consejo de ministros

Update – End Of The Golden Visa For Property Purchases in Spain

by Buying PropertyImmigrationLatestLegalVisas

UPDATE

In November Congress approved a bill that included text to scrap the ‘Golden Visa’ and end this residency scheme as soon as January 2025. On December 2nd, the Senate vetoed the bill sending it back to Congress delaying the ending of the Golden Visa.  The legislation has now been passed and will come into effect 3rd April 2025.

It will be possible to apply for a ‘Golden Visa up to that date, and anyone who has been granted residency under the scheme will be able to continue renewing in the future.

Background to the End of the Spain’s Golden Visa

Just over one year after Portugal announced that its ‘Golden Visa’ for property investors would be coming to an end, Spain has signaled the end of the ‘Golden Visa‘ for property purchases in Spain.

On Monday 8th April 2024, President Pedro Sanchez announced, “We are going to start the procedure to eliminate the granting of the so-called golden visa , which allows access to the residence regime when more than half a million euros are invested in real estate. We are going to take the necessary measures to guarantee that housing is a right and not a mere speculative business,”

The residency by property investment scheme, offers a 3 year residency permit to foreigners from third countries who purchase a property for €500,000 or more.

The scheme, introduced in 2013 in the fallout of the housing market crash and financial crisis, was seen as a way to invigorate the real estate sector by attracting investment from foreigners, but has not been without criticism.  Not least for the lightweight background checks, and being viewed by other EU nations as a back door into the EU for individuals who would otherwise not gain access.

At home, the scrutiny is more political, with those averse claiming that it distorts, and has negative socio-economic affects.  It is this which Sanchez seems to indicate as the main driver, as he stated that nearly all approved ‘Golden Visas’ and residency permits for property investments were located in regional capitals such as Barcelona, Madrid, Malaga and Valencia, ‘cities where the housing market is stressed’.

He added “We do not want a speculative investment model with housing”, further commenting on the aim of his main policy to ‘guarantee access to affordable housing . . . and assure that no citizen has to spend more than 30% of their income towards having a suitable, quality home’.

In 2023, foreign buyers bought 15% of all homes sold in Spain with British buyers continuing to top the board as the nationality with the largest numbers buyers.

When Ireland, Portugal and Greece got rid of their ‘Golden Visa’ schemes, lack of affordable rental housing stock in its major cities was also cited as a main reason.

Others, including real estate experts have a different view and warn that ending the scheme could be harmful to the Spanish economy as the country will lose foreign investment into the property sector.

Whatever view taken, one thing now seems certain, the countdown has started and it is just a matter of time before Spain’s ‘Golden Visa’ for property investment comes to an end.

Until then, it remains an option for those who have €500k to invest in a property, and anyone looking to do so, needs to act now before it’s too late.

This article references information published by El Pais

Image credit: Sala del Consejo de Ministros, Edificio del Consejo de Ministros Photographs by Borja Puig de la Bellacasa via Wikimedia Commons

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Overseas Assets Declaration

by LegalPersonal Tax Returns

Spain has legal requirement for its residents to make an overseas assets declaration, notifying the tax authorities of worldwide assets that they own or control.

Until relatively recently, failure to make an overseas assets declaration, or submission of an inaccurate one, could result in extremely costly penalties.  Unreported overseas assets that were later discovered by the authorities, would be treated as undeclared income on which tax should have been paid.

The legislation, (LEY 7/2012, de 29 octubre, de prevención y lucha contra el fraude fiscal), was passed in Spain in 2012.  It was aimed at deliberate high level tax evaders, and the fines and penalties could add up to more than 150% of the undeclared or incorrectly declared asset value.

In January 2022, the European Court of Justice passed it’s ruling agreeing with the European Commission, that the penalties for failing to properly disclose overseas assets are excessive and contrary to EU statutes and principles.

The three judges ruled that the excessive sanctions for incorrect or late compliance are disproportionate and discriminatory.  Adding that the penalties may deter businesses and individuals from investing or moving across borders in the EU single market, thus interfering in key founding principles of the EU, the four freedoms.

As the ruling was binding, Spain had to take steps to comply.   Where previously the late filing penalty was the greater of a minimum of €10,000, or €5,000 per undeclared asset, this is now a fee of €150 or €20 per asset.   The fine for incorrect or missing information, is a minimum of €300 and will vary depending on the deemed infraction.

