Thursday, November 24, 2011

Spain tax form 210 deadline nears

Where did 2011 go? It was just a few weeks ago since I was enjoying a late Autumn swim in the Med and now we are hurtling towards Christmas. One consequence is that end of year deadline for Spanish non resident tax declarations is also approaching rapidly. This is the tax that all Spanish holiday home owners are supposed to pay.

I have written about this Spanish tax, often called modelo or form 210 tax after the forms you have to submit, many times so I will link to rather than bore you with the details: Spanish tax form 210

You have until 31.12.11 to get the form in. We offer a service where we do it for the taxpayer but this is only available up to the end of November.

I have had a few clients recently who have received letters from the Agencia Tributaria (Spanish tax office) asking to see tax returns going back to 2007 so they do check up. They have access to both local tax records and utility company computer systems so they know who has property in Spain and can cross-check to the returns they have received.

Thursday, November 17, 2011

Is there any point to the Spanish Elections?

Spain goes to the polls on Sunday to elect a new government and, yes, my question is facetious. Of course the elections are not pointless; no democratic election ever is. Apart from anything the people will get their chance to pass judgment on the record of Prime Minister Zapatero and his Socialists. Polls point to a big thumbs down and the election of the PP and their leader Mariano Rajoy who has tried and failed to win twice before.

But will it make much difference whatever happens? Spain is so close to the eye of the Eurozone storm that any new government will be powerless against the combined forces of the bond markets and the Eurozone. The PP are talking tough about bank reforms (which will surely send Spanish property prices down further – How the bailout could send Spanish property crashing) and labour market reform but it will be Germany and the ECB that decides Spain’s fate.

Look at the way that Berlusconi was finally forced from power. The Italians are well rid of him but it took Eurozone threats to do the job. It is notable that the new Italian government contains not a single elected minister.

Over in Greece the call for a referendum to get popular support for austerity measures was taken as a “breach of trust” by France and Germany; Papandreou was kicked out and Greece was effectively blackmailed into cancelling the vote.

I don’t subscribe to the theory that the Southern European countries are being drawn into a German super state but they certainly have lost control of their destiny. Either Spain and the others will be rescued by Germany or it will be forced to crash out of the Euro. It’s that simple and Sunday’s vote will not change a thing.

Latest article: Spanish holiday property UK and Spain tax considerations

Friday, November 11, 2011

The taxman wants some of your Spanish rental income

If you live in Britain but own a home abroad which you rent out you can’t fail to have seen the recent headlines like this one:

Taxman pursues Britons hiding holiday rent on overseas homes

Apparently the Revenue have set up a special unit to go after “the rich” (defined as those paying 50% tax i.e. earning over £150,000 pa) and one of their tasks is to recover £560 million in unpaid tax on foreign rental income.

With the stern promise that there is “no hiding place for tax cheats” they will look at things like land registers and letting adverts to catch people earning income from their properties but not declaring it.

I don’t know how worried I would be if I was renting out my holiday home and hadn’t declared the tax. These kind of campaigns have been launched before and you sometimes get the impression its more about the publicity and scary newspaper headlines than anything of real substance.

It also wasn’t abundantly clear whether the campaign is purely about the holiday homes of “the rich” or whether it is anyone with a holiday home that is under threat.

By coincidence I got a reminder of how brutal the Spanish taxman can be when it comes to foreigners (and locals to be fair) when it comes to undeclared rental income. I got an email from someone asking what they could do about €6,000 that the Spanish tax office (la Agencia Tributaria) had taken from his bank account, with no warning or even a letter to say they had done it.

It turned out he had two holiday homes and he let out one through an agency for several years without declaring a cent for tax purposes, not even completing the non resident tax return which surely every Spanish property owner knows about by now (if you don't see this post 'Tis the Season to Pay Spanish Taxes).

We have to assume that the rental agency were asked for their records by the hungry Spanish tax wolves. I have some sympathy for the guy but then again a lot of people do things properly and pay their taxes, so why should the non-payers get away with it?

If you want to be one of those who declare their income then here is a link to an article on our main website which explains what to do:

UK and Spanish tax implications of renting out a holiday home in Spain

Thursday, November 3, 2011

The Greek bail-out could send Spanish property crashing

Last week’s Eurozone bail-out involved some debt relief for Greece, more firepower for the EFSF (the bailout fund for other crisis countries) and a bank recapitalisation plan. Quite apart from the fact that most market observers think the plan is flawed and inadequate, the last bit that should have Spanish property owners worried.

In theory, topping up the capital buffers of the banks, particularly Spanish ones which are among Europe’s weakest, should be a positive development. The banks will be safer in the event of a new crisis and there should be less fear in the interbank market, a key feature of the original “credit crunch”.

There are two ways for a bank to boost its capital adequacy ratio: raising more capital or slimming down in size to make its existing capital look proportionally bigger.

Investors are rightly suspicious of banks so raising fresh capital by selling shares is not going to be easy. Higher capital ratios themselves imply lower profitability for the banks, making it harder for them to raise capital.

Perversely Government and EU officials are making it even harder for the banks to raise capital by demanding that they pay less in dividends and pull out of certain areas of business. The proposed financial transaction tax is also depressing bank share prices.

So banks are more likely to choose to go on a diet – desperately reduce in size to meet the new adequacy ratios without raising more capital. But how do banks reduce in size? There are a few ways, all of which are negative for growth and asset prices. They can sell non-core businesses like insurance or overseas subsidiaries. They can reduce the size of their loan portfolios by slashing the amounts they are willing to lend to households and businesses. They can also sell off other assets like the properties they have repossessed.

This is what Santander intends to do according to this article in the FT: Santander seeks to offload €3bn of Spanish property If all the Spanish lenders do the same then there will be a flood of new property on the market at knock-down prices. At the same banks will be trying to cut down on lending to businesses and homebuyers.

Throw in further austerity measures by the government and falling demand in most export markets and it’s hard to feel optimistic about the Spanish economy right now.

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