Spanish taxman says "Stand and deliver"

What an absurd song that was! Good fun video though. Certainly more fun than the tax nightmares that have been visited on innocent property owners in the Valencia province recently.

I read about this story on the Costa Blanca News website and am indebted to their reporter Tom Cain for his diligent reporting of this unpleasant situation which seems to be confined to Valencia at the moment. According to the article, property buyers are being hit with back tax demands, sometimes running into the thousands of euros.

Click on the link for the full story - Expats hit hard by property tax probe - but in essence it relates to the tax you pay on purchase of a Spanish home. This is commonly called "stamp duty" by expat buyers and does work like UK stamp duty except that the % you pay is higher - between 7-8% of the purchase price depending where you are buying.

Another difference with the UK is that tax avoidance is rife on property transactions where the sale price in the contract often bears no relation to the actual price agreed. This allows the buyer to save on stamp duty and the seller to reduce their capital gains tax liability. The difference is usually made up in cash and can run into tens of thousands of Euros.

The tax authorities have always known about this practice (it would be impossible not to being completely routine in some areas) but have usually been content to accept it so long as the declared contract price is not too much lower than expected market value. But in recent years some cash-strapped regional governments have sought to levy extra stamp duty on transactions they think have been falsely undervalued.

The article here talks about highly retrospective charges though running into the thousands with very little apparent justification in terms of valuations being too low. Hopefully it will be just something that applies to Valencia and will spread no further but it certainly should give property buyers cause to think twice before committing. Not exactly what Spain needs right now - another reason for foreigners to lack the confidence to buy property here.

See also on our main website - Spanish property taxes for non-residents

The finest generation?

If I were asked to name the public figures I most admire it would be sure to include David Attenborough. Not only do I enjoy his work but he speaks a lot of sense about the environment and population growth. Here are some of the other people I most admire in the world today:

The Queen - for retaining her dignity and barely putting a foot wrong during a lifetime under intense pressure and scrutiny

Clint Eastwood - can't remember a film of his I didn't like either as actor or director. A rare independent talent in Hollywood.

Warren Buffett - the greatest investor of all time who is giving away his fortune (all $50 billon of it!)

Richie Benaud - peerless cricket commentator

The remarkable thing is not that all these folk are in their 80s but that I don't think about their age when I see or read about them; they are just admirable people who are much the same now as when I first began to appreciate them. Of course not everyone living into their 80s shrugs off the passing years: giants of recent decades like Nelson Mandela, Margaret Thatcher, Dickie Attenborough and Alan Greenspan are still around but are shadows of their former selves.

But just think of how many people are still major players in their spheres at 80 years and beyond:

Stirling Moss

Robert Duvall

Christopher Plummer

Lee Kuan Yew

Duke of Edinborough

Rupert Murdoch (mmm?)

George Soros

Sean Connery

Bernie Ecclestone

William Rees Mogg

Christopher Lee

Mikhail Gorbachev

Gene Hackman

Ronnie Corbett

Bruce Forsyth

Ginger McCain

I am sure you will have your own names to add to this list. A US website publishes a list of the 80 most powerful 80 year olds every year.

UPDATE: oddly enough another octogenarian superstar came to my attention the day after publishing this piece: Peter Munk, Chairman and Founder of Barrick Gold, now the biggest gold miner in the world and a great investment potentially (but that's another post).

Longevity and retaining vigour well into old age is nothing new (Gladstone was British Prime Minister at 84) but it is inevitable that better healthcare, changing attitudes and other advances mean that increasingly we will see many more great careers extended and more stars lingering in the spotlight. A great thing of course but another thought springs to mind - is this particular generation of octogenarians special? I think so.

Go back to people like Attenborough and the Queen and think of their qualities: unfussy and unflappable, motivated by goals other than fame and money, a keen sense of duty, practical, uncomplaining, self-reliant and responsible. I may have kept my rose tinted specs on too long but I think we are seeing not just a triumph for good diet and medicine but evidence that growing up before the war instilled some of the best of human qualities in a generation.

From our website: Prospects for the UK pension system

Ignore the media storm. BSkyB's a steal.

It's has to count as a heartening week for democracy and for standards in public life when some (very) bad journalistic practices brought a global empire to its knees. Although bringing NewsCorp to book over the phone-hacking allegations should have happened years ago, it shows yet again why public companies should value their reputation for integrity as their most prized asset.

But as an investor I have been almost as interested in the sideshow surrounding NewsCorp's bid for the 61% of BSkyB they don't currently own. Just to recap they offered 700p a share for the company in June last year; the bid was delayed as it had to clear various regulatory hurdles. In the interim the share price rose to around 850p as the market expected Murdoch would have to pay 900p or more for the big prize.

Now, just as the finishing line was in view, the whole bid is off and may not be revived. The arbitrage specialists who had bid up the share price in anticipation of a quick killing have fled to nurse their losses and the share price is now 705p (BSY:LSE) having gone as low as 660p. Shades of the BP gulf spill and another blue chip share meltdown but this is completely different and a great buying opportunity.

For one thing the BP spill seriously undermined the fundamental value of the company, plaguing it with uncertainty, eating up cash and forcing it to cancel the dividend and sell prize assets. B Sky B may suffer a temporary "guilt by association" reputational knock but its core business is not affected. And what a core business...

