Antonio Flores’ Blog

The title of the post is confusing, contradictory and appears to make little sense; I will admit to that. But at times, the idiosyncrasy of Spanish bureaucracy lends itself to these situations.

The case relates to a client who was selling his property, had been a resident of Spain for 20 years but, because he was not legally obliged to file annual tax returns (he was retired) he did not exist for the Spanish Tax Office and so, he would not be given a Tax Residency Certificate, necessary to avoid the 3% CGT retention on the proceeds when a property is sold.

And because he was so adamant that Spain was his place of retirement, and of his tax residency, he was not going to let the Tax Office get away with it.

So in the knowledge that in the Costa del Sol, if you submit a query to 3 different tax/legal professionals you end up with 4 different opinions, we told him about Hacienda’s Binding Consultation Service, the ultimate official opinion on a tax matter: the case was submitted to the Directorate General of Tax (DGT) for a definitive confirmation of what he had previously read on the subject.

And this was their response:

1. The main document that proves tax residency in Spain is the Tax Residency Certificate.
2. The issuance of an individual Tax Residency Certificate is subject to the applicant proving his/her residency in Spain.
3. Where the above certificate cannot be obtained, the onus of proving Spanish residency lies with the taxpayer who will be able to submit, in support of his claim, alternative evidence: Certificate of “empadronamiento”, children’s school enrollment applications, rental payments, water and electricity receipts etc…).
4. The Spanish Tax Office, based on the widely accepted judicial `principle of free evaluation of the evidence´, will determine whether the applicant is, or isn’t, a tax resident of Spain.

By experience, I will add a fifth item: a certificate of non-residency from the Tax Office of the country of origin. This is not mentioned but we have had it submitted on a prior case and adds considerable weight to the application.

Finally, it is worth noting that the Spanish Tax Office has not commented on the EU residency forms issued by National Police Stations; this is probably because its relevance is relatively low.

Antonio Flores Taxes Agencia Estatal de Administración Tributaria, capital gains tax spain, certificate of non resident, Retirement in Spain, Spain Tax, Spanish Hacienda, Spanish Inheritance Law, spanish property tax, Spanish Residency, taxation in Spain, Taxes in Spain

 The outcome of some Spanish residency cases never cease to surprise us. Even considering that we have successfully processed over one hundred and fifty applications in the last years, and that these cases are the exception -not the norm- both Spanish immigration civil servants and consular staff keep throwing at us, periodically, challenging decisions and behaviours that appear to mimic the antics of Spanish officials in this film, as opposed to an always simpler -and obviously preferable- direct application of the law on the matter.

I refer to a couple of inexplicable resolutions to residency applications (Investor’s and Non-Lucrative) that we thought were water-tight.

CASE 1: Russian couple that buy a property for €750,000 to obtain Investors Residency.

The case involves a couple that bought property over the threshold of €500,000 to qualify for residency. Spanish Consulate staff, on receiving our application, worked round the law to reject the applicants, verbally. Firstly, they argued that because the law said that “an investor who wishes to become a resident shall apply…”, it was not possible that a married couple applied together, unless they reached €1,000,000 the threshold. In this case they had invested €750,000 together. Secondly, they argued that the application should be filed within 3 months of purchasing the property.

In respect to the first ground for rejection, we argued that the law states that the investor the law refers can bring his wife and children under 18 years of age, within the same application. So, in practical terms, there is no difference between our application and what the law says. But to add more mystery to the Consulate’s decision, it so happens that Russian law states that, by default, assets acquired by the spouses during marriage are their community property, which means that regardless of whether either spouse buys in his/her name, or buy jointly, the property will be their community property.

The response of the Spanish Consulate in Moscow is: “…we will be guided by future case law in the matter”. That is, case law that will be produced in the next 5 years. That, or have either applicant transfer its 50% to the other so that, after thousands of Euros of costs, they can achieve the same result: have the property owned by both, through their “Community Property”.

CASE 2: Moroccan single applicant who applies for non-lucrative residency.

The lady in particular has 12 properties in Tangiers giving her just under €12,000 in monthly income (well above the €2,000/month minimum required to apply), €170,000 in cash in a Moroccan bank account and €130,000 in Spain, a jointly owned property in Estepona and no need to work for the rest of her life. The application included original documentary evidence of the above (duly translated) and so, according to the precepts of the law, should have been be plain sailing.

But it was not: the Spanish Consul, Arturo Reig Tapia, seemingly wanting to stamp his authority over his staff but lawmakers too, rejected the application on the following not-so-elaborate excuse: “…applicant did not show enough income”.

And in a fit of remorse, he inmediately called her in -following the rejection- to get a 4-year visa multiple entry visa to travel to Spain, whenever she felt like; it was clear to us that the Consul had decided that he would not apply the law in force to this case, for reasons he only knows.

