In Spain there are four levels at which ISD (inheritance tax) is paid: Level 1 = Children and grandchildren (including adopted) under the age of 21 Level 2 = Children and grandchildren over the age of 21, spouses and parents Level 3 = Other relatives such as brothers and sisters, in-laws, cousins, aunts and uncles Level 4 = Everyone else including unmarried partners If you are not married, your partner is relegated to the ‘any other person’ level of inheritance tax. Being Spain, it does vary for residents between autonomous regions. So, for example this rule applies in Valencia but not in Murcia. It is certainly worth establishing what rules apply to you as it affects both the … [Read more...] about An important decision – making your will
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Avoiding double taxation in Spain
At this point you are no longer a non-resident property owner paying imputed income tax but a Spanish resident making an annual income tax declaration in May/ June. The taxes paid in the current year are for your income the previous year. So, for example, if you make a declaration in May/June 2012 it will cover your income for the tax year January 2011 to December 2011. If you were previously living in the UK there is an exception – employment tax is currently deducted in the UK. The tax brackets in Spain will change next year but are currently 24%, 28%, 37% and up to 43% for incomes over €52,360. If you are a UK tax payer and are trying to do the right thing and pay your taxes in Spain … [Read more...] about Avoiding double taxation in Spain
Proving you’re a fiscal resident in Spain
Civil residency (the green residency certificate) is, in fact, pretty useless when it comes to financial matters. For example, when there’s capital gains or inheritance tax due. If you can’t prove you are a fiscal resident then you can end up paying non-resident taxes and there are big differences between the two. For example, if you are a married couple with a house valued at €94,000 and have both names on the deed when one of you dies. If the remaining spouse can’t prove fiscal residency then they will be charged €2,375 in inheritance tax. If they can prove fiscal residency then the tax is zero. To be exempt from inheritance tax as a fiscal resident you have to have lived in Spain … [Read more...] about Proving you’re a fiscal resident in Spain
Renewing a UK passport in Spain
There are four ways in which you can renew your passport: • Send the form off yourself from Spain • Go to Madrid • Return to the UK to obtain your new passport • Or use a service like ‘Check and Send’ Completing the form If you choose to process your application yourself you need to allocate plenty of time and read through the instructions very carefully. The passport photo is a particular hurdle to negotiate. The guidelines for this have become tighter and it must: • Have a cream or pale grey background • A neutral expression – no smiling! • Be printed on high quality photographic paper • Have a clear view of your face – no stray hairs You need to obtain a counter-signatory … [Read more...] about Renewing a UK passport in Spain
Calculating complimentary tax on Spanish property
Of course, more research might have unearthed the possibility of this tax. But many purchasers expect the information to be given to them. Unfortunately, those keen to sell property are not always as keen to inform you of the taxes you can expect to pay. Ironically, this lack of transparency is one of the reasons so many possible purchasers are anxious about buying in the first place. However, complimentary tax need not be a skeleton in the closet, provided you prepare for it. This tax, levied on purchases up to five years after the purchase date, consists of 7% of the difference between what you declared you paid and what the Tax Authority claim it is worth. Plus interest, of course. It … [Read more...] about Calculating complimentary tax on Spanish property
Wave of complimentary tax hits home buyers
What is complimentary tax? During the property boom in Spain purchasers and sellers sometimes came to an agreement to pay some of the purchase price ‘unofficially.’ This meant that the amount declared was below what had actually been paid. The idea was that by doing this purchaser and seller could avoid higher capital gains tax and Spanish transfer tax payments. The Tax Authority wised up to this and as a result began to check the amount the property had been sold at against their own valuation. Complimentary tax represents the difference between what tax they considered should have been paid and what actually was. Unfortunately the drop in the market value of most property sold today … [Read more...] about Wave of complimentary tax hits home buyers
Electricity bills back to normal
Many people rely on electric heating. This has caused some concern over the past couple of years as costs have escalated and there have been some confusing changes to charging policy. However, there has recently been some good news as far as your bills are concerned. Instead of every month, there will be a welcome return to two-monthly billing and only after a metre reading has taken place. The alternating meter/estimate bills have been something of a nightmare for people trying to budget. One month you can be charged a nominal figure of 7€ to receive a bill the month after of 100€! Hardly helpful when you’re trying to keep your bank account in the black. However, if you actually … [Read more...] about Electricity bills back to normal
Tax hikes to hit residents
From the most recent Agencia Tributaria bulletins we have been told that 85% of that €6.2 billion tax bill is to come from resident income tax. This affects the employed, self-employed, people with savings and retired people receiving income from outside of Spain such as pensions. It will be administered as a complimentary income tax in addition to the current 24% + income tax that residents already pay. As you might have guessed this tax is on a sliding scale according to how much your income is: Tax range Complimentary income tax €0 – €17.707 0.75% €17.707 – €33.007 2% €33.007 – €53.407 3% €53.407 – €120,000 4% The increases … [Read more...] about Tax hikes to hit residents
A letter from the Tax Authority
The imputed income tax is a tax on property payable by non-residents on the basis that if they wished they could receive rental income from their property. Spanish residents have to pay it too on any second property they own in Spain. For years Spanish property owners were largely unaware of the need to pay this tax. They were often not told about it at the time of purchase and without a similar tax in the UK they remained in luxurious ignorance. Until now. The Spanish Tax system tends to work according to the assumption that everyone knows what they should pay. Whereas in the UK you would expect to get a reminder of some kind for an unpaid bill, here it can go undetected for years until … [Read more...] about A letter from the Tax Authority