MASSIVE CLAIMS AGAINST TAX RETURNS ON GAINS IN VALUE OF URBAN LAND ARE EXPECTED

It is already a tradition of Spanish local finance legislation to assume that any property sale brings about a profit as a result. Such rules calculate taxes on the basis of cadastral value of the property, not on the actual profit obtained in the sales transaction.

 

Notwithstanding, it is a fact that, since the beginning of the economic crisis, houses are being sold at a lower price than they were bought.  In a judgement of February 16th 2017, the Spanish Constitutional Court has declared unconstitutional two articles of the Foral Law on Basque, since they do not take into account the actual capital gain obtained in sales operations. 

 

The mentioned articles are solely aplicable in the Gipuzkoan foral territory. However, these rules are exactly the same as the ones included in the Spanish General Local Finance Act.

 

As a result, some Spanish law firms and tax consultants are advising their clients to claim against Tax on Gains in Value of Urban Land returns of non prescribed years (the last four) as soons as possible, as there is a chance that the Spanish Constitutional Court gives judgement against the liquidations of this tax.  The advice tries to avoid the consequences of a possible temporary limitation of the Constitutional Court. Such a limitation is foreseeable, bearing in mind that a massive claim by taxpayers is also predictable.  

 

In this sense, it is advisable to submit an application for refund of undue income immediately after having paid the tax. 

 

Luisa Fernández Baladrón is a registered lawyer at the Il.lustre Col.legi d´Advocats of the Balearic Islands - http://www.fernandezbaladron.com

HOW TO CLAIM AGAINST ABUSIVE CLAUSES IN MORTGAGES

On December 21st of 2016, the Court of Justice of the EU gave judgement in favour of the unlimited retroactive application of invalidity of abusive clauses (joined cases No. C-154/15, C/307/15 and C-308/15).

In order to satisfy the requirements of the above mentioned judgement, the Spanish Government approved the Royal Decree Law No. 1/2017 on „Urgent Measures for the Protection of Consumers against Abusive Clauses“. This rule provides the consumer with a voluntary out-of-Court procedure.

The above mentioned out-of-Court procedure against abusive clauses only applies to loan or credit agreements which assemble each of the following requirements:

×          The loan or credit agreement must be guaranteed by a mortgage,

×          It must include an abusive clause which establishes a minimum interest rate and

×          It must be concluded with a consumer.

In short, the procedure consists of the following:

1.      The consumer makes a request to his bank, asking for the invalidity of the abusive clause and the refund of the unduly charged amount and the respective interest.

 

2.      If the financial institution considers that the refund is appropriate, it will calculate the amount to be returned; otherwise, it will justify the reasons for its objection.

 

3.      If the client agrees with the proposed solution, he will let the bank know in writing and the bank will proceed to return the amount; otherwise, the client reserves the right to turn to the Courts.

The out-of-Court procedure is completely free of charge and must be completed within three months.

 

 

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THE SPANISH INLAND REVENUE FOCUSES ON REAL ESTATE OF NATURAL PERSONS

The Spanish Inland Revenue has already approved 2017 anti-fraud plan. Taxable assets of natural persons will be subject to specific surveillance. More specifically, the Spanish Inland Revenue will review Equity Tax returns of non-prescribed years (the last four, in general terms).

Equity Tax had been technically abolished on January 2008, by means of Law No. 4/2008. With the economic crisis, the Spanish Government reinstated Equity Tax for 2011 and 2012. This was supposed to be a temporary measure. In the meantime, however, it has been extended year after year. In fact, it is still in place.

Real Estate is the main objective. The Inland Revenue obtains information on the ownership of the property, among others, by means of the information given by the Tax on Gains in Value of Urban Land (“plusvalía”), which is paid by the seller of the property when he sells it. The “plusvalía” is levied by the local administration, but the current direct collaboration among administrations makes it very easy for the Inland Revenue to have information at hand.