The tax office can now only review or investigate overseas assets declarations going back 4 years, and if you had assets abroad, and you can show that they originated in years outside this, you cannot be taxed or penalized for undeclared income.

The EU agree with the principle of the law, so putting aside the EU ruling regarding penalties and sanctions, the declaration of overseas assets continues to be mandatory, for all residents in Spain.

Making an Overseas Assets Declaration

Modelo 720

An overseas assets declaration is made by completing a form known as ‘Modelo 720‘. The deadline for submitting the form is the 31st of March, and generally speaking the declaration only needs to be made once, as subsequent declarations are only necessary if assets have been acquired, or disposed of, or if existing declared assets have increased in value above a given amount.

Modelo 721

In 2023 new regulations were passed to require the declaration of crypto currencies held on overseas exchanges.  The Royal Decree 249/2023, de 4 april, and Orden HFP/886/2023, de 26 Julio, which approved the “Informative declaration on virtual currencies located abroad”.

The declaration is done by completing the form Modelo 721.  The declaration requirement began in 2024 in reference to the year 2023.

Whilst this overseas assets reporting requirement might seem intrusive, it is in reality only the result of what was a small move by the authorities, in their steps to counter the country’s rampant tax evasion.

What is Modelo 720?

by FinancialLegal

Modelo 720 is the form which has to be completed by Spanish residents to declare overseas assets to the Tax Authorities.  The requirement applies to anyone who lives in Spain, who owns, or is beneficiary to overseas assets worth €50,000 or more.

The Modelo 720 overseas assets reporting requirement, was introduced to clamp down on tax fraud being committed by Spanish residents who have acquired, or intend to acquire, assets, and or hide wealth outside of Spain in order to evade paying tax.  You can read more about this in our article – Overseas Assets Declaration.

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Non Residents Property Tax

by LegalTax

Aside from Local (IBI), Capital Gains, Wealth and Inheritance Taxes, non residents must pay tax on any income they receive that arises in Spain.  Income tax for non-residents is charged at a fixed rate of 19% if you are a resident in an EU or EEA country  For non-residents from the rest of the world, the rate is 24%.  This includes a non residents property tax.

Non Residents Property Tax on No Income

If you own a property in Spain and earn rental income from it, then this has to be declared.  What some non-resident owners of property in Spain are not aware of, is that they are also required to pay tax, regardless of whether the property is let out or not!

This tax is often referred to as an imputed income tax. Spanish tax legislation for some reason assumes that a non-resident owner derives some sort of benefit from owning property and provides a system to tax it.

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Holiday Rental Regulation in Andalucia

by LegalLetting & Renting

Until fairly recently, private holiday rental regulation in Andalucia has been relatively uncontrolled.

For holiday property owners in Andalucia, this all changed at the beginning of 2016, when the regional government, Junta de Andalucia, brought in a host of regulations to conform with changes in national legislation.

Properties under Holiday Rental Regulation in Andalucia

Holiday rental regulation in Andalucia applies to:

  • Individual privately owned properties where the complete dwelling is let for holiday purposes.
  • Rooms in individually privately owned properties, in which the owner resides, e.g. bed & breakfast, Airbnb.

The maximum capacity, i.e. number of beds/people that can stay in the accommodation is limited by the occupation license, subject to overall maximum of 15 beds for complete dwellings and for bed & breakfast type arrangements – 6 beds, with no more than 4 beds in any one room.

Owners of holiday rental properties that fall into these categories, firstly need to list their property with the Registry of Tourism of Andalusia (RTA), in order to meet the first part of the regulatory requirements; secondly, meet the requirements within a year. During this time owners will not be allowed to host tourists/rent accommodation until fully compliant.

The Requirements of Holiday Rental Regulation in Andalucia

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Inheritance Tax Allowance in Andalucia

by LegalTaxWills & Inheritance

As of January 1st 2018, significant changes to the inheritance tax allowance in Andalucia, came into effect. These changes affect both expats who reside in the region, and non-residents who own assets such as holiday homes here.

The generous move by the regional Government of Andalucia raises the inheritance tax allowance to 1 million euros, where the heirs receiving the assets of a deceased direct family member, are classified as falling into Kinships Groups I and II, i.e. spouses, children, grandchildren and parents.  For this group of beneficiaries, there will be no inheritance tax (Impuesto sobre Sucesiones y Donaciones), when the sum of the assets received does not exceed this new 1 million threshold.

