Posts Tagged ‘tax rebate’

 

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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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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March 8th, 2009

A British couple who took the Spanish tax authorities to court, have won £10,000 after they had been illegally charged more than twice the amount of capital gains tax than was charged to Spanish residents when they sold a property in 2004. After a battle lasting more than a year, they have successfully reclaimed their overpayment and the case now paves the way for thousands of other foreigners to make similar claims from the Spanish government.

Until recently, foreign nationals had to pay 35pc of any gains made on Spanish properties as tax. This compared to just 15pc paid by Spanish nationals. The European Union challenged the rules, claiming they were discriminatory, and since the start of 2007 the Spanish tax authorities have levied the same 15pc tax rate on Spanish and overseas property owners.

The Spanish court ruled that the initial case put forward by solicitors Costa, Alvarez, Manglano & Associates on behalf of Mr and Mrs Roy from the UK was so convincing that there was no need for it to be passed on to the European Courts of Justice (ECJ), which is the usual procedure.

“Anyone else who believes they have been affected should come forward now with their cases,” said Emilio Alvarez, from the law firm. Six hundred other British couples are now putting cases forward, and all the cases will be decided separately by the Spanish court.

Taxpayers are also entitled to claim a refund for missing interest at a rate of 6pc from the date the reclaim is presented, making the total reclaim even higher. You are eligible if you sold a property in Spain between July 2004 and December 31 2006 and were not a fiscal resident in Spain when you sold it. You also have to have paid capital gains tax on the property to claim and need to have sold the property as an individual rather than a company.

From: Telegraph

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November 12th, 2008

There have been a lot of stories in the press recently about how Brits and other EU citizens who sold a Spanish property between June 2004 and December 2006 could be entitled to reclaim part of their Spanish capital gains tax.

Thousands of Britons who sold a property in Spain during this period could be owed a 20 per cent tax rebate from the Spanish government.

Initial estimates put the total amount to be reclaimed by British citizens at £11,000 per person, totalling an estimated £37m.

However, over the last few months hundreds of Brits have registered average reclaims of more than £19,300 each – totalling more than an estimated £86m.

It has been estimated that somewhere in the region of 4,500 British people, plus thousands more residents in other European countries, may now be entitled to reclaim their tax.

For more information, see www.spanishtaxreclaim.co.uk.

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