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0,,15743033_303,00How Spain’s tax system is undermining the property market and its would-be buyers.

The situation in Spain is fragile, what with Brexit, the continuing dictatorship of Rajoy and the out-of-control national and regional debts. Tourism, residential expats and short stay are a major contributor to the Spanish economy that appears to carry on regardless.

However, it’s ‘on a shaky peg’.

All it would take would be one small tremor on land or a bomb in a tourist place, and Spain would be in the same position as all the other Mediterranean countries.

The exceptional numbers of tourists this year is not because of an overwhelming desire for Spain, it’s due to the impression of there being nowhere else ‘safe’ to go in the sunshine.

And as for the longer-term residents, they are being hit for tax in so many ways.

Frighten these people away and their energy, work and spending power is lost, plus that of all the people they give jobs to.

That’s all money brought into and distributed in the economy of Spain, keeping employment and services alive.

It’s an active problem as last month, there was a report stating Marbella has recently ‘lost’ 5,000 residents.

Here’s part of an email I received recently from someone who has lived on the Costa del Sol for decades.

“The Spanish government do nothing to attract any investor into Spain. No one wants to invest and therefore buy property in a country that’s apparently staggering on the verge of bankruptcy, and as proof increases existing taxes and constantly seem bent on inventing and applying new ones.  It’s now classed as one of the highest taxed countries in the world. The latest that definitely affects Costa buyers is the application of the draconian law on holiday rental properties whose effect is to extract more taxes. Thus the idea of buying a second home to earn some money from it whilst it is not in use is now impossible. Buying it only serves to invite loss as there’s not a sufficient property value increase to cover the costs of buying and selling and running the property while it’s owned. It encourages the Spanish taxman to steal your wallet as he delves into your international tax affairs. Buyers are naturally deterred and will never return. It’s a bad and worsening omen for Spain and its property markets.”

A lawyer told me he has a client who owns a large villa in a Spanish company and keeps a car in the garage for use when here.

He is now being taxed for ‘notional income’ that the company could have earned by renting

out the villa when he is not there plus rent on the car for the same periods!

They’ll start at the top, but soon it will be everybody who owns a property and/or car that’s not occupied or used all the time.

It’s the same principle as being taxed on gains a seller should have made and purchase taxes a buyer should have paid, but ‘avoided’ by selling/buying a property at below the taxman’s notional value for the property.

Is the fairness of these taxes being challenged or are the professionals scared off by the hacienda threatening them and all their clients with draconian and repeat ‘investigations’?
The law works so slowly and who is going to take on the tax authorities?

 First published in Olive Press 15th Sept 2016
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