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A British newspaper has recently published a story about a retired couple who lost their retirement home on Spain’s Costa Blanca and who have had to wait six years for the UK’s Court of Appeal to rule that they will be compensated for the loss of the property and £300,000 they had spent on taking legal action.

The sad story of Stewart and Linda Forrester is a reminder to all buyers looking at properties abroad that independent legal advice is a priority. The couple, who had saved hard to enjoy later life in Spain, bought the property through a Atlas International Property Services, a UK-based agent for developers Tecnologia Urbanista. Atlas, now in liquidation, told buyers it was a ‘one-stop-shop’ that would handle every aspect of the sale, including the services of Spanish lawyer Miguel Angel Aroca Seiquer, who was supposed to ensure they got the title deeds for the apartment.

After nine years of enjoying the apartment near Alicante and spending a significant amount of money on home improvements, the couple returned to the apartment to find the foundations had collapsed causing irreparable damage. The developers offered them another property, which they accepted.

But that wasn’t the end of the story. They discovered from neighbours in the same apartment block that mortgages had been taken out on the properties, even though the Forresters and others had bought the properties outright. The lawyer Seiquer told them not to worry, as they would have the title deeds soon. Instead, they discovered the property could be repossessed at any time. So, they took the decision to voluntarily give the apartment back to the bank.

Their legal battle against the developers, Atlas and the lawyer, in which seven other couples and two other people joined them, started in 2012 and has only finished in 2018 when the Court of Appeal in London upheld that the lawyer had been negligent. Lord Justice David Richards said Seiquer failed in his duty to advise the buyers about the risk of paying final instalments on their flats without ensuring that they would get mortgage-free title to the properties. Seiquer failed to tell buyers that the transactions were not guaranteed by banks, as required by Spanish law. And he neglected to advise them not to part with their cash until the developer could prove it had mortgage-free title to the flats.

The majority of developers, agents and lawyers are reputable, but there will always be some that act unethically. So, if you are buying a home overseas, get your own lawyer rather than one suggested by developers or agents, then you can be sure that your legal representative is taking care of your best interests, not somebody else’s.

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Mark Stücklin, the knowledgeable founder of Spanish Property Insight, has highlighted an impending problem for investors buying property in Spain via the vehicle of an international company.

Until now, this has been a normal state of affairs. Wealthy investors set up an international company structure to buy properties in order to avoid tax, but it seems the Spanish tax authorities have plans to look into this and keep an eye on it. As Stücklin says, “it’s a ticking time bomb.”

Tax specialists Del Canto Chambers explained that the typical set up, which proved very popular from the 1970s to the early 2000s, usually consisted of, “International company structures, with some owned by double or triple vehicles involving a Spanish company belonging to a foreign company and, in many cases, a Trust on top.” The firm, which is based in both Madrid and London, believe that there are somewhere in the region of 5,000 properties in Spain, privately owned and using this investment structure.

Of course, it isn’t cheap to set up such a company structure, so the tax gains have to ‘vale la pena’ (worth the pain) as the Spanish say. They have been used to minimise tax payable to Spain and to make it easier to change the details of ownership and avoid inheritance tax. As you might expect, the properties owned under these company structures tend to be valued in the millions rather than a couple of hundred thousand.

Now Spain, like many of its neighbours, is taking a cool look at tax avoidance schemes, especially since its public finances are under pressure, and pensioners are marching in the streets for a better deal. Del Canto thinks that international company structures owning property have got a target on their back, and the taxation specialists are encouraging caution, because in their words, the Spanish are “high-handed and difficult to deal with.”

The report in Spanish Property Insight also suggests that the Costa del Sol is the first place the tax inspectors will go to “shoot first and ask questions later.” It is recommended that if you have a property under a company structure that you get advice about making sure you are tax compliant. Be prepared before the taxman starts asking questions – it is the best route to survival.

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Florida is the ideal state for Europeans looking for winter sun. It’s a shorter journey than to California and it has well-established expat communities, which will make you fell right at home straightaway. However, it is the USA and you might find that there are tax and compliance issues that are ‘foreign’ to you, but with plenty of advance planning and expert help it will all be fine – otherwise fewer expats would buy property in Florida.

