Saturday, January 30, 2010

Raising the Spanish retirement age isn't enough

Spain is proposing to fall into line with other European countries like the UK and Germany and gradually raise the retirement age (more accurately the age at which the state pension becomes payable) from 65 to 67 by 2025.

The arguments for this proposal are practically irrefutable as far as I can see and, without rehashing them all, one only has to look at the ageing profile of the Spanish population, the state of the government finances and the dramatic and remorseless rises being recorded in life expectancy, to see that this move won't be the last of its kind.

The Guardian reported the details of the proposal which still has to achieve parliamentary approval here:
Apparently the unions are against the move. No great surprise there but what was surprising was that I found myself nodding in agreement as I read the union bosses trying to justify their opposition. One said: "The government is getting ahead of itself by concentrating on cutting pension spending and not looking at policies to boost revenues." Well I can't agree with the first part of that comment. The figures show there will be double the number of over-65s by the middle of the century and the government is already struggling to pay its bills (latest numbers showed public sector deficit at 11%). But I was sympathetic to the second comment - no amount of tweaking benefits and whittling away pension rights will resolve the problem on its own. We have to have a plan that will raise the amount of money available to pay pensions and that needs a fully-functioning, growing, efficient economy. Sadly with 44% of Spanish under - 25s out of work it looks very unlikely that a comfortable retirement for all will be affordable whatever policies are announced.

PMN52ZGY794T Form 210

Sunday, January 24, 2010

Avoiding income tax in Spain - part 3

Keeping the tax man's hands off your money is a preoccupation almost as old as money itself (I am sure taxes were proposed soon after money's invention). I have written before about avoiding income tax in Spain both in general terms - part 1- and by going offshore - part 2. Today I want to touch upon two important and substantial tax savings available to us foreign residents of Spain. They are both entirely above board and sound very enticing but are not quite as attractive as they seem when you dig a little deeper.

Tax saving no 1: Application to be taxed as a non-resident ("Beckham's Law")

As I am sure all you well-informed readers know, a Spanish resident tax payer has to declare all their worldwide income. But there is an exception for foreigners newly tax resident in Spain: they can apply to be treated as non-residents for tax purposes i.e. only have to declare Spanish income and once more at the low rate of 24% (the top rate for residents is 43%). This is what David Beckham did when playing for Madrid, hence the nickname for the law. If your application is successful then you can take advantage of this attractive option for 5 years. There are conditions (see this good explanation here) but it is great on the face of it; certainly foreign footballers have benefited greatly.

Reservations: Two really. One is that you have to read the small print in the conditions which will make a lot of people ineligible, particularly the stipulation that you have to have moved to Spain to begin an employment contract with a Spanish entity and perform most of your duties in Spain. Secondly non-residents don't get the tax allowances and exemptions that residents get so although the rate is lower you may lose out in total because of the lost allowances (depends how much you earn and what sort of allowances you are entitled to).

Tax saving no 2. : €60.000 overseas earnings tax free

Another eye-catching tax allowance which applies if you are resident in Spain but go abroad to work e.g. doing contracts back in the UK or elsewhere in Europe. The problem here is very fundamental: you need to have paid the tax in the country where you worked so it isn't tax free as such although could be very useful if you often work in a country with low income taxes.

Conclusion: depending on your circumstances there are often allowances and benefits available so it's worth getting a tax adviser to look at your Spanish tax position when your tax situation changes. On that self-serving note I will leave you with a link to Advoco's tax services page:

Non resident tax payers might also be interested in a recent article of mine called "Making sense of Spanish tax form 210"

Sunday, January 17, 2010

Press release marketing is open to everybody

When I first started promoting my business and associated website ( I was a bit sceptical when I read the advice I am about to give you if you are doing the same: issue a press release. Not just one, but regular press releases. If you have never considered this promotional avenue, your reaction could be similar to my initial one: press releases are for big companies, movie stars, politicians and the like. Who do you think I am, Max Clifford?

Well things have changed. Press release marketing has been democratized and there are literally thousands of channels available to anyone to be able to distribute press releases online. Any business and/or website could and should benefit from issuing press releases, although you should read my caveats before you jump in and do so.

