How to save money on your Spanish non resident tax declaration

The downside to owning a place like this ...

Judging by the increased demand we have recently experienced for our Spanish Tax Form 210 service, holiday home owners are starting to think about their tax returns. There's plenty of time as the declarations for 2009 are not due until the end of the year. For those Spanish property owners who don't anything about their tax obligations, I have pasted in an extract from the Spanish tax office website describing what has to be declared for non residents who DON'T rent out their properties.

For those that do understand that there is income tax to pay and wish to ensure they are on the right side of the law, how can the declaration be made as cheaply as possible? Well unfortunately there is no way (that I know of at least) of reducing the tax burden itself because it is based on a fixed percentage of the property's rateable value (see details below) without allowances or deductions. However if you have or intend to get a tax adviser to make the declaration for you there could be savings to be made.

Many people who do pay the tax use a paying agent to do the paperwork but that can prove costly if you haven't shopped around for a low fee option. This may be the case if you are using the lawyer who handled the original property purchase. How much should you pay? Advoco charges 30€ (upwards) and some other services are being advertised for not much more.

Or why not do it yourself? It sounds a bit radical but it is not so hard particularly after the first year invested in getting yourself organised. There is info on our site (Spanish non resident tax) and others including the government's - see below. If you have any questions posting a question on one of the Spanish forums will usually yield an answer.

Extract from the Agencia Tributaria website explaining the non resident tax charge:

The amount to declare will be that resulting from applying the following percentages to the assessed value of the property as shown on the Property Tax bill (IBI):

· In general, 2%.

· In the case of properties where the assessed value has been revised or modified since 1 January 1994, the percentage will be 1.1%.

This yield is calculated once per year, on 31 December.

If you have not been the owner of the property during the whole year, or if it has been rented for any period, only the proportional part of this amount is declared.

· Tax Return Form: 210, using the general section 210-A and entering 02 as income type.

· When to file the tax return: During the whole natural year after the date of accrual.

· Where to file the return: With the Branch of the Tax Agency or Administration belonging to the Tax Agency responsible for the area where the property is located.

· Tax rate: 24%.

Telefonica to call time on "All You Can Eat" internet access

It seems like the telephone companies are starting to regret the way that internet access has always been charged. Since dial-up faded away and broadband came in, it has been charged at a flat rate by the Internet Service Providers regardless of how long the user is online or, more importantly, how much data they download; the "all you can eat" buffet model.

It does seem kind of ridiculous now that heavy users, streaming movies and downloading music and games 24/7, pay the same as the occasional user who is just sending a few emails. Particularly given that the latter may be adversely affected by the former i.e. light users subsidize heavy users but everyone suffers equally when the network runs slow at peak hours. From my experience this is early evenings with my Telefonica connection when I imagine a lot of kids are downloading stuff after school and people are illegally putting movies in their memory sticks for the night's viewing.

Telefonica's CEO Julio Linares has called the current situation "unsustainable" quoting figures that 5% of mobile internet users produce 75% of the traffic -

Telefonica wants to charge more to customers who connect more

It will be difficult to change the status quo however sensible some kind of metered charging appears to be in theory. People have got used to paying a flat rate and will not take kindly to feeling like they have to watch every minute they are online or, more likely, pay for every Byte they download.

It might be OK if the majority of light users got a big benefit from the new regime i.e. monthly bills halved (Telefonica's ADSL charges are very high when compared to the UK) but I suspect they won't. If they can get away with it the ISPs will be looking to increase overall revenues and only they will benefit (both from lower usage of their networks and increased charges from heavy users while light users pay about the same). We'll see but enjoy the free, all you can eat option while you can.

From our website: time to do your non resident Spanish taxes?

New corporation tax rate in Gibraltar

With talk of austerity and budget deficits in most parts of the world, it is refreshing to be able to report on some good tax news. Being based on the Costa del Sol, my firm of accountants and tax advisers naturally has a lot of clients with interests in Gibraltar so we have to keep an eye on what is happening on the Rock. This Summer a new Income Tax Act has come into force.

The Act is available for download on the Gibraltar government website http://www.gibraltar.gov.gi

For companies the news is pretty good, because the long-heralded reduction in corporation tax has come into force and at an even lower rate - 10% - than had been anticipated. The basis of taxation has also changed from prior year assessment to self-assessment and payment after the company's year end. Gibraltar companies are expected to file accounts and estimates of their liability to tax within 6 months of their year end and pay the tax at the same time.

