The Empire Strikes Back- Social Charges to be reintroduced for non-residents !

This is not going to be welcome news for non-resident owners of French property who have rental income, or more specifically those who make a profit.  Social Charges,  which are known as Contributions Sociales or Prélèvements Sociaux, are to be reintroduced for the tax year 2015 onwards.

Social Charges, which currently amount to 15,5% of taxable income, were introduced for rental income by non-residents from the tax year 2012 onwards. After a ruling by the European Court of Justice in February 2015 that these charges were illegal because they were Social Security contributions applied to people who would be gaining no benefit from the French Social Security system, the French goverment was  passed a law in July 2015 withdrawing these charges for non-residents and accepting applications for the amounts paid for the years 2012 and 2013 to be refunded.

However, in the Finance Law passed on 1st January 2016, Social Charges are being introduced, supposedly “in agreement with the European Commission” . The French government is claiming that this is legal because the contributions will go towards the general government budget and not specifically towards Social Security. Here is an excerpt from some recent communication that we have had from the Tax Office:

“A noter que l’application des prélèvements sociaux sur les revenus 2015 pour les non résidents est reconduite. Conformément à la loi de finance du 01/01/2016 et en accord avec la commission européenne, l’application des prélèvements sociaux est maintenue pour les non résidents mais financera le budget global de l’État et non la sécurité sociale. “

Whether this will be challenged again in the European Court of Justice waits to be seen, but whatever happens it will be a long process. In the meantime, those renting out their property in France will be faced again with a total tax payable of 35.5% of any profits they make.

Not happy reading.

Modelo 720- Declaration of Foreign Assets- technical details

Further to our general blog post of earlier today, here is some more technical guidance on the return.

Below are excerpts from the FAQs section of the Agencia Tributaria page for Modelo 720 along with our interpretation.  Our translations are a summary of the main points rather than word-for-word.

For further information and assistance, please visit our website.

Pension Plans

1. ¿Existe obligación de declarar los planes de pensiones contratados en el extranjero?

No existe obligación de información sobre los planes de pensiones (de las aportaciones a los mismos) en tanto no se produzca la incidencia que da lugar al cobro de la pensión en modo de renta temporal o vitalicia.

Is there an obligation to declare foreign pension plans ?

There is no obligation to declare (the totality of) contributions towards such pension plans as far as nothing happens to cause payment of the pension in the form of an annuity/ regular payment.

Spain Accountants interpretation: Pension plans need not be declared until an annuity or other regular payment is drawn.

2. En el caso de que se lleve a cabo el rescate del plan de pensiones ¿debe informarse sobre la renta que se obtenga?

Si, cualquiera que sea la modalidad del rescate si como consecuencia se obtiene una renta debe informase de la misma.

If a pension plan is cashed in, is it necessary to declare the amount obtained from this ?

Yes, regardless of how the plan is cashed in, the amount obtained must be declared.

Obligations for Spanish companies

Las personas jurídicas y demás entidades residentes en territorio español que tengan registrados en su contabilidad los bienes y derechos en el extranjero de los que son titulares de la forma establecida en la normativa reguladora de las tres obligaciones de información ¿tienen obligación de informar sobre los mismos?


A Spanish entity owns foreign assets and has these in its accounting records. Is it obliged to declare these ?


The Special Regime for Expatriates (The “Beckham Law”)

Una persona física residente en España acogida al régimen fiscal especial aplicable a los trabajadores desplazados a territorio español previsto en el artículo 93 de la Ley 35/2006, de 28 de noviembre, del Impuesto sobre la Renta de las Persona Físicas, ¿tiene obligación de presentar esta declaración informativa sobre bienes y derechos situados en el extranjero?


A Spanish resident is registered under the Special Regime for Expatriates detailed in Article 93 of the Income Tax law 35/2006. Are they obliged to declare ?


Revocation of authorisation in foreign bank accounts

Si una persona deja de ser autorizado (se le revoca la autorización) en una cuenta de una entidad financiera situada en el extranjero en el mes de junio de 2012 ¿existe obligación de presentar declaración informativa? ¿en el caso de que exista obligación, cual ha de ser el saldo y la fecha sobre las que se informe?

Existe obligación de declarar si el saldo que existía en la cuenta en la fecha de la revocación de la autorización hubiera determinado la obligación de declarar a 31 de diciembre, junto en su caso con el saldo del resto de cuentas objeto de esta obligación, siempre que no opere ninguna otra causa de exoneración sobre la misma.

If a person’s authorisation in a foreign account is revoked part way through 2014, are they obliged to declare ?

Yes, if the balance at the time, in conjunction with all other relevant accounts, was above the (50k Euros) threshold.

