Antonio Flores’ Blog

The criteria for residence for tax purposes varies considerably from jurisdiction to jurisdiction, and “residence” can be different for other, non-tax purposes. For individuals, physical presence in a jurisdiction is the main test. Some jurisdictions also determine residency of an individual by reference to a variety of other factors, such as the ownership of a home or availability of accommodation, family, and financial interests.

New criteria in Spain to establish tax residency for 2018

The Spanish Supreme Court, in a recent ruling of the 28^th of November 2017 (only released now) has departed from the traditional understanding of the concept of physical presence the Spanish Hacienda was using to determine the place of effective residency for tax purposes.

According to the Spanish Tax Office, the main criteria of physical residence -more than 183 days spent in Spain- would not take into account what they called “sporadic” stints in another country, as it was necessary then to prove effective residency in another country. In addition, the Tax Office was introducing the subjective criteria element -what was the real intention of the taxpayer (?)- to determine effective tax residency.

The Supreme Court has now altered this notion and stipulated that residency for tax purposes, if determined solely in accordance to the effective time spent in Spain, will no longer be influenced or linked to an element of will or intention to reside abroad but to a simple day-count exercise (number of days in Spain vs. abroad), thereby eliminating the subjective component of the reasons for residing abroad in favour of the mathematical criteria.

Antonio Flores Taxes 720 form spain tax, Spanish Hacienda, Spanish Tax Residency

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

It is hereby informed to the public at large that on the 14/11/2013 the Directorate General for Taxation (DGT), by means of Tax Binding Consultation V3350-13, concluded that a scheme consisting on transferring Spanish property to a UK-based company, with the purpose of avoiding Spanish Inheritance Taxes (IHT), is not legal.

The following statement has been issued by the DGT:

“In relation to the tax scheme consisting in legally transferring a property to a UK-based company, with the sole purpose of avoiding IHT in Spain through relocation of the taxation of the shares of the said company to the UK, there cannot be a favourable response by this Tax Department in relation to the lawfulness of the scheme. Only via the appropriate inspection procedures will the Tax Office be able to establish whether the scheme conforms to the law or, as the case may be, infringe it in which case, the Tax Office will be able to regularize the anomaly by initiating the required procedures to combat tax fraud.”

This publication of this notice is a response to the offering made by a number of service providers (SP), most notably Wincham International Limited, who are promising that Spanish IHT can be legally avoided by transferring a Spanish property into a UK Private Limited company.

Please be advised that until the DGT does not officially rule otherwise, the employment of the above scheme to avoid Spanish IHT could be deemed tax evasion and, where the unpaid tax exceeds €120,000, a criminal offence.

Lawbird Legal Services already warned the public against this scheme twice, in January 2010 and in December 2010. There was no response from Wincham other than a vague statement indicating that over the years, they had attended very happy clients who were successful in avoiding IH taxes…legally.

Finally, please be warned that Wincham are advertising their services/products extensively, offering one-to-one appointments with potential customers in several Costa del Sol venues.

Antonio Flores Taxes IHT UK company, Inheritance IHT Spain, spanish inheritance tax, tax evasion spain, Wincham Consultants Ltd., Wincham International Limited

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

The tax status of foreigners living in Spain has been subject to extensive debate and still today, is a question open to interpretation, particularly considering the ability of people to travel freely within the EU and more notably, the Schengen-space countries. This column is far too short to be able to explain in details all the intricacies of this interesting matter but the 10 points below will help understand, we think, the basis of the tax residency status.

• The distinction between tax domicile and tax residency is a concept more associated with Common Law systems, and almost ignored by Spanish laws.
• Tax residency is prima facie demonstrated by means of a Fiscal Residency Certificate, issued by the tax authority, which should confirm the taxpayer is fiscal resident in that country and that he is subject to tax on worldwide income.
• According to Spanish Courts however, this is not the sole means of proof; a fiscal residency certificate is not the only way to demonstrate residency for tax purposes; utility bills, bank statements, insurance policies, local taxes, civil registry or consular registrations etc. are all means to prove a certain tax status but, more importantly, is the fact of declaring, or not, income obtained worldwide in a particular country.
• The Spanish Income Tax Act states that tax residency in Spain will be determined by one or more of the following: spending more than 183 of a calendar year in the country, having the center of the economic interest or businesses in Spain and having the non-separated spouse, and dependent children, residing in Spain.
• The 183-day count ignores temporary absences except where the taxpayer demonstrates tax residency in another country, with a certificate as per point 2.
• Tax residency in more than one country is possible; double tax treaties signed by Spain generally stipulate where such taxpayers should be taxed.
• Where the taxpayer invokes tax residency in a tax haven, the Spanish Tax Office may request proof of physically being there more than 183 days, in addition to the documentary evidence as per point 2. Where a taxpayer of Spanish nationality changes his tax residency to a tax haven, the Spanish tax authorities will still consider him/her a tax resident in Spain for the next 4 years.
• Where a taxpayer has economic interests in more than 1 country, the tax authorities will take into consideration the weight of each as well as the intensity of social, political and family relationships in each of such countries, or having a permanent dwelling in -or nationality of- that country.
• Spanish authorities may apply for information from countries with whom a tax information exchange agreement has been signed; the UK is one of such countries.
• Double Tax Treaties are in place to prevent tax evasion, not to encourage it: this applies to the anomaly of using UK companies to avoid Spanish inheritance taxes.

