| So you've owned a Property in Mallorca for the last | | | | Hacienda (the Spanish IRS) finally got wind of this |
| 10 years and have enjoyed many a holidays in your | | | | and, in amongst some of the most sweeping tax |
| luxury apartment and have been living there | | | | changes in Spain for many years, changed the law to |
| permanently of the last 5 years. But, the time has | | | | describe residency as "fiscal residency". That means |
| come to sell, you've found something else nearer to | | | | you have to declare income in Spain in order to be |
| Puerto Adriano where you have just moored your | | | | considered a fiscal resident and that means you have |
| new boat. You've decided not to use an estate | | | | to declare ALL your income world wide and in the |
| agent (after all, you sold a property in Mallorca | | | | case where you are exempt, you must declare the |
| before) and the guy in the apartment below has | | | | exemption. If you don't do this, you are not |
| always mentioned he would buy your Apartment if | | | | considered as a fiscal resident in Mallorca (Spain). |
| you ever decided to sell because, lets face it, the | | | | To be considered exempt of capital gains retentions |
| penthouse has better views and a roof terrace. | | | | at the point of sale, you now have to present a |
| So you've agreed a price, accepted a deposit by | | | | "Certificado de Residencia Fiscal" issued by Hacienda |
| transfer (last month) and you've given all your details | | | | and of course to get this, you have to be actively |
| to the Notary who will be witnessing the granting of | | | | declaring income tax in Spain. In itself, this is not a |
| public sales deed. Yes, you are a resident and have | | | | problem, as Hacienda can now recover hundreds of |
| been living here for five years, here is my | | | | thousands of lost tax revenues. BUT, there is still a |
| "Residencia" card and my passport and here is my | | | | huge discrepancy with the banks. |
| original purchase deed. Ah, says the technician, do | | | | Speaking to the staff at the bank, they all agree that |
| you have a tax certificate from Hacienda? No, you | | | | if a client opens an account presenting either the old |
| say, all my taxes are paid in the UK. Well in that case, | | | | Residencia Card or the new Residencia Certificate |
| sir, the Spanish tax office is going to withhold 3% of | | | | issued by the Ministry of Interior (NOT the fiscal |
| the sales price on account of any capital gain liability. | | | | residency issued by Hacienda) then they will proceed |
| You begrudgingly accept this as fact, you have no | | | | to open it as a "Resident Account". |
| choice as its the law, and are actually quite relieved | | | | I have just got off the phone to my bank manager |
| as, the law has changed recently and you would | | | | to get the latest on this and this was his reply. If a |
| have had to pay 5% before that. | | | | person presents themselves with a a Residencia Card |
| So, the date has arrived and everyone is at the | | | | or Residencia Certificate they will open a residents |
| notary at the agreed time. Yes, there is some fuss | | | | account as per the banks policy. He is aware of the |
| over the registry details of the parking and what | | | | difference but says it would be impossible to ask |
| percentage of the price to allocate to the sale of this | | | | everyone that came in, to go to Hacienda, and get a |
| but everything is sorted out. The buyer is taking a | | | | "Certificado de Residencia Fiscal" as this is just not |
| bridging loan on his apartment so that he can buy | | | | feasible. Furthermore, there is a catch 22 situation. In |
| yours immediately so the bank have come with a | | | | order to become a Fiscal Resident, you need to first |
| nominative certified bankers draft for the rest of the | | | | become a "physical" resident and to file a tax return |
| price. This is as good as cash and you put your | | | | and in order to file a tax return you need a bank |
| signature exactly where the notary asks, smile | | | | account. |
| contentedly and shake hands with your former | | | | The point being that, after a full year since the tax |
| downstairs neighbour who now owns your | | | | changes were implemented, the situation can still arise |
| penthouse. | | | | and there is one thing my bank manager was |
| Cheque in hand, you make your way to the bank | | | | adament about: you cannot pay a nominative cheque |
| and smile at Marta as you hand over your cheque, | | | | issued to a non-resident into a resident account in the |
| quite pleased with the amount, after all, remember | | | | same name. Or, vice versa. His solution is the same |
| what it cost you 10 years ago ... a lot less. Marta | | | | as mine (read on ...) so if you find yourself in this |
| does the necessary and scans the cheque under the | | | | predicament do not despair. |
| bar-code reader and after a couple of computer | | | | Certainly the law is clear, but the reality is confusing. |
| beeps frowns whilst intensely studying the cheque, | | | | There is a huge disparity between what the |
| only to look at you solemnly shaking her head saying, | | | | government considers residency and what the banks |
| sorry sir, but we cannot pay this cheque into you | | | | consider (or have been told to consider) as residency. |
| account. | | | | After all, there are many other benefits to residency |
| At this point, panic sets in before you take some | | | | (non fiscal) in Mallorca. For starters, you get 30% |
| deep breaths to control it and your rapidly increasing | | | | discount when you travel to the mainland! But |
| hear rate. What do you mean, I can't pay it in? Is | | | | nonetheless, I imagine that there will have been and |
| there something wrong with the cheque? (at this | | | | will continue to be, thousand of distraught individuals. |
| stage, your former downstairs neighbour and his | | | | Not only have they just found out that they will |
| "bank manager" are taking on the look of fraudsters | | | | have to leave an automatic retention against their |
| on "most wanted list" you saw last week). No sir, the | | | | capital gain liability (yes, you are a resident sir by not |
| cheque is good, but it is made out as "non resident" | | | | a fiscal resident) then they found out they can't cash |
| and you are a resident, you have been living here for | | | | their cheque. There is a solution, the one that I used |
| the last 5 years and have had the account with us all | | | | to solve this exact problem for my client. Go to |
| that time. | | | | another bank, show them your passport (just your |
| A "resident" account, and I cannot pay a non-resident | | | | passport) and open a non-resident account, and cash |
| cheque into a resident account. | | | | your cheque. Yes, the information may cross |
| And therein lies the problem you see. For many years | | | | reference and conflict further up the line but its your |
| people were declaring Residency and therefore | | | | money and you are entitled to it. |
| showing up at the Notary with their "Residencia" | | | | The other solution, of course, is, avoid the nasty |
| simply to avoid any capital gains retention or burden, | | | | surprises, and use a reputable estate agent! |
| rolling over the money into the next purchase. | | | | |