The Spanish Constitutional Court has recently annulled the municipal tax on capital gains. This tax levies the revaluation of real estate when they are sold but is always paid, although the properties have lost value.

That is why it has resolved that in no case can the legislator establish a tax taking into account acts or facts that are not exponents of a real or potential wealth. In this way, it will force to reform this local tax, technically called Tax on the Increase of the Value of the Land of Urban Nature, and that is considered an important source of income for the municipalities.

The Court considers that it is not legal to impose a tax when there hasn’t been economic gain

The rule that questions the Court imposes a tax on the added value of urban land. This tax is due at the time of sale of the property and is calculated objectively from its cadastral value and from the years (between a minimum of one and a maximum of twenty) during which the owner has been the holder thereof.

The appraiser Tinsa calculates that the number of houses in Spain on which it could be claimed the return of the payment of the surplus value, having been transmitted a value inferior to the one of acquisition would be around 550,000. This figure includes not only sales operations, but also donations, exchanges and inheritances, since these are also taxed with the capital gains tax.

The problem is that many homes were bought at high prices during the years of the ‘real estate bubble’, but their owners sold them during subsequent years of crisis with lower amounts because of the devaluation that occurred in this market. However, at that time many municipalities reviewed their cadastral values upwards and with very large increases taking into account the land values that were applied during the previous boom period. This situation has caused that in the Balearics they have been paying of more in many taxes during the last years.

In this situation, these local taxes should be designed so that new situations in which has not produced an economic gain are not graven or prevent the  taxpayers whose are not actually prove that there was an increase of value.

Hacienda and municipalities are committed to find a solution that satisfies both parties, owners and municipalities.

If you need more information or advice on the return of capital gains, please do not hesitate to contact us. At Ripoll & Mateu Solicitors Mallorca we advise, defend and represent our clients at all levels. Our greatest asset is an infrastructure of professional leaders in each field of action, especially Real Estate and Tax, as well as our international vocation and multilingual capacity.

The EU has thoroughly examined the regulations of the Anti-Fraud Act 2012 on the declaration of property abroad and has sent an opinion to Spain in which it requests that it amend the regulations on the obligation to report the assets in the abroad for residents with more than 50,000 euros outside Spain in assets such as accounts, real estate or shares.

What Brussels criticizes is not the fact of having to report obligatorily on the goods abroad, if not the hard punitive regime that accompanies it. We should note that the undeclared income abroad, or declared out of time, are recognized as a capital gain unjustified and receive a penalty of 150%. This happens even when the goods come from periods already prescribed. Brussels considers disproportionate this aspect and already in 2015 urged advisers and lawyers to inform of cases in which Hacienda applied this sanction.

The Spanish Government has now a period of two months to submit allegations.
The EU understands that fines discriminate between citizens with assets abroad and those who have their assets in Spain. Fines are much higher than sanctions applied in a purely national context, which is why the rules may discourage businesses and individuals from investing in or moving within the single market. Therefore, these provisions are discriminatory. The fine applies regardless of whether the asset has been included in other statements such as personal income tax or wealth tax.

Last November, the European Union opened disciplinary proceedings against Spain and gave a period of two months to Hacienda for submit observations. The response of the Spanish administration has not been satisfactory and the European Commission has now sent a reasoned opinion requiring Spain to amend and reduce the penalty regime that accompanies the obligation to declare assets abroad in a period of two months.

In the event that a satisfactory response is not received within two months, the Commission may refer Spain to the Court of Justice of the European Union.

At Ripoll & Mateu Solicitors Mallorca we advise, defend and represent our clients at all levels. Our greatest asset is an infrastructure of professional leaders in each field of action, especially Real Estate and Tax , as well as our international vocation and multilingual capacity.

The draft of the law that must regulate the holiday rental in the Balearic Islands has not left anyone indifferent and has generated negative reactions between the different estates involved.

This legislation has the opposition of the Councils of Ibiza and Formentera, all municipalities and the Hotel Federation of Ibiza and Formentera.

The Vice President of the Government and Minister of Tourism has reported that a total of 370 allegations have been submitted to the proposed tourism rental law. 20 of them have been submitted by the Administration, 40 by entities, 16 by individuals and 294 online via email. In the same way, small and medium enterprises or the Balearic association of the holiday rental, Aptur, ash out against this legislation that, as they say, will keep the business illegally. They consider that a very small number of apartments, less than 1%, will be able to fulfill what is requested, while more than 99% of the tourist rent will be condemned to continue in illegality with the new tourist regulations. At the same time, they defend the power of municipalities to regulate and tourist rental zoning, with the vision they have of the situation in each area of the island.

The recent celebration of the International Tourism Fair of Madrid (Fitur) made public what was already an open secret in the tourism sector, the Balearic Islands will be next summer the star destination of the entire Mediterranean. The association of the holiday rental and some of the main operators of this segment assure that the next season will be a great success and that the demand for holiday accommodation will grow 40% in Mallorca over last year.

Forecasts say the influx of British to the island this season will skyrocket 96%, which is the same as saying that in the British brexit accommodation in apartments is doubled.

