Antonio Flores’ Blog

With effect from the 29-09-2013, the Spanish Government has approvedthe Investors’ Support and Internationalization 14/2013 Act which includes, among others measures, a Spanish residency programme that will allow investors to become permanent investors if they invest, at least, €500,000 in a property. The law was published early this morning in the Spanish Official Gazzete (BOE) and one of the most crucial aspect of it is that it facilitates people traveling to, or residing in Spain, who intend to carry out a ‘relevant investment’.

What is a relevant investment?

According to article, 63, the following will suffice to attain residency in Spain:

• An investment of at least €2,000,000 in Spanish Government bonds.
• An investment of at least €1,000,000 in shares of Spanish companies.
• An investment of at least €1,000,000 with a Spanish-based bank or financial entity (basically, depositing that money in a savings or fixed deposit account).
• An investment of at least €500,000 in Spanish property (one or more), per applicant, provided the first €500,000 of the property value is unencumbered (mortgage free).
• A business investment that is to be carried out in Spain and is deemed of public interest for which purpose, at least one of the following conditions will be considered relevant: a) jobs it will create b) socioeconomic impact in the geographical area where the activity is to be carried out and c) relevant contribution to technological or scientific innovation.

Investment by foreign companies also qualify for residency provided it does not originate from an offshore tax haven, as per Spanish laws, and that the investor owns, directly or indirectly, the majority of its voting rights and has also the right to designate or remove the majority of the members of the board of directors.

Investment Residency Visa and Investment Residency Permit

The Act has created 2 different types of documents to enter and reside in Spain, the Residency Visa and the Residency Permit. The Residency Visa is valid for up to 1 year, and the Residency Permit is valid for up to 2 years, which can be extended for a further 2 years. This would give a total of 5 years, 4 of which are deemed proper residency and the first one, just the right to stay and live (an important distinction because 5 years of continued residency entitles the beneficiary to reside permanently in Spain). In addition to meeting the conditions to qualify for the Investors’ Residency Visa, an applicant for an Investors’ Residency Permitwill have to comply with the following:

• Hold an Investors’ Residency Visa that is not overdue by more than 90 days over the expiration date.
• Have travelled to Spain at least once during the validity of the Visa.
• Prove that the investment that enabled the applicant to receive the Visa is still in place.

What other requirements have to be met?

The Act will also require that any applicant complies with the following (standard in the Non-Lucrative or Non-Working Residency Permit):

• Not be in Spain irregularly.
• Be over 18 years of age.
• Absence of a criminal record in the country of original residency.
• Have medical insurance.
• Have sufficient money or financial means to support the applicant (and family) during the period of stay in Spain: if we are guided by the prerequisites of the Non-Lucrative Residency Permit, the applicant will need to prove earning of at least €2,128/month, plus an additional €532/month per family member.

Application Process and Timescales

The Residency Visa will be applied for and granted by the Spanish Consulate of the demarcation of the applicant. The Residency Authorization will be applied for and granted by Directorate General of Migrations. An application for a Residency Visa will be resolved in a maximum period of 10 days, except where the application is subject to the EU Visa Code. The Residency Authorization will be granted in a maximum period of 20 days from application after which period, if the Consulate has not responded, the application will be presumed granted.

How would it work, in practical terms?

An applicant that wishes to apply for a Residency Visa under the Act will first need to apply for an ordinary visa, with a view to travel to Spain and investigate investment options/opportunities, meet with lawyers, real estate agents, banks, etc. Once a decision is made and the investment carried out, the Residency Visa will have to be applied for at the Consulate. Obviously, it is possible that an investor decides to proceed with the investment operations remotely (for instance, purchasing a property via a lawyer, with a Power of Attorney) and, on conclusion of the property conveyance transaction, he applies for a Residency Visa with the required proof of his investment i.e. Property Title Deeds. The Act does stipulate that the investment needs to be maintained during the period of the validity of the Residency Visa or Residency Permit, and that routine checks may be carried out to verify if this is the case.

Do I have to be in Spain for more than 6 months during any year period?