Leaving Spain

Si una persona física se traslada al extranjero una vez iniciado el ejercicio y debe presentar declaración del Impuesto sobre la Renta de Personas Físicas por este ejercicio. ¿Tiene obligación de presentar el Modelo informativo respecto a los bienes y derechos en el extranjero?

Sí, siempre y cuando de acuerdo con la regulación de estas tres obligaciones de información resulte obligado a informar de las mismas.

If a person leaves Spain part way through a year but still needs to submit a residents’ income tax return for that year, are they obliged to declare ?


Bank overdrafts/ negative balances on accounts

¿Deben declararse las cuentas con saldos negativos en caso de que existan otras cuentas con importe superior a 50.000 euros?

Sí, deben declararse.

Must negative balances be declared when there are other accounts which total more than 50k Euros ?


Exchange rate to be used for foreign property

En el caso de los inmuebles, el valor de adquisición, al igual que en el resto de bienes y derechos objeto de declaración, debe ajustarse al tipo de cambio vigente en la fecha 31 de diciembre del ejercicio al que corresponde la información declarada.

This is quite ambiguous. We assume that it means that the exchange rate at 31st December for the year being declared must be used. So for the 2015 returns, the rate at 31st December 2015 should be used.

As explained in our other notes, the amount to be converted is the cost of the property.

Modelo 720- Declaration of foreign assets – update

We have already reached the third year that Modelo 720, the declaration of foreign assets, has been with us.  Judging by the lack on any further information posted on the website of the Agencia Tributaria since last year, nothing has changed in the rules.

After the initial bewilderment and even fear (looking at the kind of fines that the Agencia Tributaria propose for errors in declaration, produced by Modelo 720 when it was first released), I would say that things have calmed down now.  We have not come across any Tax Office fines or penalties,  and it appears from correspondence received from them that they are mainly using the data submitted in Modelo 720 to check that income from foreign assets (e.g. rental income from a foreign property) is being properly declared in Spain- subject to the provisions of the relevant international Double Tax Treaties.

However we continue to advise that those filing this declaration take extreme care to fully and correctly disclose all details. I    wouldn´t want to take any risks with the Agencia Tributaria given their capacity for giving and enforcing sanctions and penalties.

As nothing has changed in the rules since last year, I am copying below our general guidelines and have added some more specific technical notes in a further post.

For more information and guidance, please visit our website

Obligation to declare

Spanish residents with foreign assets or income in any of the following categories exceeding 50,000 Euros on 31st December.

  1. Accounts in any kind of financial institution e.g. banks, building societies.
  2. a) Investments/ rights of representation in foreign companies or other entities.                                                                                                                   b) Investments in foreign collective investment institutions (e.g. unit trusts).                                                                                                                         c) Foreign life/ invalidity insurance; income from foreign annuities.
  3. Property and rights to property.

Note that the threshold is for the total value of each of the three categories.

Where assets are jointly held (e.g. with a spouse), it is the total value of the asset which is relevant. A separate return must be submitted for each person.

Presentation deadline

This tax return must be submitted by 31st March following the end of the year in which the taxpayer is obliged to declare.

Frequency of declarations

The Agencia Tributaria guidelines state the following:

After the initial return is presented, a new return must be filed when the total of any category of assets/ income increases by 20,000 Euros or more, either at 31st December or during the last quarter of the year.

Valuation of assets

Property: purchase price;

Investments which are traded on the open market: market value as at 31st December;

Other investments: value on last published balance sheet.

Penalties for non-disclosure

The guidelines mention “minimum” penalties of 30,000 Euros for non-disclosure ! I can’t envisage how such big penalties could be applied, or even if they would be enforceable if challenged under EU law.

Information is, in principle, shared very easily between financial institutions and Tax Offices in both EU and non-EU countries these days; this means that, in theory at least, the figures that you declare can be checked by the Agencia Tributaria.

The Agencia Tributaria FAQ’s imply that even the slightest error, even unintentional (e.g. in a bank account number) will be punished by a minimum fine of 10,000 Euros !

This would appear to be nothing more than scaremongering.  But the fact is, we don’t know.  To date we have not heard from any prospective clients who have received a fine,  so at this point we can only conjecture

For more information and guidance, please visit our website

Andalucia gets tough on holiday rentals

Over the last few days the Junta de Andalucia has signalled new legislation that will have a massive effect on owners of Spanish property who rent it out.  The legislation, which is technically an update of legislation from 2010, Decree 194/2010 on Tourist Apartments, will oblige property owners to register their rental activity with the Junta de Andalucia within three months of publication of the new legislation, which is expected to be made in May.

Big fines are proposed for property owners who contravene the new legislation, up to 150,000 Euros for serious offences.

The authorities are expected to target local real estate agencies and internet portals through which a high proportion of Spanish rental bookings are made. It is not clear how the new legislation will affect websites such as Airbnb who have no physical presence in Spain, however any property whose actual address is published on the internet is open to investigation.