Most importantly for companies who are not run in Gibraltar or active there, the scope of corporation tax is only on profits "accrued in and derived from" Gibraltar itself. So if the company is based on the territory or makes money there, only those profits are subject to the new corporation tax regime. In addition interest, royalties and capital gains are not taxed.

Gibraltar used to be a popular place for foreigners resident in Spain to set up companies because of the existence of "non resident" companies which did not pay any tax at all. These have been abolished and all Gib companies are subject to the new regime wherever they are managed from or where they generate their income. But provided the company has no Gib activities ( or these are incidental - less than 22 days a year) or locally generated income, the profits of Gib companies can still escape tax. For individuals with international activities and income that can be booked through companies based anywhere, the low tax rate and the exemption of non-Gibraltar income make the Rock look an attractive option.

In Spain and need tax advice for a company or business (or thinking of setting one up)? Check out our website ww.advoco.es which has a lot of useful articles like Contracting in Spain and Autonomo Guide (self employment in Spain)

Praising Telefonica is simply not worth the risk

I have always considered Telefonica as part of the enemy i.e. one of the organisations or systems in Spain which serves to make and otherwise peaceful and idyllic life so difficult and frustrating at times. Along with the banks, utility companies, tax office, certain shops and tradesmen, garages, public sector bodies and officials, they are the ones that drive you mad with their inflexible bureaucracy, third world service standards and unresponsive staff, while you should be relaxing and sipping a glass of wine in the sun.

I have had all manner of complaints with Telefonica (now rebranded Movistar as their mobile division seems to have become all important) in the past to do with billing, line faults and installation. Probably my fault for moving about and needing their services quite a lot. They seem to be typical of an ex-monopoly that hasn't quite shaken off the worst features of being a cosseted state giant.

That was until recently. I had begun to notice a change in their service. Two or three times they have been right on the ball getting things done quickly and efficiently. They even rang up to offer a reduced tariff which didn't seem to come with strings attached.

I was right at the point of writing a blog post praising the turnaround and to see if anyone else had noticed a leopard changing its spots. And then ...

They cut me off! Not out of the blue - I had asked for the line to be deactivated at the end of the month, repeatedly stressing the date - but nevertheless my office line has simply ceased to be. Many confused and annoyed clients with me trying to make do with Skype (internet is so far mercifully available). Well, by their past standards it wasn't a major crime but I did feel the familiar Telefonica rage welling up inside me. I am only glad I didn't give them a glowing write-up on the blog last week. They still have a way to go to get themselves in my good books.

Related - Telephone firms most complained about in Spain - http://www.elpais.com/articulo/madrid/Electricidad/telefonia/centran/quejas/consumidores/elpepuespmad/20100810elpmad_8/Tes

From the Advoco website -

Starting a business in Spain Spain autonomo classifications

Spanish tax strategies for married couples

A little while allow the firm's website published a guide to the calculation of tax for married couples (Spanish Taxation of Married Couples) and it has prompted quite a lot of couples - or at least the half of the couple who do the tax stuff - to send in their queries.

Apart from the mechanics of the calculations, there have been a few proposals for cutting the overall tax bill by some restructuring of the couple's fiscal affairs. Often the question is "I've had this idea for reducing our tax bill; will it work?". People can get quite creative. I just wanted to comment on a couple of ideas:

Income sharing - often a retired or semi-retired couple will have a very uneven skew of income with one spouse earning almost everything. If some of the income could be shifted to the other spouse then that could save tax either by using up more of their personal allowances or shifting some of the couple's income out of higher rate tax. Obviously some sources of income are very specific to the person - like a pension or salary - but some deposit accounts and investments could be put in both names to divide the resulting income up between spouses.

Similarly couples where one spouse owns a business may be able to legitimately transfer some income to the other either by employing them in some capacity or, in the case of a limited company, paying a dividend to them.

A very specific idea I came across was the proposal to form a Spanish business partnership - Sociedad Civil (description of legal form here) - to take the place of a simple autonomo set-up. The husband was self-employed and earning a high and regular income; the wife earned nothing. The idea was that if they formed a partnership then they could say the partnership earned the money and then divide the proceeds between them as income. This could work, with two provisos:

- the partnership will cost more than a single autonomo to run thus taking away some of the tax savings from increased use of allowances and less higher rate tax. Primarily this is because both husband and wife will have to sign up for autonomo social security ( see Autonomo Guide) and also because there is more reporting to do. While a Sociedad Civil only has to submit one IVA declaration, each of the partners has to do quarterly income tax returns.

