Are you thinking of buying a property in Andalusia?

Good news! The Andalusian Tax Government has approved a reduction in the Transfer Tax to be paid at a flat rate of 7%!

What is the Transfer Tax?

When you purchase a property in Spain, you are liable to pay a transfer tax for both first and second-hand properties calculated on the purchase price.

• First-hand properties: 1.5% tax rate – It has been reduced to 1.20%
• Second-hand properties: It usually implies a progressive tax rate from 8% to 10% depending on the purchase price. Now, a flat rate of 7% is applicable.

Which are the requirements to get this flat rate applied?

The only requirements are the following:

• The property to be located in the Andalusian region

Does it have any further tax or legal implications?

The only implication is the significant saving on the transfer tax related to the purchase of your property in Andalusia!

What are you waiting for?

The Andalucia Lawyers team will be pleased to assist you with the conveyancing of your dream house.

Feel free to contact us!

What is Form 720 (Modelo 720)?

Form 720 is an informative declaration on offshore assets and rights located outside Spain.

According to current regulations, Form 720 submission is requested in order to comply with the following objectives:

-Inform the Spanish administration about the offshore real estate and existing rights over them.

-In relation to the previous, communicate about the status of the accounts in financial entities located outside the national territory at the taxpayer disposal.

-Finally, information on insurance, income, securities or rights obtained abroad is a substantial part of the declaration.

What should be included in Form 720?

The obligation to submit Form 720 must be ascribed to the following information, which in turn relates to article 4.2 of Law 10/2010 on prevention of money laundering. In this sense, due to the repeated omission or non-submission of offshore assets, the inspection control on obligation of submission of this form has increased throughout the European Union. It must be taken into consideration, as established by the Spanish Tax Office, that the minimum fine for breach of a single information obligation amounts to € 10,000.

Thus, the statement must contain information on accounts in financial entities located abroad of which the taxpayer are holders or beneficiaries. It is also mandatory in the event that the taxpayer appears as authorized. In addition, real estate and rights over them (outside of Spain) shall also be declared.

The obligation, as indicated by the Spanish Tax Office, is extended to those holders of participations or shares in the capital stock of collective investment institutions, of which they are holders and are located abroad. The taxpayer shall also report whether they are a beneficiary of life or temporary annuities, contracted to entities located abroad, as well as life or disability insurance policy holders.

Who is required to submit Form 720?

As we indicated before, the obligation to file Form 720 -and report on the accounts in financial entities located abroad- lies on those owners, representatives, authorized persons, beneficiaries, whether individuals or companies with rights of disposal or full ownership. To this extent, we must also add the obligation to report on values, rights, annuities and insurances obtained outside the national territory, as well as real estate or rights over real estate located abroad.

At this point we must add a fundamental element: the obligation is limited to an specific amount. There will be no such obligation in the event that the asset or the total of assets does not exceed € 50,000. If we focus, for example, on the accounts in financial institutions, the submission of the form will also be mandatory in the event that the total amount of the balances -or average balances- as of December 31st exceeds that figure.

If the submission of this form is made for the first time, the obligation for the following years is only imposed in the event that the average balance had been subject to an increase of more than € 20,000, taking as reference the last submitted form.

In the case of real estate, shares or annuities, a new submission of Form 720 is requested in the case that the taxpayer sells any of the previously declared assets or buys a new asset. In the case a previously declared bank account is closed, the taxpayer shall also inform.

How is Form 720 submitted?

The Form 720 is to be submitted electronically. In order to file this form, identification with a digital signature (electronic certificate or electronic ID) or with the Cl@ve PIN identification system (only individuals) is requested. In the event that the taxpayer does not have an electronic signature, the person in charge of submission must have the authorization to submit declarations on behalf of third parties. In this case, this authorised person must be registered as a tax office collaborator or as a legal representative. Andalucia-lawyers.com has a team of accountants and tax experts who can help you with this From

When is Form 720 to be submitted?

The deadline for submission of Form 720 is stipulated from 31^st March of the year following the one to which the reporting exercise refers.

This tax affects income obtained in the Spanish territory by non-resident taxpayers, both individuals and entities (article 1 of Spanish Non-Resident Taxation Law). However, in this article we will just focus on individuals.

The following exemptions will no longer apply:

• Interest and capital gains derived from movable property obtained by residents of another Member State of the European Union (EU) with certain exceptions.
• Exemption for reinvestment in habitual residence for taxpayers of the EU, Iceland and Norway: the capital gains obtained by the transfer of the property that was their habitual residence in Spain may be excluded from tax, provided that the total amount obtained by the transfer is reinvested in the acquisition of a new habitual residence.

Taxable base (article 24.6 of Spanish Non-Resident Taxation Law) : Expenses as per article 24.6 will no longer be deductible. As per previously applicable article, taxpayers residing in another Member State of the European Union, individuals, could deduct expenses following requirements of the General Spanish Taxation Law. For example, in the case of property rentals located in Spain will from now on be taxed for the full amount of the rent without the possibility of deducting any expenses.

Tax rate (article 25 of Spanish Non-Resident Taxation Law): In relation to income taxed at the general tax rate, the general tax rate of 19% applied to EU residents will no longer be applicable and 24% will be the new applicable rate.

Option for EU residents to pay taxes as Spanish tax residents (article 46 of Spanish Non-Resident Taxation Law): It will no longer be applicable the special regime by which non-resident taxpayers, individuals, who prove that they are residents in another Member State of the European Union or in a Member State of the European Economic Area, and who have obtained income from work or any economic activities in Spain, could choose to pay taxes as a regular resident taxpayer under the General Spanish Taxation Law without losing their status as non-resident taxpayers.