taxation Agreement between Spain and UK indicates where you should be considered to be resident.

(1) For the purposes of this Convention, the term `resident of a Contracting State` means, subject to the provisions of paragraphs (2) and (3) of this Article any person who, under the law of that State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature; the term does not include any individual who is liable to tax in that Contracting State only if he derives income from sources therein. The terms `resident of the United Kingdom` and `resident of Spain` shall be construed accordingly.
(2) Where by reason of the provisions of paragraph (1) of this Article an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules:
(a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests);
(b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;
(c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting state of which he is a national;
(d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
(3) Where by reason of the provisions of paragraph (1) of this Article a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated.

2.- To gather the information and documents required to prepare your Spanish Income Tax Return.

If it is the first time you require our services to prepare your Income Tax return, we attach the list of documents you should bring with you. Many of them may not be applicable in your case.

1.- Photocopy of your NIE/Residence Card and passport.

2.- Tax information provided by the Spanish Tax Department.

3.- Draft of Income Tax return (if received from the Tax Department)

4.- Certificate of retentions made on salary.

5.- Certificate or information on retentions on pensions.

6.- Information from your bank of interests and capital.

7.- Information of payments made into a special account for the purchase of a home.

8.- Information of mortgage payments of your home.

9.- Information of rentals of houses, premises, etc. and expenses incurred from these.

10.- Certificate of retentions on account of Income Tax from rentals.

11.- Deeds of property/ies.

12.- Information about shares, public debt or other assets, such as investment funds.

13.- Information of company shares.

14.- Certificate of life insurance.

15.- Disability information.

16.- Pension plan information.

17.- Information about donations to charities.

3.- Resident Tax Calendar.

The period to declare and eventually pay Income Tax in Spain is from the 1st of May to the end of June. Notwithstanding, the software to prepare the Income Tax returns is available from June.

You should contact us at the beginning of May providing us with the above detailed information (from 1st of January to 31st of December of the previous year). We will check that information and will provide you with an appointment to show you the Income Tax return and then sign it.

4.- Who is obliged to provide the Spanish Income Tax return.

The provided information is just a short description of the common cases where it is not necessary to declare Income Tax in Spain. This does not substitute the advice for each individual.

As a general rule everyone has a duty to present the Income Tax return, for income from the 31st of January to the 31st of December.

The exceptions to the rule (those who are not obliged to declare Income Tax) are:

– Those who obtain a global yearly income of no more than 1000 Euros, regardless of the nature of the income.

– Those who have losses in their Capital Gains of 500 Euros or more.

– Those who exclusively receive one or more of the following Incomes:

a) Salaries or pensions, with the following limits:

1.- As a general rule those who receive up to 22.000 Euros from only one payer.

2.- Those who receive up to 22.000 Euros from more than one payer providing that they also comply with the circumstances below:

– The amount of the income received jointly by the second and further payers does not exceed 1500 Euros.

– That the sole income received is the described in Article 17.2.a of Law 35/2006 and according to the special regulations there has been a retention at source. (those incomes from Social Security pensions, Government, disability, retirement, pension schemes, amongst others).

3.- Those who receive up to 10.000 Euros when any of the following circumstances arise:

– When it proceeds from more than one payer and the addition of the second and further pensions/salaries are together over 1.500 Euros.

– The income has the nature of divorce maintenance.

– The payer is not obliged to retain according to the regulations.

– When the income is subject to a fixed rate of retention (for example; company directors).

b) Net Returns of movable assets and Capital Gains, both subject to retention, with a limit for both of 1.600 Euros.

c) Deemed Income provided from tenancy of second home; returns from movable assets without retentions (treasury debts); and subsidiaries to buy an officially protected house, with the limit of 1.000 Euros.

Apart from the above exclusions, there is an obligation to declare an Income Tax return those tax payers with a right to deductions from:

– Investment in special account for the purchase of a home-

– International Double Taxation.

– Contributions to disabled persons individual assets.

– Pension plans.

– Insured pension plans and others.

– Dependency insurance.

5.- MENU OF SOURCES OF INCOME

a) The sources of Income Taxable at a progressive rate.

b) The sources of Income Taxable at a flat rate of 18%.

GROSS BASE

a) What are the sources of income taxable at a progressive rate?

1) Salaries, pensions, and assimilated sources.

– This source when produced in over one year may have a 40% reduction.

– This source of income admits some deductions as expenses.

2) Returns from property and rents.

3) Interest from loans paid by companies vinculated with the interest received.

4) Returns from business activities.

5) Capital Gains generated where there is no transmission of assets.

6) Presumption of income derived from immovables other than home, excluded land.

7) Tax transparency for returns and profits of partnerships and other assimilated where the tax payer is involved.