Antonio Flores Taxes Spanish Tax Domicile, Spanish Tax Office, Spanish Tax Residency

With the advent of the crisis and the coffers of the Spanish Inland Revenue drying up fast, foreign property owners now seem to be the target of a renewed tax levy campaign, judging by the content of tax office letters received by a few clients. Because whereas before property owners that did had never paid Non-Residents Property Income Tax, an annual tax based on the ratable value (valor catastral), were deemed to be under the radar of the taxman, they are now being specifically pinpointed.

The letters sent by the Hacienda are not openly threatening, if that is possible at all, but a reminder that taxes have to be paid by virtue of owning a Spanish property. The written request states: “based on the information we hold, it appears that you have owned a property in Spain during the years 2008, 2009, […], and, according to our records, you have failed to submit a tax return for Non-Residents Income or Wealth Tax“.

The letter then says that this is neither a tax request nor the commencement of an investigation. However, they seem to have all the information owners were hoping would not be picked up by the taxman, not until the property was sold (time when it would have had to be disclosed, and taxes paid up, if one wants to claim the 3% Capital Gains Tax retention back successfully).

This obviously does not affect tax-abiding property owners, who file they annual returns prior to the 31st of December of the following year (2010 tax is to be paid by the end of 2011), and are expected to pay an average of between €200 to €800, depending on size of property and the municipality; with larger villas paying substantially more. Resident property owners, on the other hand, are exempt from this tax.

Wealth Tax to be reintroduced in 2012

With effect as from 2011 and during the next year, property owners will be taxed again on Property Wealth Tax, having to submit the tax returns in 2012 and 2013, respectively. Residents for tax purposes will have tax breaks on their habitual home, up to a certain value, and an allowance of €700,000, which means that most Spanish residents will effectively be exempt from it.

Finally, nonpayment of due taxes will attract penalties, surcharges and interest and ultimately, a charge on the property so, to avoid unpleasant surprises, we suggest you act promptly by talking to a qualified professional.

If you have questions, you can read this FAQ about non residents tax in Spain.

Documents

• Non resident tax letter being sent by the taxman (PDF – 238Kb)

Antonio Flores Taxes Income and Wealth Tax, Modelo 210, tax spain, Taxes in Spain, valor catastral

About to wind down for the weekend, yesterday evening I received an email from Alexandra Goss, personal finance reporter for the Sunday Times, in relation to a few enquiries sent by Spanish property buyers, and sellers, that were unexpectedly receiving letters from the Spanish tax office challenging the prices at which they had bought, and sold, their properties in Spain, respectively.

Indeed, one thing came to her mind considering the state the Socialist Government has left Spain in: the Spanish Tax Office (AEAT) is desperate for revenue and are finding avenues to levy extra demands for transfer tax from property buyers, and so, if the Spanish property market was not an already depressed sector of Spanish economy, they now come, as real predators, to make it even harder for people to buy, and sell.

This is the real paradox of it all: the Spanish Interior Minister flies out to England to do his silly property-selling road show, and in Spain, those buyers get shafted by the Inland Revenue his Government controls. The good thing? That courts are, mostly, not contaminated with the wrong ideology and will employ reasoning and logic to counteract this property-buying prevention scheme, and will mostly, again, throw out of court these extra tax demands.