There is currently a rise in demand for Spanish holiday rental property, for instance from certain markets such as Russian clients who have are moving away from destinations such as Turkey because of the political outfall from the war in Syria, and Egypt because of terrorist attacks on Russian citizens.

Spain is a safe go-to tourist destination in times of global turmoil and the Spanish Authorities realise that now more than ever, they are missing out on massive amounts of revenue because most property owners are not declaring their rental income.  Forcing property owners to register is likely to be a very effective way of ensuring that they pay tax on their income.

Properties can be registered in the Registro de Turismo de Andalucia on the Junta de Andalucia website at the following link: .

If you are the owner of a property in Andalucia and would like further details in English on the legislation and requirements for the properties to be rented out, then a recommended website is Rental Tonic at .

If you would like any assistance in the preparation and filing of your rental tax returns then please visit our website at or contact us at .

Changes in Spanish tax for the year 2016

2016 is the second half of a two-year tax project which was published last year, so there are no surprises from a tax point of view. In this post we am looking at the rates for the year 2016. The tax rates have decreased further this year,

In our blog this time last year we commented that the cut in tax rates was to be expected for an election year. Well although the governing Partido Popular won the general elections in December, it was not enough to gain an absolute majority and Spain is, at this point in time, still without a permanent government. Clearly tax cuts will only take you so far ….

As always, you will find the full updated tax rates and allowances on our tax database starting

Income tax

Tax bands (rates valid for Madrid)

Tax rates have decreased across the board, as follows:

From (EUR) To (EUR) State Tax % Regional Tax % Total Tax %
0 12,450  9.50  9.50 19.00
12,450 20,200 12.00 12.00 24.00
20,200 35.200 15.00 15.00 30.00
35,200 60,000 18.50 18.50 37.00
60,000 + 22.50 22.50 45.00

Personal allowances

The 2015-2016 tax project has seen big increases in the personal allowance and children’s allowances:

 Personal allowance

Under 65 years old 5,550 Euros
65+ 6,700 Euros
75+ 8,100 Euros

Children’s allowance

First child 2,400 Euros
Second child 2,700 Euros
Third child 4,000 Euros
Each further child 4,500 Euros

The system for calculating the employment-related personal allowance has been changed, as follows:

For taxpayers with salaries of less than 14,450 Euros and other income less than 6,500 Euros, there are the following deductions:

Earnings not more than 11,250 3,700 Euros
Earnings 11,250 to 14,450 3,700  –  1.15625 x (Earnings – 11,250)
Earnings 14,450 + 0

In addition, there is also a general allowance of 2,000 Euros applicable independent of the income of the taxpayer.

Tax on capital gains, savings and dividends

This has been reduced across the board, and in 2016 is as follows.

Capital gains


First 6,000 Euros:           19%
6,000 – 50,000 Euros:  21%
50,000 + Euros:               23%

Non-residents:                  19%

Savings and dividends

Residents and non-residents

First 6,000 Euros:           19%
6,000 – 50,000 Euros:  21%
50,000 + Euros:               23%

Tax credits and deductions

The tax credit for payments to rent a property, which was applicable to low-earners, was abolished from 2015 onwards.

The  1,500 Euros tax free amount on dividends was also abolished.  Further to the previous abolition of the proportionate tax credit on dividends which was much more beneficial, there is now no tax credit at all given for dividends received from Spanish companies. Although the tax on dividends has been reduced, this is rather harsh from a tax point of view, especially for companies owned by the taxpayer- as there is no compensation for the underlying company tax alread paid- so dividends are actually taxed twice.

Company tax

As of 1st January 2015, the general rate of company tax in Spain has been reduced from 30% to 28% in 2015 and 25% in 2016.

For small and reduced-sized companies, up to 2014 there were which have now been eliminated (as the reduction in the general tax rate renders them meaningless), except for a transitory period in 2015, when the rate is 25%, except for the profit over 300k Euros for medium-sized companies where the tax is 28%.

A company is defined as small if the turnover in the previous year was less than 5 million Euros and the company has between 1 and 24 employees.

A company is defined as reduced-sized if the turnover in the previous year was less than 10 million Euros.

As of 1st January 2015, there has been introduced a new lower tax-rate for newly-formed companies which applies to the first two years in which it obtains a taxable profit. The rate is 15%.

You can find further information on our services on our website .

Filing of the 2015 income tax returns – Renta

The Agencia Tributaria has now published their calendar for the year 2016. The key dates for filing the 2015 income tax declarations- La Renta, are as follows:

6th April: Tax return software (PADRE) available for download online. Tax returns can be filed online from this date.

25th June: Deadline for filing tax returns where tax is due and to be paid by direct debit (domiciliacion).

30th June: Deadline for filing of all returns.

You can find further details on our tax return filing services on our website