Specifically, NO! The Act stipulates that Residency Visa or Residency Permit holders do not need to spend more than 6 months in Spain, with a view to renew the permit (which implies that, as stipulated in the law, provided they are in Spain at least once during the period of the Residency Visa, they are pretty much free to spend their time as they wish, in Spain or in any other country).

Can I become a Permanent Resident in Spain or a Spanish Citizen through this method?

YES. In fact, the Act specifically states that the applicant’s absences will not prejudice the right to permanent residency (5 years onwards) and citizenship.

Can a person still apply for permanent residency without having to invest the sums in this law i.e. buying a property worth say €200,000, with a €180,000 mortgage?

The Act has not modified the 2 other main types of residency permit applications, which are:

• Non-Lucrative Residency Permit (Autorización de Residencia No-Lucrativa)
• Self-Employed Work and Residency Permit (Autorizacion de Residencia y Trabajo Por Cuenta Propia)

This means a person can still apply for residency in Spain via the regular -above- procedures.

Can I apply if I already have a (unencumbered) property in Spain worth €500,000?

The Act does not include investors who already had a property in Spain prior to its enactment although, nothing stops them from selling, buying again and then apply for the Investors Residency Visa and further, the Investors Residency Permit. People that comply with the other financial criteria (having cash deposits, shares etc.) can apply.

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Targobank, the last bank still willing to open bank accounts to Iranian investors, has followed the trend of all other Spanish banks and placed a blanket ban on any Iranian national who, for the most part, arrive in the country to buy Spanish property.

These ordinary investors, attracted by the comparatively low prices of Spanish property, are seeking to invest in the country and that that effect, are granted tourist visas (some apply and attain permanent residency) by the Spanish Consulate in Tehran, N.I.E. numbers by district Police Stations, property deeds by Notary Publics and “empadronamiento” certificates by Town Halls and yet are, irritatingly, snubbed by Spanish banks on the pretext that laws don’t allow them to do so.

So whilst sanctions against Iran have been tightened and these have been particularly aggressively enforced in the U.S. and Canada and by contagion, those countries with closer links to the superpower, still today no trace of where within those sanctions lies the prohibition of merely opening of a bank account for an Iranian traumatologist, pistachio exporter or car dealer who wishes to buy a property in Marbella, Madrid or Gran Canaria.

This has arguably created a view where anything remotely related to Iran is often viewed as toxic and problematic and thus leaves lawyers, property developers and real estate agents to all but “abandon” business with the numerous Iranians that wish to invest in Spain.

Alas, on closer inspection it appears there is no such blanket ban in Spain because there is no specific regulation by the Bank of Spain, the Ministry of Interior or that of Foreign Affairs to the effect of entitling banks to slam the door in the face of Iranian investors.

And yet when one meets with branch managers armed with the mandatory ‘Know Your Client’ detailed paperwork, excuses fly around: Iranians have been banned by the EU, bosses say it is not possible, the computer system blocks that particular nationality, our entity does not specialize on dealing with such nationals etc. etc. La Caixa, for instance, does request certain disclosures in respect to Iranians but they are not specifically banned from opening accounts…and yet they do so.

Sadly, it all boils down to Spanish financial institutions being terribly scared of retaliatory action by the U.S. Government and so prefer to drop certain foreign citizens as clients, even if they risk being reported to the Banco de España for arbitrarily, when not discriminatorily, refusing to open bank accounts to them.

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Great day yesterday in the office with James Scurrah, from Marbella Property Co, and Luis Ruiz, from TrecMedia. The purpose of the get together was to film 15 or so videoblogs in respect to matters pertaining to investing in Spain, property costs etc.