What should one do if one receives one of these letters, after of course all the understandable cursing and imprecating? Well, go get a lawyer that knows his stuff and appeal within the stipulated timeframe, by choosing one of the 2 legally available avenues:

1. Challenge the “unreasoned”, “standardized” valuations made by the tax office that happen to be nothing else than some formulas being applied on unknown coefficients by a computer program that pumps out wholly impossible valuations (a 2-bedroom flat on a 200-unit empty development in Manilva worth €280,000?). The funny thing about this is that University graduates sign off these valuations, knowing that they are essentially wrong and untrue (land registrars in most of Andalusia are in charge of the Transfer Tax collection, and/or “arquitectos tecnicos” employed by the Andalusian Government, the same graduates that think that the property is twice as expensive!).This is what the courts in Spain think about these predatory extra tax demands:
   • Supreme Court 14^th December 1998: The valuation carried out by the architect for the Tax Office is a standardized printed form full of scant references that have the weight of an opinion rather than that of a property valuation, and therefore one cannot assume it has any reasoning or justifiable criteria, losing its legally binding effect.
   • Economical Administrative Tribunal 20-06-1995: The legal mandate granted to the Tax Office to raise supplementary tax demand fails due to the Tax Office not following a logical process when arriving at property values but rather by using abstract figures when calculating these. Also, the Tax Office fails to properly provide a valuation when they simply perform arithmetical calculations on the basis of a unitary basic module, without reasoning or justification, and certainly can never comply with the law when to this value or figure, a stereotyped all-purpose text is added on as reasoning. (Tantamount to calling the “arquitecto tecnico” a dumbass).
2. Carry out a proper valuation by a proper “arquitecto técnico”, or as they don’t like to be called, “aparejador”, who will surely determine that the property’s real value is either the price you paid for or sold it for, or perhaps less, and submit it, hoping that the “arquitecto tecnico” working for the Tax Office will abide by the norms of ethics of their profession and admit to being wrong. Because the funny thing here is that, depending on whether these university graduates work for you, or the Tax Office, their opinion of what the quoted property is worth will be €140,000 or €280,000, respectively. It´s funny, certainly, but it is also very worrying.

This subject matter is very very interesting, and so expect some interesting, and surprising, developments very soon, including a legal suit against the Andalusian Tax Office.

Anyhow, check tomorrow the Money Section in the Sunday Times, I am quoted there.

Antonio Flores Property, Taxes spanish property taxes, Spanish Tax Office, spanish transfer tax

Offshore is definitely off. The times of the property owning offshore-based companies are over. The glamour associated with names such as Seychelles, British Virgin Islands, Turks & Caicos etc., has now turned into a stigma. Because there was a time in Spain when, if you went to certain summer cocktail parties or high-flying bashes and you did not own an offshore company based in some fanciful island, you were a nobody. In fact, your lawyer was quickly tagged as unsophisticated, uncreative, in essence, not up to scratch with this new posh trend that was all the rage among the richer.

The Mallorca Provincial Audience (May 2010) has sent a lawyer to jail for almost 4 years and given him a fine or €600K  for setting up a “fiscal engineering scheme to instrumentalise defrauding and money laundering procedures “, in the sale of a property in Puerto Pollensa (Mallorca). In this case, he had set up the structure to, among other aims, avoid (or rather evade) paying Capital Gains Tax (at 35%) on the real price (as opposed to the officially declared) when selling his client’s property.

According to the prosecutor, and the judge in the examined ruling, the investigated  law firm indiscriminately offered offshore companies, via the website offshore.biz site (in which even two Mallorca notaries were mentioned), to their clients with the intention of:

• Minimizing the tax almost to the point of exemption.
• Offering 100% protection to the assets.
• Offering 100% anonymity.

The message this Court ruling has sent out is a very clear one: using offshore companies to hold Spanish property does not entitle the beneficiary to legally avoid payment of taxes in Spain, whether you sell the shares, and alongside it, the property. This applies also to the buyer of the structure, who is not exempt from paying transfer taxes.

The Court Office, in reaching its decision, invoked the following:

• Non-Resident Act 5/2004: Capital Gain Taxes obtained, directly or indirectly, from property situated in Spain, will be taxed in Spain. In particular, the following gains are included: when they are originated or derived from rights or shares of a company, resident or not, which assets are made of up of, primarily, directly or indirectly, property based in Spain. The gains obtained from transferring the shares of a company, resident or otherwise, that attribute its ultimate owners the right of their enjoyment in Spain.
• Double Taxation Agreement between Spain and Ireland of the 18th of November 1986: the gains derived from the sale of property can be taxed where the property is located (for some reason, this was invoked as part of the defence strategy).