The French market is also growing strongly, with a 75% rise in Mallorca. Even so, the main customer of Mallorca, which contributes almost half of the tourists, is the German who raises its holiday rental demand by 25%.

As also agree the different agents involved in the emergence of holiday rental, is in the arrival of the seasonal adjustment.
The revitalization of Palma, largely thanks to the holiday rental growth contributes significantly to the season is lengthening, in an effect that also spread to the rest of the island.

If you are going to rent a holiday villa or has a property in Mallorca and want to get a rental income don’t hesitate to contact us. Ripoll & Mateu Solicitors in Mallorca will advise and report you about latests news of the Law of Tourism in Balearic Islands.

During last year was verified that Balearic Islands, and mainly Mallorca, is one of the most attractive Spanish territories in which to invest. Foreign capital is concentrated in refugee values such as the tourist sector and the real estate sector, which have benefited from foreign flows.

The investment that comes to the Islands mainly comes from countries of the European Union.

The main sectors in which this flow of investment is invested are the real estate sector, tourism sector and finance. Real estate activities received more than 58 million euros, 11.6% of the total capital flow. The largest investments corresponded to the sale of real estate for own account (34.4 million), rent for own account (18.9 million) and property management (4.5 million).

The real estate sector is becoming the shelter of the richest people all over the world. These assets, which exceed 30 million dollars, not counting their habitual residence, prefer to invest in residential, offices and hotels before the swings of the stock market and the low yield of bonds.
In this sense, real estate investment in Spain offers rates of return that quintuple, in the worst case of the State Bonds to 10 years. The profitability offered by investment in houses to rent has increased to 6.1% from 5.5% a year ago, due to the strengthening of demand for rentals.

The return of greater and better financing, the stabilization of prices, and the increase of investments in a context of low interest rates offer the different statistics that measure the pulse of the market.

Swedes, French, Germans, Swiss and British are capitalizing on purchasing operations in Mallorca. Also, the increase of the aerial connectivity with Nordic and Central European countries has stimulated this increase of real estate operations in the last two years.

The stable growth of prices at a general level suggests that in 2017 will reach 500,000 transactions in Spain, 12% more than in 2016. In addition, the investment in housing will grow above 3% and the sale of real estate will move to the construction activity. 2017 could conclude with the signing of almost 90,000 visas for housing construction.

Whether you are a foreign investor or a national buyer don’t forget the need to have an expert advisor during the process of buying your property in the Balearics.

Throughout the whole process, the presence of a lawyer is essential to be responsible for providing obligatory advice to clients on legal, tax and legal liabilities acquired during the action of sale.

In Ripoll & Mateu Solicitors Mallorca, we offer our clients a comprehensive service in everything required for the sale of a property. We specialise in Real Estate Law and legal and tax advice in the process of buying and selling a property in Mallorca

It is a clear fact that foreign capital is strongly committed to the recovery of the real estate sector in Spain. Fundamentally since 2014, several firms have entered in Spain through the purchase of office buildings, shopping malls or logistics complexes. Subsequently, several funds landed in SOCIMI’s that have raised more than 3,000 million to invest in tertiary assets. In recent months, these international companies have taken the leading role in the purchase of land and residential development in Spain, looking for the returns offered by a market that is waking up.

In the last year these foreign funds have entered with force to the residential business. The soil is still cheap compared to the period before the crisis. In addition, there is confidence in the recovery. These funds are interested in buying land because they have to meet their high capital returns, of around 20%, and it is in the residential where they are now finding these returns.

These are safe investments for this foreign capital, because there is a lack of new housing after the break due to the brick crisis started in 2007.

Funds have become in recent months to buy land or reactivate housing, unlike other segments such as offices or shopping centers, where competition is greater. They have injected capital to companies stopped since the crisis and have relied on local knowledge of Spanish partners. It is essential to consider that there are sectors, such as tourism, which are always key to the Spanish economy. Others, such as finance or real estate, are once again gaining prominence and have been among the most active in 2016. By type of investment, foreign direct investment has greatly changed its sectoral composition. There’s a notable increase from 2012 investment in real estate, which in 2015 represented 12.9% of the total productive foreign investment, which has increased to 27.1% in March 2016.

Real estate investment in Spain will close the year marking a new high. In the absence of a month to finish the exercise, the data indicate that it will exceed 13.9 billion euros, 8% more than in 2015 and 45% more than in 2014. The SOCIMI’s have played the leading role, the main operations in Spain and represent 40% of the total investment. Although the national investor shows increasing enthusiasm (its weight has increased five percentage points compared to last year), so far more than 37% of the investment has come from abroad.

For foreign investment, we offer legal assistance regarding funds from other countries for investment in real estate and business. Our team has extensive international experience and cooperation agreements with international firms. We are also members of the Association of International Property Professionals (AIPP).This allows us to offer detailed advice in the field of internationalisation by providing services such as: International Trade Consulting, recruitment, formation of companies, subsidiaries and branches and Advice on tax issues