The Spanish Socialist Party ("PSOE"), have implemented an earlier election promise by abolishing wealth tax as from 1st January 2008.
With the Spanish tax year running from 1st January to 31st December, wealth tax will still be payable by those to whom it applies in 2008 based on the tax return for the 2007 tax year.
Whilst wealth tax for the average property owner has not been a major burden the abolition will come as welcome news in these days of ever increasing prices.
There has been a certain amount of interest recently following publicity in the British press concerning applications to reclaim a percentage of the Capital Gains Tax ("CGT") paid by sellers on the sale of their Spanish property between the years 2003 - 2006.
This interest arises as a firm of Spanish lawyers has been marketing a class action against the Spanish Revenue.
Until 2007, non-residents in Spain were charge CGT at 35% compared to the 15% paid by residents. This was declared by the European Commission as discriminatory, and as a result Spain harmonised CGT rates for all individuals, whether resident or not, by setting a flat rate of 18% for the 2007 tax year.
Arising from the decision of the European Commission, the Spanish law firm mentioned above is promoting the class action for eligible tax payers on a "no win - no fee" basis. The object of the class action is to recover the 20% differential in the CGT rate applied against non-residents.
From a Spanish perspective the idea of a class action against the offices of the Spanish Revenue is an interesting concept and as there are numerous obstacles to be overcome the proposal of a "no win - no fee" basis is understandable. In the case of some UK resident taxpayers, if the applicable rate of CGT in the UK for them in the relevant period was 40%, the benefits derived from a successful reclaim application in Spain may be dissipated to virtually nothing (1) once the success fee is deducted and (2) HMRC seek to charge additional UK CGT on the refund as it arises from the sale of the foreign asset.
The above may not be applicable to all UK taxpayers, but before seeking to join the class action it may be wise for them, and those resident in other tax jurisdictions, to consult their accountants to determine if a benefit will arise.
In cases where a non-resident property owner dies intestate according to the law of their home country and leaves no Spanish will, we have noted an increase in requests from the Spanish Land Registry for a Certificate of Law to explain the rules of intestacy as applied in the home country of the deceased.
As this can be both time-consuming and costly, we would remind readers this can be avoided by the fairly inexpensive process of ensuring a Spanish will is in place.
Whilst no-one denies the Spanish property market has slowed dramatically, the doom and gloom that pervades in the UK press fails to take into account Spain still has an excellent climate; an historic culture; a relaxed lifestyle and a cost of living which is far below that of Northern Europe.
With the changing times, developers and private owners are having to become realistic about their prices and substantial reductions can be negotiated by those wishing to purchase anything from a grand villa to a family apartment.
Whilst a price reduction can be daunting for the seller, in the case of UK residents, it is often overlooked they can benefit from a strong euro to offset the reduction which, in turn, is passed-on to the buyer.