Spanish bureaucracy and tax loopholes

LAST UPDATED: 11 Jan, 2015 @ 21:48
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Spanish bureaucracy and tax loopholes

If I say that Spain is a country in love with bureaucracy, your response might be: “Really…I don’t believe you for a minute?!” Sarcasm is rarely better suited to a statement than here.

Yes, unfortunately a good proportion (not all) of the 2.7 million Spanish civil servants need to move paperwork around to justify their jobs and that includes the Spanish Hacienda. But they do seem to be getting better all the time. One example is the clampdown on tax loopholes on buying shares of a property-owning company, even considering the exasperatingly confusing layers of new amendments.

Let’s take an example of article 108 of the Stock Exchange Act, a precept devised to prevent Spanish property buyers from using companies to circumvent the payment of transfer taxes. The wording of the article, modified at least six times since 1989, has given food for thought to judges, lawyers, tax advisors and notaries who, in very dense interpretations of what the lawman really meant to say, ended up more confused than before (getting many hundreds of property buyers into trouble in the way).

Simply put, this article regulated a general exemption of Spanish VAT, transfer tax and stamp duty for the transfer of securities of companies that held real estate assets. Back in the 90s, the article regulated on the scope of the exemption of payment of taxes if you bought property via the shares of a company and it talked about not acquiring more than 50% of the share capital of a company whose balance sheet was made up by, in at least 50% of it, Spanish real estate.

So many people, ensuring they bought equally with a partner of friend, got away with this and bought property free from transfer taxes, much to the despair of the tax office. In a new twist, the lawman introduced a new condition: that three years had to pass between the time of transfer of the property into the company and the sale of shares (to avoid purpose-made company incorporations).

Not being enough, new amendments were introduced but primarily, they came up with one definitive concept: that it was presumed that if any of the above were met, one was definitely trying to cheat the Hacienda.

And to close the loop, they introduced the final amendment whereby provided the property was being used for an economic or professional activity, transfer tax will be applied because it is presumed (subject to rebuttal) that one is trying to buy a home and pay no taxes (pretty practical here!).

In conclusion, a no-go area for potential tax-avoidance adventurers.

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Lawyer Antonio Flores is the legal columnist for the Olive Press. Antonio has been practising law since 1997, year in which he began working for a large law firm in Marbella as a Property Lawyer. In 1998 he left the company he had joined a few months earlier, and used his knowledge and the experience gained to build his own practice. He is known throughout the community as independent, reputable and trustworthy. Through a combination of strong work ethics, determination and international exposure, his competence of Spanish Law is unparalleled and demonstrated through his fluency in English and Spanish.

2 COMMENTS

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  1. in the uk the Inland revenue has a duty to let people know what procedures they need to follow to stay in the law
    for instance leaflets are available in every language under the Sun

    in spain it is your responsibility to find out what you need to do to stay within the law/ even when practically impossible to find out what you are supposed to do

  2. Good piece.
    @rob:
    you are so right, it is so difficult to keep up with what you need to do with even the people enforcing the laws/changes in the law 90% unaware of changes. i have recived at least 5 fines after following incorrect infomation given to me from the Hacienda, town hall, junta.

    there is a short film mocking the whole paper work/public office worker system, it is very funny but also very true:

    it has subtitiles for those who dont speak spanish:
    “https://www.youtube.com/watch?v=2wtbQUaC9mE”

    enjoy :)

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