8) Tax transparency for non residents in Spain, companies or schemes where the tax payer is vinculated to reduce the tax in Spain.

9) Image rights.

10) Collective Investment Institutions.

b) What are the sources of income taxable at a flat rate of 18%?

1) Capital Gains generated from transmission of assets.

2) Income from Capital (Art. 25).

Those obtained as result of own assets , own shares or own participation in any type of entity:

– Dividends, Assistance Premiums, Profit Sharing.

– Return on assets of any type authorized to participate in an entitys’ profits, with the exception of the issue of some shares.

– Returns derived from the use or benefit of stocks or shares that represent the participation in shareholders’ equity of an entity.

– Any other utility derived from an entity by the condition of partner.

– The distribution of the stock premium of shares or benefits.

2.- Those obtained by the transfer of equities to third parties:

– Returns derived from any instrument/draft of giro or credit.

– Returns derived from accounts in financial institutions.

– Income derived from transactions of temporary transfer of financial assets with a repurchase agreement.

– Income settled by a finance company for the transmission, transfer or transfer of a credit.

3.- Those derived from operations of capitalization and from life/disability insurance contracts and from income derived from savings deposits:

– a) Returns derived from operations of capitalization and from life/disability insurance contracts (except those that are taxed as earned income):

1º. Pure endowment/differ capital: earning = equity – the amount of the paid premiums.

2º. Immediate life annuities.

– Not acquired by inheritance or legacy: the income is the result of applying to each annuity a percentage according to the age of the person who lives on the investment income plus profitability accrued up to the setting up of the income.

– Acquired by inheritance or legacy: the income is, exclusively, the result of applying to each annuity a percentage according to the age of the person who lives on the investment income.

3º. Immediate Temporary annuities:

– Not acquired by inheritance or legacy: the income is the result of applying to each annuity certain percentages plus profitability accrued up to the setting up of the income.

– Acquired by inheritance or legacy: the income is, exclusively, the result of applying to each annuity the percentages of the Income Tax Law.

4º. Income derived from retirement insurances (life) or disability (different to those in Art. 17.2.a) in those that there is no mobilization of provisions of the insurance contract:

– Not acquired by inheritance or legacy: they will form part of the Gross Tax Base (18%) until the moment that they exceed the paid premiums (they must have been signed two years prior to retirement).

– Acquired by inheritance or legacy: they will form part of the Gross Tax Base (18%) when they exceed the current actuarial value of the income at their constitution (they must have been signed two years prior to retirement).

NET BASE

What are the tax reductions?

1. Pension plans and other expenses for pension schemes.

2. Insurance for covering risk of disability.

3. Payments made for schemes in benefit of disabled persons.

4. Payments on behalf of exposed by a judicial decision.

FREE ALLOWANCE REDUCTION

– Generally 5050 Euros.

– For tax payers over 65 years of 5950 Euros.

– For tax payers over 75 years of 6150 Euros.

– Other amounts for disabled and children.

– Further free allowances for families that declare jointly:

– marriage not legally separated 3400 Euros.

– in the case of unmarried couples or legally separated couple 2150 Euros.

TAX RATE

a) General rate.

b) Flat rate at 18%.

NATIONAL TAX DEDUCTIONS

-Investment in habitual home, purchase or improvements.

-Tax deductions in business activities according to the Corporation Tax Act.

-Gifts to charity.

-Income from Ceuta and Melilla.

-Investments in Spanish Historic Heritage.

-Payments in special business savings accounts under the Nueva Empresa Act.

REGIONAL TAX DEDUCTIONS

-Birth or adoption.

-Large families.

-Payments to kindergarten/playschool.

-Disabled tax payers over 65 years of age.

-For relatives of the tax payer that live with him/her that are over 75 years of age, or 65 years of age and disabled.

-Housework of one of the spouses.

-Purchase of first home for tax payers of 35 years of age or under.

-Purchase of home by disabled people.

-Money invested in purchase or improvement of habitual home proceeding from Public help.

-For rents paid for renting the habitual home.

-For payments of renting a home required for work necessities.

-Investments on habitual home for profitability of renewable energy.

-Ecologic purpose gifts.

-Valencian Heritage Gifts.

-Donations to promote the Valencian language.

6.- GENERAL TARIFF

Base Liquidable

Hasta €

Cuota Integra

Resto Base Liquidable

Hasta €

Tipo Aplicable

Porcentaje

0
0
17.707,20
24
17.707,20
4.249,73
15.300
28
33.007,20
8.533,73
20.400
37
53.407,20
16.081,73
En adelante
43

 

THE SPANISH WEALTH TAX HAS BEEN ABOLISHED

In the electoral campaign of April 2008, the Socialist party announced that the Wealth Tax would be abolished. After the elections, the new finance minister formally declared in the media that the year 2008 will be the last time in the history of Spain that the Wealth Tax is paid.