Here are a few of the issues you should plan for before buying in Florida.

How will you pay for the property in Florida?

If you’re paying cash, no need to concern yourself with sorting out a mortgage. If you do need a mortgage for a U.S. property, it is best to go to a licensed mortgage expert. Not only do they undergo continuous training, they also keep up-to-date with all the current special offers and can often offer you lower rates and better set-up costs. Banks on the other hand are limited to what they have to offer in-house, and their deal may not be the best for you.

What are the Florida tax requirements for property owners?

There are several of these and you should consult a tax expert to minimise your payments within the legal requirements.

You will need to pay income tax to the IRS if you rent out your property, even if you mostly live overseas, unless IRS withholding tax has been applied, and then you don’t.

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Moving overseas?

There is a tangible personal property tax on furniture and fixtures in rental and business properties. Tax returns reporting the value of these assets must be filed to the Property Appraisers’ office by April 1st.

Property tax must be paid annually. The Property Appraiser’s Office establishes the assessed value of a property and prepares the tax roll. You’ll usually receive the tax statement around the beginning of November each year.

If you’re renting out your property and it is for less than six months of the year, there is a tourist development tax and a sales & use tax. A management company can handle this for you, even if you collect the income in your home country.

There is also a local business tax that rental owners have to pay annually. And then there is the capital gains tax, which applies to a sale once you’ve owned the property for more than one year. And, U.S. tax law also demands that any non-resident alien who sells an interest in a U.S. property is subject to a withholding tax of 15 percent of the gross sales price.

It probably sounds more complex than it is, but it is still better to get expert advice and ensure you know exactly when to pay and what you are liable for.

Take a look at the properties for sale in Florida on Umuzee.com – bring some sunshine into your life!

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Non-residents with property in Spain need to consider how to handle the Spanish inheritance tax system. It is quite complex and can differ between the various autonomous communities, i.e. the rules in Andalucia may be different to those in Catalonia, which is why you need the advice of an experienced lawyer in the region where you own property.

In Spain, inheritance government and regional authorities manage this tax, hence the differences between regions. The tax applies to:

  • Taxpayers who usually reside in Spain
  • Non-resident heirs who are inheriting property in Spain
  • Anyone receiving a payout from life insurance policies where the insurer is Spanish

Non-resident inheritance tax, Spain

Until recently, the inheritance tax rules were applied differently to non-residents. Before a new law came into being in 2015, non-residents often paid up to 80 percent more tax than Spanish residents. However, now inheritance tax laws can’t discriminate against non-residents and all EU citizens can ask to be treated in the same way as a Spanish citizen would, according to the local laws of their region.

One thing to note is this: inheritance tax in Spain is very closely based on the relationship of the heir to the estate owner. This was established to protect the rights of children of property owners. However, it becomes more complicated where there are no direct heirs, or in cases where a couple are not married.

Inheritance tax rates, Spain

This is where it gets complicated and where you need a tax lawyer to help with forward planning. For example, the biggest tax allowance is given to natural and adopted children under 21. Children over 21, spouses, grandparents and grandchildren are in the second category and have a lower tax free allowance. Unmarried partners will need to be registered as ‘pareja de hecho’, a de facto spouse, in some regions to qualify for the same level of exemption; otherwise, they don’t receive any tax allowance at all. Other relations, such as aunts, uncles, sisters, brothers and cousins etc get the smallest tax free allowance.

Check your liabilities back home

Overseas property owners may also be liable for inheritance tax in your home country. Even those who are considered resident in Spain might be liable and while you may be able to offset payment in one country against the amount demanded in Spain, this is something that requires expert advice.

Tax planning is something every property owner should think about after buying a property in Spain. Otherwise your heirs may find they have to pay more than is necessary.

Umuzee.com can help you find a lawyer to handle your tax planning in Spain.