In this case, the tax office, assisted by the police, found enough evidence of the crime when they were given authorisation by the court to raid the firm’s premises, in which they found not only crucial information on the transaction (particularly deeds of share transfer and deeds of resignation of director and appointment of new director, both done on the day that the property changed hands, bank transfer slips, etc.) but also a private purchase contract for €875,000 for the property in question, when the price paid officially paid was €425,000.

Finally, the Tax Office’s report puts under serious scrutiny Law Firms that, apart from offering the standard juridical, financial and accounting services, have specialized in the design of schemes and structures of fiscal engineering that are utilized to defraud and launder money. These professional firms, which act as company incorporating agents, don’t have as its object international fiscal planning, but are purveyors of mechanisms for subjective simulation, by inserting physical and juridical persons, national and foreign, in the ownership of the assets they intend to conceal. The mechanisms, according to the Tax Office, are as follows:

1. Incorporation of offshore of property holding companies (offshore-based) .
2. Incorporation of Spanish Companies (mostly Limited-SRL), owned by the above offshore, to manage Spanish property. These companies are merely holding property, having scant bank movements.
3. Appointment of directors different from the ultimate owners, either being the same lawyers that created the structure or, as in the case study, someone paid to do the job (and who has also been sentenced to a jail term, albeit suspended). These persons are also authorised to operate both the offshore and the onshore accounts and are, at times, beggars pulled off the street. 
4. Utilization of the law firm’s clients account to receive and remit transfers, with the intention of a) concealing the true nature of the transactions behind the transfers and b) avoiding compliance with anti-money laundering provisions (thereby making it more difficult to know the real nature of the deal).

As a result of the above court action, the lawyer, the ultimate beneficiary and the director were all sentenced to jail terms, although only the lawyer will have to serve time, for the beneficiary paid up the taxes owed prior to the hearing (€135,000) as well as the fines, and the director was found guilty only of conspiracy to defraud.

Offshore is definitely off, and therefore it would be advisable that anyone willing to sell a property owned by a string of companies opted for not selling the shares abroad, because, not only all the above could easily be applicable, but also whoever was buying them would be buying into problem, unless of course he/she was sitting on a pile of cash he wanted to get rid of…(not advisable anyhow).

It may be interesting to see how this links with this new trend of incorporating UE based companies to avoid Spanish Inheritance Tax, particularly UK based, but will leave the study of this dubious proposal for a separate post.

Antonio Flores Companies, Corporate Law, Inheritance, Property, Taxes offshore companies, spanish capital gains tax, spanish inheritance tax

It comes as no surprise that 30% of the enquiries we receive during a month relate to inheritance tax (IHT): there is an almost absolute ignorance about how much it is, when and where is it payable and how does one go about not paying, if at all possible.

IHT tax in Spain can span from nothing, if you inherit under a certain sum and are a Spanish resident to a whopping 81,6% if you inherit loads of money, you are also very well-off and you have no family ties with the testator. This is why it is important to know more or less what would the tax liability be for our inheritors should we pop our clogs within say 12 months (it makes a difference if one dies tomorrow as opposed to dying in say 20 years, particulary if you have a 20 year mortgage which by then would have been repaid).

To calculate quickly how much tax would our inheritors have to pay we could do with an IHT calculator and hopefully this will soon be an application on our website but meanwhile see below some examples on the tax liability if we were to inherit different value net assets (after mortgages, debts etc.):

(We are assuming, for the purposes of the above calculations, that the net values have already been reduced with the average legal allowance, approximately 15.000 Euros)

The following list is by no means complete, but mentios a few of the most common mistakes made by non-resident testators with regards to their Spanish property. I always recommend that people:

1. If you have already bought, don’t just transfer the property to your children (or designated inheritors)!: This seems quite obvious but still today many property owners believe they can do it lawfully and don’t realize that logic and common sense are up against them: how can children buy when they don’t have money?
2. Don’t panic and jump into equity realease programmes, foreign company incorporation scheme or other miraculous option. The reason for this is very simple: the suppliers of these products/services do this for a living which means that they will not wish that you opt for another IHT avoidance scheme, but only theirs. In short, they are not able to give you impartial advice. If you are not sure, try asking them…
3. Over a certain value, don’t buy in your own name: How much will have to be paid will depend on the value, whether you have a mortgage, the number of designated inheritors and the relationship with them or if these are residents for tax purposes.
4. Don’t reciprocally will the property between the spouses, if the ultimate heirs will be the children. This can raise the tax bill dramatically.
5. Don’t pass away without a will or just a foreign will and think a Spanish will is not needed. Any asset proprietor in Spain should arrange his post-death affairs in a neat way, inasmuch as the heirs would otherwise be involved in consuming and expensive legal procedures which would attract different legal jurisdictions. An experience not recommended by those who have experienced it.
6. Don’t use the services of the so called tax experts to draft a will.
7. Don’t attempt tax-evading tricks, especially if you don’t know the risks!