Two cases that fortunately are the exception to the rule but, nevertheless, worth commenting on.

Have you had any experience with Spanish Consular staff worth mentioning? We would love to hear about your experience.

Antonio Flores Immigration, Uncategorized Non-lucrative residency application, Self employed work and residency application, SPain GOlden Visa, Spanish Consulate Moscow, Spanish Consulate Tangier, Spanish Residency, Spanish visas

The Spanish Government was left reeling following heavy critizism by the European Union when they published an automatic house-for-residency programme last November. The reason? The very low property price threshold set by the impending law of €160,000.

Now, that value has been set at €500,000 and it appears that this time it is going to happen, according to El Economista.

The draft proposal establishes that the family will also be eligible and the residency will be indefinite for as long as the investment is maintained.

An additional possibility contemplated by the law establishes that a minimum investment of €1,000,000 and 2 workers will give the right to automatic residency, or €500,000 if the investment is kept yearly.  There is also the possibility to combine different types of investments to attain the half  million mark.

According to the sources, the residency programme will not be retrospective, “as demanded by the Russians”.

Finally, the draft leaves out the right to Spanish State medical cover and education, social beneftis and, rather strangely, the freedom to travel around the Schengen countries (which would breach EU laws on the matter).

Antonio Flores Immigration Immigration to Spain, Residency with Property, Spanish Immigration, Spanish Residency

The Spanish Government has officialy released its plan to bring Spain out of the recession by offering residency to non-EU citizens who buy property worth over €160,000. The specific conditions are yet to be legislated on but the Secretary of Commerce, Jaime García-Legaz, has indicated that the property value is “balanced” and will not give rise to a massive demand for residency permits. He also said that the proposition is directed at the Chinese and Russian markets.

Three things we would like to comment on:

1. If this is to happen, Spain risks being again a victim of its own success because the demand for property in Spain can be unprecedented, far more than in the boom years.
2. China and Russia will only be tip of the iceberg as their citizens currently find less problems in obtaining tourist visas than citizens of countries like say Iran, Pakistan, Egypt etc.
3. If this proposition is finally approved, raising property taxes may not be a bad idea altogether.

We can hope is that Spain will now be able to learn from its previous mistakes and manage the potential masses of property buyers more intelligently by implementing rigid controls on property developers – banning the dodgy ones of course-, real estate agencies and other connected professionals.

Antonio Flores Immigration, Property business residence permit, Spanish Immigration, Spanish Residency

The discretional nature of the Spanish residency application approval process adds a great deal of uncertainty to potential applicants that wish to relocate to Spain on the basis of a self-employed residency application.

The following tips should help increase the chances of a successful business residency application:

1. Where possible, try to visit the area in which you wish to start the business and establish contacts with legal professionals and accountants, real estate agents, schools, existing friends or fellow countrymen that are already established there, keeping a detailed agenda. The reason for this is that once you are granted the self-employed application by the immigration authorities in Spain, who don’t know you, the consul may still want to arrange a conference call, or a meeting, to find out that you are a genuine applicant and a genuine investor.So make sure that you are acquainted with the area and with your own business plan. At all times show your commitment to the venture.
2. Do have a good business plan that makes sense: As the courts have put it, it will have to be…a business project that, in principle, can be said to be economically reasonable, within a social and economic environment, capable of guaranteeing the applicant enough income to ensure a dignified financial position.Out of curiosity, a recent ruling by the Supreme Court established that street trading… is an activity that, in spite of the modesty of means and resources, provided, it ensures a minimal financial stability for the trader…and given the seriousness of the business proposal and the confidence in a certain financial viability proposal… is good enough to secure a self-employed work and residency permit. The High Court threw out the State Lawyer’s allegations that this activity would force the foreigner into marginalization, begging and even a social danger.
3. Where possible, try to show a professional background and/or experience connected to the business proposition. This is a plus but not an obligatory requirement.
   
4. Do have suitable qualification for a specific business: if you are willing to start a doctor’s practice where you are the sole practitioner, and your background is engineering, you will fail. Equally, if you are a doctor, in say India or South Africa, and have not homologated your degree, you will also fail.On the contrary, businesses that you can run without having a specific qualification or degree, such as a restaurant, a music shop, a rural tourism resort etc. can be started by anyone, and therefore not subject to this restriction.
5. Do have enough funds to back your business plan: Any serious applicant will have to show that he/she has a financial backing for the business proposal in question, the quantum being consistent with the projected investment. For example, an applicant that wishes to manufacture aircraft will need substantially more than €30,000. If you fall short, you will fail. Conversely, if you exceed the average cash requirement for any business, you are more likely to succeed.
6. Where possible, try to get your business report “validated” by one of the 4 self-employed workers associations (UPTA, ASNEPA, CIAE and OPA), which have the authority to do so, pursuant to an agreement signed (PDF) by them with the General Directorate for Immigration, as envisaged in a 2007 Ministry of Labour circular (PDF).In fact, if you comply with this requirement, Government discretion in respect of points 2, 3, 4 and 5 are almost eliminated.
7. Do have the funds in a bank account in the name of the applicant(s), and not just for a day or two: this is one of the requirements of current laws and cannot be substituted by a company account, a friend’s account or an account based in a bank that is not in Spain. Also, the authorities may request that you produce a bank certificate proving the “average” balance once the application has been granted and so it is highly advisable to leave the funds until the authorities resolve the application.
8. Bear in mind that spending at least 184 days of a calendar year, once you receive your residency permit, is a requirement applicable to any resident of Spain if he/she wishes to retain his/her status. That is not to say that when you apply for the residency to be renewed, the authorities will be counting the days spent in Spain, or at least within any of the Schengen countries, but it is worth keeping it in mind.
   