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Switzerland is known for chocolate, watches, mountains, yodelling and an extraordinary number of wealthy inhabitants. The latter have influenced the values of real estate in the country, as have pension funds buying up property while interest rates are at historically low levels. The country also has a fairly relaxed immigration policy for those who have enough to get a Swiss private visa, making it one of the easier countries to move to in Europe, although outside the Eurozone. For example, if you have €100k in savings, the Swiss authorities will consider on a case-by-case basis if and how long you can stay there; if you have several millions you will get a permanent residency quickly.

Most people rent in Switzerland

Due to what a Swiss real estate agent referred to as “one of the most irrational” property markets he has ever seen, over 60% of people rent their homes in Switzerland. Ownership is higher outside the main urban areas, but as the cities have expanded, creating a housing shortage, rising house prices and the tight property market mean that desirable residences are both expensive and hard to find.

Switzerland has strict property purchase regulations

Add on to this, Switzerland has strict regulations regarding property purchases by foreigners. These stipulate that you can buy a property if:

  • you are an EU or EFTA national with a Swiss residence permit who resides in Switzerland; or
  • you hold a Swiss C Permit.

The Swiss C permit is the equivalent of permanent residency, allowing a non-Swiss citizen to work and live in Switzerland without any restrictions. The permit C holder does not need an authorisation to change employment or develop an independent activity. This is clearly what is on offer to the super rich.

If you qualify for either of the above, you have the same rights as a Swiss citizen to buy a holiday home, an investment property or business premises.

If you don’t qualify, (and this includes those working for diplomatic missions, UN agencies and CERN) you will most likely have to apply for a licence to buy a property in Switzerland. The rules vary between the different Swiss cantons, but you are more likely to get a licence if you have already been living there for five years and plan to buy a primary residence.

Local knowledge of the property market is invaluable if you have your heart set on buying a home in Switzerland and don’t expect a fast buying process; it can take up to three months. Also, allow around five percent of the sales price for fees and charges.

This is not the easiest country for overseas buyers, but it does offer one of the best lifestyles, so if you have the will to do it, you’ll find the way.

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It is highly likely that you have heard of the footballer David Beckham and perhaps you’re wondering what is his connection to living in Spain. The answer is this: in 2005, Spain introduced a new tax law, which has become known as Beckham’s law, because the famous footballer was the first to use it when he moved to play at Real Madrid.

How does Beckham’s Law benefit overseas buyers?

Prior to the law’s introduction, a foreign worker who spent more than 183 days of the tax year in Spain was considered a tax resident by the Spanish authorities. This meant they faced having to pay tax in Spain on their income worldwide.

But, following the Spanish Non-resident Income Tax rules, an overseas worker can apply to be taxed as a non-Spanish resident and will only pay tax on earnings in Spain, if they have any.

If an overseas buyer claims this exemption, they pay a flat tax rate of 24%. When you compare this to the tax rates Spanish residents are charged, which are on a scale of 15% to 43%, depending on the amount of income, it is clear that Beckham’s law has some advantages, especially if you happen to have a high income, which he undoubtedly did at Madrid.

Does Beckham’s Law apply to you?

It is quite clear to everyone that this law was primarily aimed at wealthy international footballers who come to plat for Spanish teams and other high net worth individuals, but that doesn’t mean you have to be in either of these groups to use the law; any foreign worker can use it if they think they are likely to fall into the higher tax brackets.

There are certain conditions that an overseas worker must fulfil. These are:

  • You must be a ‘first time’ resident in Spain, or not have resided in Spain for 10 years before the application.
  • The overseas worker must be relocating to take up employment with a contract in Spain.
  • The employer must be a Spanish corporation, or a foreign company with registered Spanish offices.
  • The majority of their work must be carried out in Spain, and if they do work outside the country on behalf of their employer, the income earned from this work mustn’t exceed 15% of the total earnings.
  • The overseas worker must apply for the tax exemption within six months of starting their employment in Spain.

If you are accepted on to the scheme, the exemption will last for six tax years.

If you are interested in taking advantage of Beckham’s law, it is advisable to talk with a tax expert about the pros and cons of applying for the exemption.

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