Catalonia is not a tax haven, but yes, there is something you can do to minimize the damage… To pay as little as possible (within the limits of legality, of course), what do you have to know about tax residency? The Wealth tax? The Beckham law? The infamous 720? What is the most common complaint regarding tax advisers in general? Why is Shakira having a big problem now with the Spanish authorities?
Raisa Venermo and Alejandro Puyo from AvaLaw responded these questions, among others, as guest speakers at Expat Breakfast organized by Barcelona Activa and Banc Sabadell. The event generated great interest and 300 people signed up.
Want to see? Here is the link to the presentation where Noemí Aliaga, a tax lawyer at Sabadell first explains the theory, and then Raisa & Alejandro share their experiences of what happens when you add real people with real lives into the theory. Why there are suddenly no easy answers to simple questions?
If you do not have one hour to listen the whole story, here is a quick summary of few items discussed:
This is how it works:
- The main rule is that you become tax resident in Spain when you live in Spain for more than 6 months in a calendar year, and/or in general have the centre of your vital interests here. This is the critical moment when you start paying taxes in Spain for all the income you get from anywhere in the world.
- There is no-one assigning the tax residency for you automatically. You (or your advisors) will apply the residency rules and declare where you are tax resident. The country that is not happy with your declaration (the one losing you as tax resident), may ask you to prove that what you declared, is true.
- If you live and work permanently in one country, you have a house there, your family lives there, and you have a local gym membership; there is nothing much you can do. Don’t get creative.
- You may have some room for tax planning for example:
- Regarding the tax year when you are moving from one country to another (should you move in June or July, before or after the 6 months limit?)
- In a case where you travel a lot, work in different countries, have houses or family in many places, etc.
To make the right choice regarding the tax residency when it is not obvious and 100% clear, you of course need to know where you pay less. Want us to help you to find out?
INHERITANCE AND GIFT TAX
Are you planning to transfer money or buy an apartment in Barcelona for you son or a maybe for your special friend? Just bear in mind that it is not always free of charge in Spain, the gift tax may apply. These taxes are regional. In most communities, if you do the deeds correctly before a Notary Public, within the established time frame, and following the rest of the procedure by the letter, you may get significant discounts. In Catalonia for example, reductions may apply when parents buy the first apartment for their young daughter or son for her or him to live there.
Regarding the inheritance, you can do a marvelous tax planning now based on your current situation, but you should keep in mind, that the laws applicable to the inheritance are the ones in force when the inevitable happens. And yes, the inheritance tax laws change often. Also, the location of the assets, the country of residency of the deceased and the country of residency of the heir when the time comes, affect greatly on the taxes.
There is one thing that does not change and that we warmly recommend you to do if you have properties in Spain: make a Spanish Will. It can be an instrument for tax planning, and in any case greatly saves time, money and headache for your heirs when they try to register your properties in their names.
AvaLaw is a full-service law firm specialized in assisting foreigners in Spain. We have a strong tax practice, but also do the accounting for you, assist you in real-estate operations, in corporate matters, immigration, etc.
Over the last few years we have served clients from 65 different countries and are currently closing several foreign investment operations per week.