First the advantages which really fall into three categories:

1. Publicity. Obvious really but a decent release published in the right places can be an invaluable source of publicity as the release gets read directly plus indirectly as it gets picked up by online news aggregators like Google News and Topix, blogs, social network sites etc Particularly valuable if you can get exposure to your release on sites specific to your industry or niche. A good release can confer some credibility on your small business or site.

2. Media exposure. Most press releases don't get any media exposure i.e. get picked up and used as news by real media professionals, but they could if they are (a) interesting and newsworthy, perhaps in a particular niche (b) released on the right PR distribution sites (ones that pros use like PRWeb but note these are more expensive).

3. SEO benefits. For most small sites and businesses this is probably the best reason to use press releases. They rank very well in search results and quite quickly (Google regularly crawls PR sites for fresh material). They can give you valuable links to boost your own site's rankings although this varies from site to site as some PR sites are more prestigious than others and some don't allow you to put links in their free release options. Best of all if your release gets picked up by other sites there is a very good chance that you will pick up links from there as well. Adding press releases to your own site, perhaps in a "Press Room" area can also make the site more interesting and professional-looking as well as encourage Google to re-index regularly.


You have got to do it right or you end up looking unprofessional and gaining few of these benefits. The release itself should be well-written, conform to PR norms (and those of the site you are distributing it on), genuinely interesting and not a sales pitch. This last point is vital - you risk coming over like a crass clown if you put out a press release which is merely a thinly veiled plug or pitch. When you read your release back to yourself it should sound like a genuine bit of news that other people might genuinely like to hear about. Don't overload it with links to your site, maybe just one but do put links to other articles and authoritative sources that add credibility and explain the background to the item.

I think I got the balance right with this one: (based on an article I had written about the Spanish property market which also achieved extra exposure through the release)

Also not all PR sites are created equal. Of the free ones I have found PressReleasePoint and PRLog to be good but try a few out.

Another tip is to read other people's releases and articles explaining how to write an effective release before you try it.

Useful information and guidance if you are new to running and promoting a website:

Tuesday, January 12, 2010

2010 Spanish property market outlook

New Year - fresh dawn of optimism on the Spanish property front? I have posted on Spanish property prices a couple of times mainly to update readers on my downbeat August article "Ten Reasons Why Spanish Property Prices Will Stay Depressed". The ten reasons basically hold but I was hoping for some reasons for cheer by now. Perhaps some sign of prices stabilising with Euro interest rates set to remain low and economic recovery elsewhere in Europe under way.

Instead the New Year has bought bad news with a depressing ring of familiarity to it. First up we have news that several more British owned properties in Almeria are to be demolished as they are illegal builds. The attendant publicity in The Telegraph, Sun, Mail etc could hardly be a worse start to 2010 for those charged with persuading Brits that buying Spanish property is safe. "Happy New Year - We're Going to Bulldoze your homes" was the Mail headline.

Secondly came headlines about a tidal wave of repossessions and banks dumping their property portfolios onto the market as a result of changes to accounting rules. The respected website spanishpropertyinsight has the full story:

Where does this leave us? With many of my 10 reasons why property prices will remain depressed still in place (particularly the surplus of properties on the market and sterling weakness) 2010 doesn't look to clever. BBVA said in December they expected a further 12% fall in 2010 - worse than the 9% seen in 2009. Let's hope things are better than that.

Sunday, January 10, 2010

What Spanish pigs can teach us about economics

The contribution of the humble porker to economic theory has been pretty negligible up until now but, after reading about the crisis in the Iberian ham industry, I was struck by how perfectly the story illustrated a crucial but little-appreciated piece of economic theory that goes a long way to explaining the crisis.

First the problem piggies. Iberian pigs are renowned for the quality of their meat and dry-cured hams from acorn-fed free range herds are a prized delicacy in Spain and among gourmets around the world. But as the FT reported recently ("Austerity takes a slice out of Spanish ham sales") demand has plummeted in the recession and taken prices of some grades of ham 50% lower. Priced at up to 60€ a kilo, jamon serrano is a luxury that some people, particularly companies who used to buy whole legs for corporate hampers, have dropped in these straitened times.