1. Anyone in the world can freely buy a property in Spain; there are no restrictions to any nationality nor a special permit is required. All you need is a valid passport, money and an NIE number.
2. Get a lawyer to represent you as not only does his/her expertise be very useful to ensure a safe outcome but also, they have mandatory professional indemnity insurance in case something does not go plan.
3. If you take out a Spanish mortgage, keep in mind that if you default, you will not be discharged from the loan by just “handing the keys back”. In fact, the bank can chase you in your own country.
4. If you are buying a finca, villa or any other form of detached property, a survey can be very useful to know where the boundaries lie and whether extensions built on the property require registration, in addition to what a survey normally does for you. In Spain, valuations for bank purposes are good enough because they include a survey. However, if you want something more specific and in English, you can hire a UK-registered surveyor, for instance, SurveySpain.
5. Ask about potential inheritance taxes (IHT) before buying as these are very different from the UK but also, each region within Spain has its own specific regulations. Splitting ownership with your inheritors will significantly reduce your exposure.
6. Draw up a will once you have completed on your property. This will avoid having to go down the grant probate route as inheriting will be a relatively straightforward matter.
7. Open a bank account to arrange a standing order payment for your utilities.

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Once again, Lawbird Legal Services’ name is being used by the ‘Nigerian scam’ fraudsters to cheat Australian citizens. In a nutshell, the letter says that 10 million U$D are waiting for you if you advance some money to us.

If you have received one of such letters, we suggest you do the following:

1. Write to us on info@lawbird.com, attaching where possible a copy of the letter.
2. Report the incident to the Australian Competition & Consumer Commission.
3. Ignore the missive and just bin it!

Going back to the letter, we must add that it gets it wrong factually and conceptually too. Firstly, I am no Barrister, but a lawyer (in Spain, there is no distinction between a Solicitor, a Barrister or a Lawyer), and I am not a Doctor in Law.

Secondly, if you ring on the given mobile number, you will get to talk to someone that looks just like the chap on the picture or even, any of these 3, talks with a funny accent which is neither Spanish or English, but from West-Central Africa and has so little credibility that it should be easy to tell it is a scam. This you should not miss, as it is very distinct.

Finally, it is forbidden by the Spanish Law Society to use any official sign, stamp, emblem or otherwise on our correspondence. These dangerous clowns don’t know but even if they were to read this post, they would still not understand as they think it does give them credibility.

We urge recipients of such letters to proceed as explained above.

Thank you

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According to Wikipedia, trusts arise where one person (a “settlor”) gives assets (e.g. some land) to another person (a “trustee”) to keep safe or to manage on behalf of another person (a “beneficiary”). In other words, formal vs. beneficial ownership.

Spain does not have, in general terms, such an institution and therefore it is not recognized.  However, a resident of Spain who sets up a trust abroad (and its heirs and beneficiaries) will be subject to Spanish taxes, pursuant to the findings of 2 rulings issued by the Spanish Directorate of Taxes (DGT) that conclude as follows:

• Setting up a trust is not subject to Transfer Tax.
• Income Tax: as the settlor continues to be the owner of the assets transferred to the trust -as far as Spain is concerned-, income taxes apply normally.
• Wealth Tax: as above, the settlor is subject to wealth tax on the net value of his/her worldwide assets and rights. However for 2013, Wealth Tax is not applicable.
• Gift Tax: transfers made from trusts to beneficiaries during the life of the settlor are subject to Spanish Gift Taxes provided the former is a Spanish tax resident or where not, if the assets and rights gifted are based in Spain, could be exercised or should be carried out in Spain.
• Inheritance Tax: transfers made from trusts to beneficiaries/heirs on death of the settlor are subject to Spanish Inheritance Taxes, provided the former is a Spanish tax resident or where not, if the assets and rights inherited are based in Spain, could be exercised or should be carried out in Spain, noting that the Spanish Tax Office does not distinguish, for this purpose, between inheritors and beneficiaries (contrary to English law).
• Life Insurance policies: beneficiaries will be subject to Spanish taxes provided they are Spanish tax residents or where not, if the policy was taken out with a foreign company operating in Spain.

The above would be applicable so long as Spain does not ratify the Hague Convention on the Law Applicable to Trusts, or the 1^st of July 1985, or it decides to change its laws to accommodate this unique contribution of English law to the legal system, which seems very improbable.

Antonio Flores Corporate Law, Tax Law, Taxes English Trusts and Spain, Hacienda, Spain Taxes Trusts