Note that non-residents are also subject to Equity Tax, though only for their assets located in the Spanish territory and for the rights that may be exercised in the Spanish territory.

Of course, there is an exempted amount. But be very careful with it, since the amount is different in each region. Thus, for instance, Catalonia´s exempted amount is only 500.000€, whereas Valencia´s is 1.000.000€.

Luisa Fernandez Baladron is a registered lawyer at the Il.lustre Col.legi d´Advocats of Balearic Islands. www.fernandezbaladron.com

DEFERRED PAYMENT OF TAXES FOR FREELANCERS

Measures of Royal Decree-Law 3/2016 in matters of deferred payment

Royal Decree-Law 3/2016, of 2 December, eliminated the option of granting deferred payment or split payment of specific tax debts, including split payment of Corporation Tax and that derived from taxes, such as VAT, which must be legally added, unless it can be shown that the added payments have not been paid.

Processing of deferred payment in accordance with Royal Decree-Law 3/2016

Applications for deferred payment or split-payment of debts affected by this measure will be rejected, while the remaining applications will be processed according to their amount, in accordance with the established procedure, which has not been modified by the Royal Decree-Law. Thus, applications for deferred payment or split-payment regarding debts for a total amount equal to or less than 30,000 euros will not need to provide guarantees, and will be processed via an automated process. Applications for a higher total amount must provide the appropriate guarantees and will be processed by means of an ordinary non-automated process. The limit exempt from providing guarantees was raised in October 2015 from 18,000 euros to the current 30,000 euros.

Impact of the measure on self-employed workers

With regards self-employed workers, the measure regarding split-payment of Corporation Tax does not affect them, given that they are taxed in Personal Income Tax. The measure on added VAT affects them, and they can continue to request deferred payment and split-payment of VAT if they can accredit that these added payments have not been collected. Therefore, the main change for self-employed workers will be that they are required to accredit that they have not collected the added VAT payments, specifically in requests that exceed the limit exempt of guarantees.

As a result, self-employed workers may request deferred payment, regardless of the amount, of their Personal Income Tax and VAT in the following circumstances, according to the total amount of the debt:

1. If the requests refer to a debt, the total amount of which is equal to or less than 30,000 euros, deferred payment will be granted, without guarantees, of up to 12 monthly payments, unless the payer has requested fewer monthly payments, in which case, the number of instalments requested will be granted. The periodicity of the payments will be monthly. They are processed by means of an automated mechanism.
2. If the requests refer to a debt, the total amount of which is over 30,000 euros, deferred payment will be granted, according to the type of guarantee provided by the debtor, and for a maximum term of 36 monthly payments, unless the payer has requested fewer monthly payments, in which case, the number of instalments requested will be granted. If the debts are for VAT, it will also be necessary to accredit that the VAT payments added have not been paid.

Source: Web-Site of the Spanish Inland Revenue (AEAT)

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TAXATION OF HOUSING LEASE WHEN THE TENANT IS A LEGAL ENTITY

Sometimes, the housing tenant is not a natural person, but a legal entity, which rents the housing for its employees.

In this case, two questions arise:

• if the lessor benefits from the reduction by 60% of the rental income, as it is the general rule in housing lease;
• if the aforementioned housing lease is VAT free.

INCOME TAX REDUCTION - In a recent Resolution, the Spanish Central Economic and Administrative Court has stated that, in such cases, the lessor may also apply the 60% reduction to rental income, since the law does not expressly require the tenant to be a natural person to benefit from the reduction.

VAT EXEMPTION - As far as the VAT exemption is concerned, the Spanish Central Economic and Administrative Court considers that the aforementioned lease will not be exempted from VAT, in general terms. In fact, VAT Act requires the tenant to be the one who occupies the real estate, to make the deduction possible (Art. 20.23 of VAT Act). Actually, if the housing is rented by a legal entity, we are in presence of a sublease (instead of a lease).

However, if the rental contract mentioned the name of both the tenant and the sublesee, the VAT exemption would be applicable.

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