At this point you might be thinking, "but what insight does that give us into economics?" The recession has crashed demand for all sorts of products (my last post was about the travails of the Spanish car industry and Spain's scrappage scheme); surely falling demand can be blamed on the recession but doesn't explain the crisis itself. Time to introduce the theory and then see if we can tie it back to the pigs.

Some economists point to the "intertemporal misallocation" explanation of the business cycle as a good way to understand and view the crash. Many have argued that interest rates around the world were held too low, for too long in the years before the crash, causing a boom and then the inevitable bust complete with debt hangover. But the intertemporal explanation takes this view a step further and explains the real danger in holding down interest rates.

Generally we see interest rate cuts as a "good thing" as they "stimulate" the economy. Low interest rates encourage more consumption and make it cheaper to borrow to invest to meet the increased demand, thus setting a up a virtuous cycle of economic activity. But there is a flaw in this logic and it relates to the job interest rates do allocating an economy's resources over time: they make sure that current consumption does not crowd out investment for the future and that, when the future increase in production arrives, there are consumers willing and able to buy it because they have savings. If rates are too low then the signals get distorted: people save too little while companies borrow and invest too much. The economy hots up for a while but the contradiction soon reveals itself. Companies have new production/supply coming on stream just at the point where their customers are borrowing and consuming less to enable debts to be repaid. Back to the pigs.

The collapse in demand for hams was only part of the story. The industry association was quoted as saying: "With overheating fuelled by easy credit, and permissive regulations protecting all types of pork meat, a lot of businessmen, including many property developers, went into the ham business and started mass production." The supply of top quality ham rose 33% in the ten years to 2009 and the lower grade production increased by over 400%. But does Spain really need so much ham? Did the country save enough to be able to afford the increased production? Obviously the answer is no on both scores: Spain was the victim of low interest rates which sent out the wrong signals to producers and consumers alike. The same story was repeated across all sectors most tellingly in the case of property. So next time you see a boarded up shop, empty car showroom or unfinished apartment block think back to a herd of pigs munching acorns and what they can teach us - low interest rates can hurt just as much as high interest rates.

Please contact me if you need a Spanish accountant or tax adviser for your New Year "to do list". My personal email is or see the website Happy New Year

Monday, January 4, 2010

Spanish car sales worst for 15 years

I read with interest a recent article in the Spanish press about new car sales for 2009 being 18% below 2008 levels, dipping below 1m for the first time since 1995:

I was interested for two reasons. Firstly this came despite a government scheme called Plan 2000E which is the Spanish equivalent of the UK's scrappage scheme offering up to 2,000€ subsidies to private new car buyers if certain conditions are met. All the details are on the Advoco website:

It was introduced in May of this year to save the car industry and 260,000 transactions have taken place under the scheme. Without it one wonders what kind of year the car industry would have had. The plan has been extended as it has in the UK. The trouble with these kind of schemes (apart from the fact that they often favour imported smaller cars) is that the effect is to bring forward demand giving a short term boost but potentially leaving a hole in demand when the scheme ends. There is also concern that the scheme will come to the end just at the point when VAT is due to rise on cars (and everything else) halfway through 2010 by 2% thus hitting a fragile sector with a double whammy.

The second reason for interest was that I know someone shopping for a new car at the moment. They have been doing the rounds of car showrooms looking for a good deal on a fairly high end vehicle. They told me they were surprised how little attention they got. Having heard about the recession hitting new car sales they fully expected keen salesmen to be flocking round them offering hot deals but apparently they were mostly met by the usual apathy - a struggle to get anyone to talk to them never mind a test drive. I may be reading too much into the story but perhaps Spain needs to move on from talking about the crisis and actually showing some urgency in working its way out of it. With Spanish property prices still in the mire and the rest of the economy in the doldrums we need Spanish business to show a bit more drive and willingness to become more customer friendly.

OctoFinder Blog and ping Spanish Insight - Blogged