On the 23rd of December 2008 the law to abolish the Wealth Tax was approved. Therefore, in 2009 neither residents or non residents will have to pay the Wealth Tax.

Non resident owners of a property in Spain will now only pay two taxes instead of the three previous taxes, these two taxes are:

– The Local Rates Tax paid to the Town Hall will continue to be paid.

– The presumed income of the property paid to the Spanish Tax Department (in most cases 0,198% of the value of the property) is also to be paid.

The largest part of the taxation charge was the Wealth Tax and the abolishment of this tax means a considerable saving for many people.

In addition, the Wealth Tax was considered an important obstacle for many people who wished to be residents in Spain. With the abolishment of the Wealth Tax it will result more tax efficient for many non residents in Spain to become residents and consequently pay their taxes as residents.

PLANNING IN THE CASE OF FUTURE INCAPACITY

The reality is that we are living longer and that there is a chance that during our latter years of life we will live with our mental faculties diminished. In addition, there is an increasing number of brain injuries and illnesses due to accidents and degenerative diseases brought upon us from earlier years. What to do in this case? This is a question that we should all ask ourselves since it is something that one day will affect us.

We must decide what we should do while we our mental capacity is still perfect. Sometimes, such as in the case of Alzheimer sufferers, the patient is often unwilling to accept that he/she will lose their mental capacity. They remain confident that even with losses in their mental capacity they will still be able to govern themselves. However, this disease and other evolving diseases that progress rapidly, before the patient realises it they are in such a deteriorated mental state that they are not able to engage in any contract, Will or Power of Attorney: this becomes the time when others have to make decisions for him/her since he/she failed to do so when they were able to.

Ultimately, the moment to start deciding what to do when one no longer has the a good mental capacity is not when the first symptoms of the degenerative disease arise, these decisions should be made sooner, when one is in good health.

What tools does the Law offer me to protect me when I am incapacitated?

Here we will explain some legal instruments that can be useful to make a more bearable and dignified life for the incapacitated.

WILL

A Will is a document in which in anticipation of future death, one declares who will be heir to the assets of the testator. It is a document which comes into effect when the testator dies; in many cases the Will is known after several months following the death of the testator.

The testator CANNOT change their Will when they have lost their mental capacity, even when they have not been declared mentally incapacitated by a judge. If they had signed a Will in that condition it would be considered to be void.

In many instances, a Will is made at an early age without even thinking of the possibility that towards the end of our lives we could live a number of years with our mental capacity diminished.

In anticipating possible future incapacity, we would appoint executors of the estate to deprive of the inheritance those that did not take care of the testator. Often the testator is very limited due to the existing legitimates set by the law in favour of their children and therefore other instruments better suited in anticipation of incapacity should be thought of.

TESTAMENTO VITAL (LIVING WILL)

It is not a Will for their assets like the previous one, it is a document in which a person in anticipation of an eventual situation of becoming incapacitated manifests their wishes regarding their medical treatment and other aspects such as organ donation and maintaining their life through artificial means. They may also designate a person to interpret the document they are signing.

This document, which comes into effect when the incapacitated person cannot make their own decisions, helps the medical professionals and their families to make difficult decisions in critical moments, and rejects treatments that the sick person does not wish to receive. This document can help to avoid discussions in respect to medical treatment.

POWER OF ATTORNEY

A Power of Attorney granted to a person of confidence is a very important document to prevent future practical difficulties.

The Power of Attorney can be granted with the faculties that the grantor wishes, it could be a general Power of Attorney for all matters. The important aspect is that the Power of Attorney be granted with the limitations that the grantor wishes, these can also be only temporary.

One should also take into account that the Power of Attorney can only be granted when the grantor has sufficient mental capacity to do so. Once the grantor is mentally incapable they cannot grant one. At the time of granting the Power of Attorney they may state that the Power of Attorney should maintain its effects even if at a later date the grantor becomes mentally incapacitated (it is not necessary that a judge declares the person mentally incapacitated, it is sufficient when it is apparent). If the Power of Attorney is not drawn up with the appropriate attention this can be considered void when the grantor becomes incapacitated.

Another option is granting a Power of Attorney that only comes into effect in the case that the grantor becomes incapacitated. This is similar but not the same to the ENDURING POWER OF ATTORNEY.

There are many people that by not preventing their future situation they find themselves incapacitated to even handle the payment of the bills of a worthy nursing home where they are to spend the last years of their lives. It is not necessary that the Power of Attorney be granted in favour of a person of confidence or a friend, it can also be granted to an acquaintance or a professional.

