Posts Tagged ‘tax benefits’

 

March 16th, 2010

David Beckham has the looks, the talent and – perhaps most importantly – the bank balance to make many green with envy. But it seems David Beckham’s good fortune where money is concerned improved when he signed for Real Madrid.

His transfer to the Spanish giants Real Madrid was not just a great move as far as his footballing career was concerned. In fact he left Manchester United just as the Spanish tax system was changed to benefit foreigners in an effort to draw more highly-paid professionals to these shores.

Designed to be part of the government’s budget for the 2004 financial year it came into operation on 1 January 2004 and basically allowed foreign employees to be treated as “non-resident” for tax purposes even though they were living and working in Spain. In simple terms a foreigner since then is entitled to cut his rate of income tax from a punishing top rate of 45 percent of his earnings to just 24 percent overall.

Former prime minister Jose Maria Aznar’s conservative government altered the tax laws to make it more attractive for foreigners to live here and to help companies that employ many workers from abroad — who are often paid high wages.

This law has helped the highly-influential and affluent bosses of most of Spain’s biggest football clubs as it leaves them with substantially lower wage bills and hence even bigger spending power to bring more stars to their domestic game.

Without a doubt, the law change was engineered to help football clubs to reduce their wage bills as it was reckoned if the players were paying much less tax, the cost to the clubs would be lower.

And though it might seem like these pampered prima donnas on the football pitch are having it all their way, it is not just a perk for the rich and famous. Sources from the Spanish Treasury Department emphasised that even though the new tax rules were principally brought in to help footballers, the tax change applies to anyone who is working here as a professional.

This tax provision is therefore available to all foreign professionals, from the executives with multinationals to researchers or any other salaried expat who works for a national company.

There are a few qualifications to which foreigners have to submit however:

  1. They cannot have worked in Spain for 10 years before – a measure to stop tax cheats
  2. They must work on the payroll of a Spanish company, though this can be a subsidiary of another multinational
  3. The application is be taxed as non-resident must be filed with the Spanish tax authority within 6 months of taking up the position

Finally, don’t think that it always beneficial to claim for this special tax treatment. Though the overall rate of 24 percent is very attractive and significantly lower than the highest rate currently applicable, it’s only of interest to high-income employees.

The downside of this non-resident regime is that the tax payer cannot claim the normal tax allowances and deductions applicable to resident tax payers so, as a general rule, it will only be of interest when the individual expects to earn in excess of EUR 70,000 -75,000 in a full tax year.

To make the correct decision about claiming the tax status or not, it’s best to speak to a tax advisor.

Story from Expatica

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October 14th, 2009

Britain has been designated the worst place to live in Europe, compared with nine other major countries, despite the fact that Brits earn by far the highest wages.

Life in sun-soaked Spain, where people retire earlier and live longer, was judged to be the best by researchers at uSwitch.com in the latest European Quality of Life index.

Earning 35,730 pounds ($56,410) a year on average, Brits are 10,000 pounds ($15,790) richer than their European neighbors, but that doesn’t translate into an easier life and they are getting a “raw deal” researchers concluded.

Shoppers in Britain pay higher prices for fuel, food, alcohol and cigarettes and receive poorer healthcare and education, the survey found.

“There is more to good living than money and this report shows why so many Brits are giving up on the UK and heading to France and Spain,” said Ann Robinson, Director of Consumer Policy at uSwitch.com.

“We have lost all sense of balance between wealth and well-being,” she said.

British workers toil three years longer and die two years younger than their French counterparts.

The Spanish enjoy 2,665 hours of sunshine a year, compared with just 1,397 in Ireland and they pay five percent less taxes than their light-deprived Irish cousins.

The 10 major countries surveyed were ranked in the following order from best to worst quality of life: France, Spain, Denmark, the Netherlands, Germany, Poland, Italy, Sweden, Ireland and Britain.

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May 15th, 2009

As part of a raft of useless gestures to deal with the economic crisis, José Luis Rodríguez Zapatero, Spain’s Socialist Prime Minister, has announced that mortgage relief will be eliminated on mortgages taken out after 2011 by borrowers with incomes of 24,000 Euros or more.

The measure is supposed to stimulate the housing market by giving buyers a reason to bring forward their purchase, rather than wait and potentially lose their right to mortgage relief.

If it were to succeed, this would help mop up Spain’s housing glut of 1 million new homes, and eliminate a fiscal incentive to buy rather than rent, something that organisations like the IMF and OECD have been calling for for some time.

Zapatero announced the measure during the annual state of the nation debate in Parliament this week as a way to deflect attention from Spain’s economic problems. In typical Zapatero style it was presented as a ‘progressive’ measure that only hits ‘high earners’.