- the partnership has to be legitimate or at least not demonstrably illegitimate. For example if a lawyer sets up a partnership to practice law with his wife, who is not a lawyer, then that would clearly not be acceptable. If, on the other hand, the couple is doing an activity which both could plausibly be contributing to then setting up a Sociedad Civil is a perfectly acceptable route to follow. But the tax savings would have to be considerable to make it worthwhile which is probably why it is still quite rare.

New guide on our website - Spanish non resident taxes

Will Spanish business ever get the internet?

Anyone who has ever lived in Spain (or owned property there, or done business there, or even been on holiday there) will know that generally levels of customer service leave much to be desired. During my family's 8 years in Spain we have had all sorts of problems with all kinds of private sector organisation from the local shops to nation-wide corporations. Not only can service be slow and erratic but outright deception seems to be a common and accepted tactic among those employed to deal with the public.

This is hardly news but I would just like to comment another twist to this sorry record of bad service - the 'net hasn't changed much. On the surface of things Spanish business seems to have embraced the internet, not to the extent of the US or Northern Europe, but at least most reasonable sized businesses have a web presence and offer some options for online service. However dig below the surface, i.e. start making orders, enquiries, complaints etc online, and you will find that the same poor service culture exists online just the same as offline. Many times I have used an email for enquiries, quotes etc and not received a reply. The attitude seems to be 'out of sight, out of mind' and the online message is often. You need to get on the phone (if you can get a response there) or go down to see someone face to face.

As an example I needed 4 new tires for our car and decided to save money by getting a deal online (my local tire changing garage charges at least twice as much as they should). There are a lot of options once you do a search and I got what looked like a good deal from webneumaticos.es and all seemed well on the surface with automated payment, email confirmation etc I then arranged a garage to do the fitting again finding one with a website and all the trappings of modern service and communications. Without boring you with the details needless to say I soon got bogged down in a host of problems and it has taken me 2 weeks of chasing, unreturned phone calls and broken promises to get the job done.

Advoco has written before about how Spain can lift its economy out of recession and focused on a better deal for autonomos and employers. Maybe businesses need to start getting serious about service culture. It can be changed. Pre-Thatcher Britain used to be equally rubbish but now I would say most businesses are good on service because they have to be. Even in Spain I have noticed that Telefonica (or is it Movistar) seemed to have improved their previously appalling customer service record of late.

Related article at Advoco.es - 30 ways to market your business in Spain

Latest Costa murder was made in England

A 40 year-old Irishman was shot dead outside Coco's Bar in Benalmadena on Wednesday and police are seeking fugitive Darren O'Flaherty (pictured) in connection with the murder. If it was this guy then there should be some heads hanging in shame in Britain right now. Specifically I would like to hear from the judge who let him out on bail in 2006, despite the fact that he was facing charges of robbery and kidnap at knifepoint. He subsequently jumped bail and fled to Spain. Heaven only knows what hideous things he's been doing between then and the murder.

Perhaps you think the judge was being reasonable to let O'Flaherty walk free while the knife case was prepared? Innocent until proven guilty and all that. Then gain maybe not when you consider his previous history:

- 1995. Liverpool. Stabbed a man 9 times and given 5 years in prison. Let out early.

- 1999. Inflicted serious head injuries on a police officer and sent to prison again.

- 2006 - held a lorry driver at knifepoint for several hours before robbing and setting fire to the lorry

In amongst all this, also charged with dangerous driving "with intent" (!) and gang membership. Quite clearly someone who was dangerous and had no intention of mending their ways. What does it take for the courts to actually take someone off the streets? Once arrested for the kidnap case that should have been it for this guy - never see the light of day again. I can accept people being given one chance but not a string of them.

It reminds me of the Tony King "Costa Killer" case when a London man was finally arrested for killing two girls. He had a past in England involving 5 serious violent sexual assaults for which he served only half his sentence (5 years) before going onto rob a woman at gunpoint. Naturally he was turned lose again and fled to Spain where he changed his name. Now two young girls are dead because he wasn't stopped.

Almost every time there is a murder or serous assault in the news, a similar story emerges. They have committed a string of offences and either been let out early or on bail thus reinforcing their contempt for the criminal justice system. The guy shot dead on Wednesday would be alive today if some English judge had had the nouse or the guts to recognise this piece of scum for what he was and put public protection as the top priority.

New articles at Advoco: Contracting in Spain Spanish tax forms explained