INSTRUCTIONS IN THE CASE OF BEING DECLARED MENTALLY INCAPACITATED

When a person becomes mentally incapacitated they lose their rights to handle business matters and sign contracts. In order to protect the incapacitated person, the judge declares the state of incapacitation and names a tutor to represent him/her.

The affected person may also establish the instructions, prior to having lost their mental capacity, for when a judge designates a guardianship; for example who the guardian will be, if there should be a person or an institution that should oversee and control the guardian, if property should be sold to ensure a comfortable life at the time of becoming incapacitated, etc.

SETTING UP A PROVISION OF FUNDS IN THE EVENT OF FUTURE INCAPACITY

The setting up of a special fund to attend the needs of an incapacitated person can be an excellent instrument to alleviate and better the quality of life of those incapacitated to a certain degree, independently of whether they have been declared so by a judge; the persons that would benefit from this fund are those with a mental incapacity of 33% or more, or by a physical or sensory disability of 65% or more, both must be accredited by a regulated certificate.

There are very important fiscal benefits in constituting this fund or a specially protected wealth, which on the other hand any other fund would not have the rights to. The assets may be paid in by the incapacitated person or by third parties, family members or strangers.

The wealth will be managed according to the instructions of the constituents and within the margins of the law. To sell property a judicial authorisation is required like in the cases of the guardianship, while it is permitted that the judge softens this regime when they consider it to be appropriate when the circumstances in the specific case are convenient and in all cases without it being necessary to proceed to public auction.

RETURN OF MONEY PAID BY NON RESIDENT VENDORS WHO PAID 35% CAPITAL GAINS TAX TO THE TAX DEPARTMENT

You may be aware from English newspapers that a Court of Justice in Spain has declared void the payment by non residents of the Capital Gains tax rate of 35%. The Court has accepted that a 15% tax rate is applicable to both residents and non residents.

As a result of this all those involved have a considerable credit that the Tax Department is obliged to return plus interests.

This decision by the Courts was based upon the European Court that prohibits discrimination between European citizens. For this reason the Spanish Government modified the law in December 2006 and from the 1st of January 2007 Capital Gains Tax for both residents and non residents was taxed at an equal rate of 18%.

In principle, the ordinary temporal limit to make the revision of the tax is applicable. This means that those who sold their property 4 years and 4 months ago are eligible to request for this return of money (20% of the gains). This period will be accounted from the date of the petition of the revision of the tax. In other words, those who sold their property from November 2004, 2005 and 2006 may request the return of the money. The rule of 4 years and 4 months is not applicable from today, it is applicable from the day that the non resident requests the return of the money, therefore this is an urgent matter to attend to (for instance, if a vendor requests the revision of the tax on the 1st of May 2009, the sale should have taken place on or after the 1st of January 2005). Notwithstanding, it is also possible in a future judgment that the Court declares contrary to European Law the national restriction of 4 years and 4 months.

PROPOSAL ON VAT AND RETURN OF CAPITAL TAX

The Spanish Government has approved a proposal in the law (it is likely that the Parliament will approve it) that will increase the taxes in Spain. The 400 Euro deduction applied in the Income tax will be taken away and the tax on return of capital will increase between one and three points.

At the present moment the standard rate of VAT is 21% and the reduced one is 10%

SIMPLIFICATION OF DOCUMENTATION FOR BINDING BUSINESSES

The Spanish Government has approved Royal Decree number 6/2010 which will come into effect from the 14th of April 2010.

This rule simplifies the documentation required for binding business between companies and its directors, shareholders, family, etc.

The new regime will be valid for the tax years after the 19th of February 2009. Therefore, the new law is applicable to the 2009 tax year (to be taxed in 2010).

According to the new law there is no legal duty for keeping the documents proving market price for companies with returns lower than 8.000.000 € provided that the total binding business of the company with all binding persons/companies is not higher than 100.000 € according to the parameters of the market value.

Nevertheless, there is a duty to keep documents proving the market value of linked business when the business is carried out with binding people/companies with residence in an offshore territory (according to the list of the Spanish Tax Department) except:

A) When their residence is in a State within the European Union and

B) The company proves that such business has valid economical grounds and the people/company linked in the business are people/companies that ordinarily carry out business.

Notwithstanding, although the company may not have a duty to carry out the special protocols there is a duty to enter the business accounts in accordance with the market value. Non fulfilment of this duty will entail a fine which under some circumstances could be very high.

This Governmental decision proves that the Spanish Government is totally beleaguered by the serious economical crisis beating Spain and is clueless as to which measures should be approved to get out or improve the economical framework. The protocols of binding businesses were brought about 2 years ago and have caused unnecessary expenses and worries to thousands of companies and have been an enormous waste of time for companies and advisors.