In the following days I will elaborate more on each of these points.

—

For those of you interested, on Tuesday September the 28th, I will be in the The Hannah Murray Show on Talk Radio Europe, discussing the inheritance issues that affect foreigners in Spain. You can tune in directly through their website (internet stream), or through the FM frequency assigned in your area.

Antonio Flores Inheritance, Taxes inheritance tax spain, Spain taxes, Spanish will, tax avoidance Spain

Taxes are a funny thing. One day you get a registered letter, sent via the post office, with a on the spot demand for €2 surcharge, and another day Mr. Roca, the brains behind the biggest corruption ring ever to hit the headlines, faces an €800 million fine for, among other counts, Tax Fraud.

Whatever your problems with the Tax Office are, small or big, I find a very worrying pattern among some professionals in the real estate business: they are still providing tax advice to people buying real estate in Spain and the VAT refund they are supposedly entitled to if they buy through a company.This Costa del Sol legal/tax-gossip is all the more dangerous as it openly despises the complexities and sophistications of VAT tax provisions.

I am talking about advice relating to VAT refund when buying plots of land or property, and is no small talk if one considers that it accounts for 8% (or 18% on plots of land), but also if we think that it can make the difference between buying or walking out of the real estate’s office.

This inexpert advice is presumably given out innocently, but the excitement it creates is not nearly as exciting as the tax officers’ desire to quash the application and return a letter with a fine equating to 50% of the VAT amount trying to be recovered!

This “Sonderbehandlung”, or Special Treatment, is reserved by the VAT officials to those they deem are trying to cheat the Tax Office and so the matter demands some adjustment in perspective. But this is only one side of the (horror) story, because we could also find that having paid VAT, and having been entitled to a refund, the seller of the plot or property who charged us the tax is not a trader and therefore not only will we struggle to obtain a VAT refund but also we will have to pay Transfer tax on top of the VAT!

So as to not bore readers, I will succinctly explain 3 real life case scenarios:

1. A property holding company buys a plot at La Mairena, Ojen, from a legitimate land trader with a view to develop it and sell the finalized property. The buyer claims a VAT refund and receives, by way of return letter, a rejection to the application and a fine of 50% of the VAT that the unsuspecting applicant was after, because the Tax Office, in a display of extreme distrust, considers that the company was never intended to be used to carry out a commercial activity, but rather only as a means to apply and obtain the VAT refund, since the property, they contend, was to be used as living accommodation for the owner of the company. The Tax Office concludes that the property holding company has no other property, no prior experience in construction, no offices (either owned or rented), no employees, is not registered with the Tax Office with a specific “epigrafe” (which is a communication made with respect to the activity the company intends to do) and is not proven that the property was intended to be sold through real estate agents (this particular requirement was used, by a client of our firm, to demonstrate in extremis the genuineness of the claim).
2. An individual buys plot of land at La Quinta, Marbella, and pays VAT for it (16%, now 18%). Some weeks later the Regional Tax Office sends a tax demand for Transfer Tax for an additional 8%, as it is determined that the seller should have not sold with VAT because he is not a property or land developing professional, in fact has, objectively, no business organization as such, and, consequently, the deal is subject to Transfer Tax and not VAT. Connected to the above is the situation whereby the buyer is a proper trader, buys with VAT and intends to claim it back. His surprise is massive when he is told he does not have an entitlement to a VAT refund but he stills has to pay Transfer Tax.
3. An import-export company based in Torremolinos buys a new flat and tries to shave off the VAT paid, alleging that the apartment is being used by the company to carry out its activity. Input VAT is deducted, but 1 year later a letter arrives indicating that application for a VAT refund was made irregularly and it has to be repaid. Applying the Lennartz UE doctrine, the applicant manages to keep 50% of the tax arguing that 50% of the apartment is used for business office purposes and the other 50% for private living purposes.

VAT is a complex tax and is the most visible example of the permanent war between the Spanish Inland Revenue and tax payers that merits an abrupt treatment, inspired by distrust, of the former on the latter. But also, VAT is the Inland Revenue’s obsession so careful when dealing with it.

Antonio Flores Taxes Spain Tax Office, Spain VAT, Spanish Inland Revenue, Transfer Tax