   The only time that we were questioned about this was when an Egyptian resident, who had already applied for his residency renewal and had to go back to his country, had to request a “permit of return” from the Police Station (which allows entry to Spain when the residency is expired), and was told that should he apply for one, they would be forced to advise the immigration authorities that the passport did not show any entry into Spain within the whole of the first years of residency (thus recommending residency to be revoked with immediate effect). Faced with this, the applicant opted to stay in Spain until the renewal was approved.
9. Don’t have a criminal record: obvious and yet, some people don’t realize that having criminal records will automatically mean a rejection. The law states that you need to have clean criminal records in the country(ies) where you have lived in the last 4 years.
10. Do retain competent legal advisors to represent you in the application.

Antonio Flores Immigration business residence permit, Spanish Residency

Living in Spain as a resident has become a rarity among Spanish elite sports professionals. This includes Fernando Alonso, Sergio Garcia and Jorge Lorenzo, among others, who have their residence in tax havens such as Switzerland. Rafa Nadal and Alberto Contador (2-time Tour the France winner) on the contrary feel that paying taxes in Spain is a moral obligation.

The Spanish Inland Revenue and a couple of smaller political parties want to stop them from representing Spain internationally.They had already tried to implement this law some month ago but was it thrown out.

“Social scourge”, “tax cheaters”, “lacking in solidarity”, “miserable compatriots” are just some of the adjectives used to define these sports stars who could, if a law proposal succeeds, stop performing for Spain in future. But when is a person considered to be a resident in Spain for tax purpose and how can the tax office invoke residency of a certain individual in Spain so that he is forced to pay taxes on world-wide income? As with many other countries, any person staying in Spain for more than 183 days in a fiscal year (ending 31st Dec.) will be deemed a resident for tax purposes and is obliged to submit a tax return on world wide income. Unlike the UK, the 90-day rule does not apply in Spain but on the contrary other points of connection with the latter country do apply. To make it simple, the criteria used is one the following:

1. Spending more than 183 days per tax year.
2. Having the main center of its activities or economical interests, directly or indirectly, in Spain.
3. For companies, having most of the assets, directly or indirectly, in Spain or when the primary activity is carried out, as well as having the management centers, in Spain.

Nowadays it is extremely complex for the Spanish Inland Revenue (and presumably for other Tax Offices in the EU) to determine when is a person resident in Spain for the simple reason that passports don’t get stamped any longer. But if someone gets a letter from the Inland Revenue saying that they have detected that he/she is a resident for tax purposes and request payment of taxes on worldwide income the onus of proof falls on the tax subject. Showing water and electricity bills of a property in a third country is no longer a valid excuse for the Spanish Inland Revenue which has now increased the proof of residency by demanding a Certificate of Residency issued by the tax authorities of the third country, provided this country is not classed as a tax haven and that it has some form of tax information exchange agreement.

Where this third country is a tax haven the Spanish Inland Revenue will only let the tax suspect off the hook if he/she can prove that they are effectively spending more than 183 days per year in this country. The reason is that foreign taxpayers are being issued with what they consider as a “passive residents card” which does not oblige them to declare any income nor, ultimately, pay any taxes (normally only a small investment easy to comply with, such as lodging a few tens of thousands of Euros in a bank account or buying an apartment).

If the Spanish Inland Revenue and the Catalan Party CIU (Convergencia I Unio) can convince the Spanish parliament that fellow compatriots dodging taxes is immoral and that consequently they are to be stripped of the Spanish flag on their endorsements we may soon see Fernando Alonso and Sergio Garcia racing and hitting balls, respectively, for Switzerland, Lorenzo riding for Andorra or Pedrosa also riding but for England, leaving the poor(er) Nadal and Contador the burden of…building roads and council tennis courts for their beloved fellow compatriots.

Antonio Flores Taxes Spanish Inland Revenue, Spanish Residency, Spanish Tax Office, Spanish Taxman, Taxes in Spain