The local Balearic government have come through on one of their campaign promises. Namely, to reduce the level of inheritance tax to as low as 1%, based on the degree of kinship. However, the limited jurisdiction of local government means that the new rate is only applicable where the deceased had their primary residence on the Balearics.
Until recently, when non-residents wanted to sell their property, they would take 5% from the purchase price from the buyer and give it to the Spanish tax authority as a pre-tax. This has not changed dramatically, other than that the pre-tax rate was lowered to 3% in the new Income Tax laws introduced in 2006.
The
Plus Valía is a community tax that has nothing to do with the increase in the purchase value of a property, but rather is calculated using the change in the price as given in the land registry since the last change of ownership. In law, it was always the case that this tax was paid by the seller, although on the Balearics it is common practice to shift this tax expense onto the buyer. That is no longer possible.
It's a fact that everyone who is a resident of Spain has to declate their complete income here. There is a serious misconception among man resident ex-pats that they only have to declare their Spanish income here. Many also falsely believe that they don't even have to complete a formal tax declaration, and simply have to wait for the tax bill to arrive.
A conference of the "American Bankruptcy Institute" took place in Berlin on the 26th October 07. As the delegates were meeting and chatting, a more subdued mood than usual was palpable, as the general state of the economy had been going well enough to cause bankruptcy administrators some sleepless nights.