Murdoch did not scheme and plan for years to get the bid through for sentimental reasons. He knows the company is superbly well -placed to capitalise on its position as the UK's leading broadcaster. A lot of the hard work has already been done - winning 10 million paying subscribers and investing in its technology, programming and new products. There cannot be a more consistently successful large corporate innovator in the UK. Goldman Sachs agrees that this already profitable company is about to enter a phase of improved cashflow and improved earnings: Goldman rates BSkyB a buy.

There are risks. Some have speculated that News Corp may have to sell even its 39% stake but I find that alarmist. Also the pre-scandal price took account of cost-cutting synergies between Sky and NewsCorp. Longer term there may be a threat to Sky's business model from internet piracy as I discussed recently here We're going to pay for all this free stuff. But the strengths are too numerous to ignore.

The company already yields 3% and trades around 14 times earnings which is very low for a company in this sector, with next to no debt and considerable competitive advantages. What is more, as this article explains, there is the potential for the end of the bid to result in the board of BSB making a huge special dividend to shareholders of up to 20% of the current market value: BSkyB investors expect special dividend if NewsCorp bid fails. Buyers will soon be circling again and the share price is likely to rise in the short and long term.

From our website: Taxation of rental properties in Spain

Spanish tax advice that could cost you dear

As I am sure the whole of Spain knows by now the annual tax return season has just ended. The Spanish tax office (Agencia Tributaria or more colloquially La Hacienda) have issued some interesting stats about the tax campaign which I have summarised below. But before coming onto that, I must point out an error on a website popular with ex-pats (Euroresidentes.com) which could have serious repercussions if anyone believed it. They say, in answer to the question “I am a foreign resident, I live in Spain and receive a monthly pension from England. Do I have to declare tax in Spain?”:

No. If you collect your pension in England must comply with tax laws of that country with respect to their income. Only people who have a job or a pension in this country have to declare that income in Spain.

This is absolutely incorrect as we describe on our website: Do I have to do a Spanish tax return?

Anyone who is tax resident in Spain – generally those living here more than half of a calendar year – has to do a tax return and declare all their income including income earned outside of Spain. The only exception is if this income falls below certain levels (see Spanish income tax rates 2011 for these) or if the overseas income is exempt from Spanish tax. There are few such exemptions, the most common being income from a “crown” pension (basically a UK government pension which is, because of the UK-Spain tax treaty, taxed only in Britain).

So I hope no one has read this kind of advice and decided they don’t need to do a tax return because they have no Spanish job or pension. If for example they are living off foreign savings (e.g. offshore bank account interest) it is highly likely that not declaring will come back to haunt them. It is also worth noting that all foreigners who become Spanish tax resident should declare in the first year of becoming resident regardless of the sources or level of their income.

As for the Hacienda’s stats (see Agencia Tributaria website), these revealed:

The average wage declared on tax returns was 22.596€. Given that the law paid do not have to do returns the average wage of all Spanish people must be a lot lower.

2/3 of taxpayers had wages less than 21.000€ a year. Only 3,8% declared gross salaries in excess of €60.000

There were around 1.5 million business declarations and 600.000 autonomos declaring

About 12.7 million declarations were made seeking a tax rebate and so far 6.2 billion € has been returned to taxpayers

A golden generation

If I were asked to name the public figures I most admire it would be sure to include David Attenborough. Not only do I enjoy his work but he speaks a lot of sense about the environment and population growth. Here are some of the other people I most admire in the world today:

The Queen - for retaining her dignity and barely putting a foot wrong during a lifetime under intense pressure and scrutiny

Clint Eastwood - can't remember a film of his I didn't like either as actor or director. A rare independent talent in Hollywood.

Warren Buffett - the greatest investor of all time who is giving away his fortune (all $50 billon of it!)

Richie Benaud - peerless cricket commentator

The remarkable thing is not that all these folk are in their 80s but that I don't think about their age when I see or read about them; they are just admirable people who are much the same now as when I first began to appreciate them. Of course not everyone living into their 80s shrugs off the passing years: giants of recent decades like Nelson Mandela, Margaret Thatcher, Dickie Attenborough and Alan Greenspan are still around but are shadows of their former selves.

But just think of how many people are still major players in their spheres at 80 years and beyond:

Stirling Moss

Robert Duvall

Christopher Plummer

Lee Kuan Yew

Duke of Edinborough

Rupert Murdoch

Sean Connery

Bernie Ecclestone

William Rees Mogg

Christopher Lee

Mikhail Gorbachev

Gene Hackman

Ronnie Corbett

Bruce Forsyth

I am sure you will have your own names to add to this list. A US website publishes a list of the 80 most powerful 80 year olds every year.

Longevity and retaining vigour well into old age is nothing new (Gladstone was British Prime Minister at 84) but it is inevitable that better healthcare, changing attitudes and other advances mean that increasingly we will see many more great careers extended and more stars lingering in the spotlight. A great thing of course but another thought springs to mind - is this particular generation of octogenarians special? I think so.

Go back to people like Attenborough and the Queen and think of their qualities: unfussy and unflappable, motivated by goals other than fame and money, a keen sense of duty, practical, uncomplaining, self-reliant and responsible. I may have kept my rose tinted specs on too long but I think we are seeing not just a triumph for good diet and medicine but evidence that growing up before the war instilled some of the best of human qualities in a generation.

From our website: Prospects for the UK pension system