In reality, however, the plan hits the middle class, and given property prices and incomes in Spain, will affect almost anyone with enough money to buy a home. Mortgage relief will be reduced after 17,000, and eliminated after 24,000 Euros income per annum.

The opposition leader Mariano Rajoy called it an “attack on the interests of the middle classes” and said his party would retain and increase mortgage relief to stimulate the market.

Developers have criticised the plan, calling it a negative stimulus. Though it may help them shift some stock in the short run, it will harm them in the long run, reducing the incentive for people to buy homes from developers.

Some experts are claiming that banks will be the biggest, and possibly only beneficiaries of this measure. “The banks are the ones with the key to financing and with the cheapest property,” Eduardo Molet, President of the Network of Property Experts, told the Spanish press. “But thinking that the banks will sell their stock rapidly is a mistake, as their product isn’t exactly the best,” Molet points out.

Mortgage relief in Spain is only available to residents with mortgages on their primary residence. As such, Zapatero’s plan will have little impact on the second home market on the coast. Nevertheless, it could affect Britons and other foreigners relocating to Spain and buying a main home with a mortgage, if they have incomes above 17,000 Euros per annum.

Eliminating mortgage relief does little to address the real problem of the Spanish property market, namely that too much inappropriate, unattractive, and overpriced property has been built, especially on the coast.

Story by: Mark Stucklin

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May 12th, 2009

Many Britons who let out their second home in Spain could now be eligible for a tax rebate windfall from HM Revenue & Customs.

From 6 April, 2010, furnished holiday lets in the UK will no longer be treated as business assets, against which owners can offset losses against their other income and roll over capital gains tax to reduce their tax bill. The break was originally introduced in the 1980s as a way of encouraging British tourism.

The Government withdrew the concession after the European Union ruled that it breached EU law by discriminating against non UK owners of second homes in other European countries.

Although the most published elements of the recent Budget concentrated on tax increases, much less published is a new opportunity for owners of holiday lets in Spain, who have been given the chance to apply retrospectively for tax repayments going back up to a full five tax years. Property owners who thinks they may be eligible should act quickly, as the tax breaks will cease in April 2010.

This change in taxation is applicable where either of two circumstances has arisen:

  1. Where owners have incurred losses from the letting of the property since 6 April 2003
  2. Where a property used for holiday lets has been sold at a profit since 6 April 2003

Example 1

Mr Smith owns a Spanish villa that, apart from a couple of weeks’ private use, is let commercially throughout the year. Whilst Mr Smith tries to let the property all year round, the seasonal nature of the business means that, year on year, a loss of around £5,000 is incurred. Mr Smith may now be able to make a claim to offset this loss against UK income tax over the last five years. As a higher rate taxpayer, this would generate a tax repayment of around £10,000 (5 years x £5,000 x 40%).

Example 2

Mrs Jones acquired a holiday property in Portugal in 2001 for the equivalent of £100,000. The property was let out for five years, on a holiday-let basis, and sold in 2006 for £200,000. She paid capital gains tax in the UK of £30,000 on the sale, after all available tax reliefs. It may now be possible to go back and amend the calculation to include further reliefs, which would reduce the taxable gain to around £2,000. This would save Mrs Jones £28,000.

More than two million Britons currently own a property abroad, and a number may recently have become eligible for one of these tax breaks. Many owners who previously kept their homes for private use have been renting them out to holiday makers over the last couple of years, to generate an extra source of income during the economic downturn.

This is a one-off opportunity in the 2009/10 tax year to secure a unique tax rebate. In 2010/11 the set-off or carry back allowances which create the rebate will no longer apply. To be eligible for the allowance, properties must have been let for ten weeks a year and available to let for 140 days.

Target Chartered Accountants are offering a free tax consultation with a fee only chargeable if a successful tax refund or reduction is achieved.

Landlords who think they may be eligible and would like to take advantage of the free tax review should contact Target Accountants

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November 4th, 2008

Spain’s Socialist government on Monday announced a new round of emergency measures to soften the impact of the economic crisis, including the funding of a two-year, partial moratorium on mortgage payments by the unemployed.

In addition to the mortgage relief, José Luis Rodríguez Zapatero, the prime minister, unveiled tax benefits and financial incentives designed to help home-buyers and promote job creation, especially in industries such as alternative energy that the government wants to promote.

“The government is convinced that it has the capacity, strength and determination to ensure that the families in this country in the most difficulty are supported and helped,” Mr Zapatero said.

Read more at Financial Times

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