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Inheritance Law

by FinancialLegalWills & Inheritance

Of all the issues that we provide information about on this site, inheritance law in Spain, is one of the most complex and we strongly advise anyone concerned about their affairs relating to this area to seek professional advice.

In the European Union alone, every member state has different laws in relation to death, inheritance and inheritance tax. They are usually in constant change and are complex. To have to encounter and work with them at the moment of loss of a family member or friend is extremely stressful and you may get lost in a quagmire if you try to do it on your own.

Similarly in making a Will for your self, if you have assets in Spain as well as your country of your nationality, matters can get very complicated.

Some basic information –

Before 2012, inheritance law in Spain stipulated that, in the case of a foreigner deceased, the law to regulate her or his inheritance would be the law of their nationality.

So, in theory, the position was relatively simple: UK inheritance law was used to regulate the inheritance from UK nationals who die owning property in Spain. In the same way, Swiss law is called to regulate the inheritance from a Swiss national who dies owning property in Spain etc.

However there were contradictions in this system, which created confusion and conflicts. For example, UK inheritance law provides that the disposal of immovable assets (land and buildings, household and personal goods) abroad is governed by the law of the country where the property is situated and the disposal in inheritance of movable assets (bank accounts, life insurances, cars, boats/yachts, shares, bonds and other investments), is governed by the law from country of the last domicile.

French law confirms the inheritance law of the country where the deceased had the last domicile or residence. Similarly, Denmark Belgium, Switzerland, Finland, Germany, Sweden, Norway.

Why is it important to identify which inheritance law is applied to the estate?

Because there are critical differences between the Spanish and laws from other countries regarding wills and inheritance. The most important difference is that the Spanish have the figure of the “Compulsory” or “Obligatory Heirs” (Herederos Forzosos), which means that the testator cannot dispose from the full inheritance freely, and in whatever circumstances, he must leave the 66% of his inheritance for determinate persons called Obligatory Heirs (mainly descendants and spouses).

This system of “Obligatory Heirs” is common in countries like France, Belgium, Switzerland, Germany, Norway, Denmark, Sweden, Iceland, Norway, and Russia, in which the testator has the obligation to leave a percentage of their assets to determinate inheritors (usually surviving spouses and children). But, this system is different in the UK and USA.

In this way, for example, UK Inheritance law allows the free disposal of assets, transferring with total freedom the inheritance at the entire wish of the person.  The testator has total freedom to leave whatever he/she wishes, to whomever he/she wishes.

With this system, it could happen that a UK citizen, with two sons owning a property in Spain, can make a Spanish Will leaving their property in Spain to their surviving spouse, and that this last Will cannot be executed because, if Spanish laws are applied, then 50% of that property should be transferred to the spouse, for the other 50%:

  • One-third is divided between surviving children in equal shares.
  • One-third is reserved for surviving children but can be distributed equally or unequally according to instructions in a will. (The surviving spouse retains a ‘life interest’ (usufruct) in this part of the estate and the children do not inherit until the spouse dies.
  • One-third can be disposed of freely in a will.

Current legislation effective since August 2015 offers 2 options:

Option 1: You decide the law which will govern your inheritance.

So, if you are French, British, German, Norwegian, etc., you can decide on your Will or Probate, which the law you want to be applied on your passing.

Option 2: Inheritance by country of permanent residence.

If you have not stipulated in your Will, anything in relation to the law that you wished to regulate your inheritance, then, Option 2 will be applied and defined as country in which you had you residence during the last 5 years.

In cases in which you have been living in different places, and/or the permanent residence is not clear, then, the law will be the one from the country in which you had the strongest connection during all your life – open to subjective interpretation of course.

[creativ_alertbox icon=”” colour=”blue” custom_colour=””]Need to speak to a professional about Inheritance Tax in Spain? Call us to arrange a free consultation with a Financial and Tax Specialist. (+34) 951 77 55 44 / (+44) 033 000 10 777[/creativ_alertbox]

Recent Change to Inheritance Tax in Andalucia

From the beginning of 2018 the threshold for Inheritance Tax in Andalucia has been set at 1m euros. This is a massive increase on the previous limit, and brings Andalucia in line with the other autonomous regions of Spain. This significant change, opens up estate planning opportunities for individuals who have up until now deliberately kept limited assets in Spain as part of their Inheritance Tax planning strategy.

Read more about this change in our article, Inheritance Tax Threshold Increase in Andalucia