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The Spanish Lawyer Online

Spanish Law Tribune

Keeping up-to-date with Spanish Law


Archive for September, 2008

Spanish Inheritance Tax Abolished? I’m Afraid Not!

September 19th, 2008

Some of you have probably recently read in the press (http://www NULL.citywire NULL.aspx?ID=313872)that Spanish Inheritance Tax has been abolished, and have received the news with excitement! Well, I don’t believe that anyone is in a hurry to pass away to benefit from this supposed tax exemption, but it would indeed mean a relief for all of those concerned about the Inheritance Tax burden for our heirs when the time comes!

As our colleague Fernando Del Canto rightly points out in his excellent blog, the news is incorrect. Apparently, Spain’s Government has published in the English version of their site a press release (http://www NULL.htm) in which they mistakenly claim that the abolishment of Inheritance Tax is to be approved.

The text, lost in translation, is as follows:

The Government approves the abolition of Inheritance Tax and 24 reforms aimed at economic recovery

Thursday, 14 August 2008

The president of the Government appeared after today’s extraordinary Cabinet Meeting to explain the economic reform programme that is focussed on six strategic sectors: finance for small and medium sized enterprises, housing, transport, energy, climatic change, telecommunications and the information society, and services. These reforms will take place during 2008 and 2009 with the aim of helping families and businesses, and preparing for economic recovery.
Adopted measures

The head of the Government announced that the Bill for abolishing inheritance tax, to come into effect from 1 January 2008, has been referred to Parliament. This represents a fiscal improvement of 1,800 million euros for approximately one million taxpayers.

We would like to confirm that, unfortunately, this is just an error due to a poor technical translation into English. What the Government meant to inform was that Property Wealth Tax (http://www NULL.marbella-lawyers, as already reported at large by the media, was to be abolished as from the 1st of January 2008.

Inheritance, Taxes , ,

Landlords Afraid of non-Paying Tenants Take Pre-Emptive Measures

September 16th, 2008

As read on the Sur newspaper (http://www NULL.diariosur NULL.html), more than 9,000 landlords have adopted in their tenancy contracts the Arbitrage System which allows eviction associated costs to be cut down significantly. Malaga is the Andalousian province in which this practice has been most successful. More than 8.980 Tenancy Agreements uphold the arbitrage system should one of the parties breach the contract i.e. non-payment.

This system was created back in 2004 and allows to significantly reduce both the associated expenses as well as the necessary eviction time compared to a normal court procedure (which normally averages at least 10 months). However, this system only works if both parties, tenant and landlord, abide the mandatory Arbitral Award something which does not always happen as non-paying tenants may only buying time with no real intention of paying the arrears.

The Arbitral Court guarantees that the case will be examined within 30 days, often even less. The main advantage would be the swiftness in which the arbitral award is obtained. This is particular important in cases in which the landlord offsets the rent against his mortgage repayments.

To apply for it is only necessary to request it in one of the 120 real estate agencies of Malaga province which are homologated by the Arbitral Court or simply including it as a clause in the Tenancy agreement waiving the ordinary court procedure. It only costs 42 Euros plus a further 300 Euros in case of a protracted conflict. A normal court procedure would have an average cost of at least 2.300 Euros. The second advantage would be the considerable amount of money it saves the landlord.

Another option available to the Landlord is to hire a Rental Insurance which cover the event of the tenant defaulting until he is effectively vacated from the property. These insurance companies will request the tenants’ payslips to ascertain their financial ability.

More information on the subject can be found on our article Landlord: Keys to Successful Rental Income (http://www NULL.marbella-lawyers

Property , ,

Up to 300% Increase in Property Taxes in Malaga in 2009

September 12th, 2008

Thirteen local councils in Málaga province will revise and update the cadastral values (valor catastral) of properties within their limits, translating into increases which range from 80% to 300%. It is expected that the increase for residential properties will be no more than an average of 150%.

The increase in cadastral value is quite significant (http://www NULL.surinenglish NULL.html), as this figure is a benchmark which is used in calculating various taxes in Spain, such as IBI Tax, IIVT (or Plusvalía Municipal Tax), Wealth and Income Tax and the dreaded Inheritance Tax.  The cadastral value, which is generally well below the true market value of real estate, is regularly updated every decade or so, as not to significantly detach the taxable values from those of the market. The single most important factor that raises or lowers the cadastral value is the appreciation or depreciation in value of the land.

In the Málaga province these updates were carried in general in the 80s and mid 90s. The municipalities of Alfarnate, Arenas, Atajate, Benamargosa, Benaoján, Cútar, El Burgo, Cuevas de San Marcos, Gaucín, Jubrique, Málaga (city) Totalán and Abdalajís Valley will all be updating the cadastral value of real estate in their territory.  In some of these towns the cadastral value hasn’t been updated since 1989 such as in El Burgo or Gaucín. IBI tax may well even triple in these municipalities as from next year.

Important cities in Málaga province such as Estepona or Vélez Málaga (http://www NULL.surinenglish NULL.html) already updated their cadastral values last year. However many other towns will also have to update them soon, such as Marbella (unrevised since 1988), Alhaurín de la Torre (1996), Benahavís (1996), Campillos (1996), Cártama (2000), Manilva (1997), Rincón de la Victoria (1999), Ronda (1998) or Torrox (2000).

Most owners have IBI tax set as a standing order against their Spanish bank accounts. Make sure that you have enough funds in your bank account before this tax is due (normally between June and September). Regarding Property Income tax (Property Wealth Tax is due to disappear next year), your solicitor will let you know how much this figure is.

Property, Taxes , ,