The Andalusian government reduces the tax on property transfers and documented legal acts.

 On 30 April 2021, Decree-Law 7/2021 of 27 April on the reduction of the Property Transition Tax and Documented Legal Acts is approved. With the approval of these measures, which will be valid exclusively until 31 December 2021, the Property Transfer Tax and Documented Deeds Tax will be reduced in order to boost the Andalusian economy. Thus, the property transfer tax is reduced from 8%, 9% and 10% to a flat overall rate of 7%. Also, the general tax rate on documented legal deeds for notarised deeds is reduced from 1.5% to 1.2%. These legal measures are taken to achieve a dual objective:

• To uplift and revitalise the real estate sector, which has been severely affected by the crisis.
• To significantly ease the financial burden of access to housing for citizens who will suffer the most severe consequences of the economic crisis caused by the pandemic.

The Spanish Supreme Court is extending the temporary residence permit/Settlement Residence Permit (“arraigo laboral”) systems to foreigners.

The Fifth Judicial and Administrative Section of the Supreme Court of Spain has issued a ruling establishing that in order to obtain a temporary residence permit in Spain due to exceptional circumstances of employment (“arraigo laboral”) foreigners may prove an employment relationship and its duration by any evidence, including a certificate of employment (“vida laboral”) proving an employment relationship based on a previous residence permit that has expired. According to a press release issued by the Court, it is not necessary to prove an employment relationship solely by the means established in the second paragraph of article 124.1 of Royal Decree 557/11 of the Regulation of the Law on the Rights and Freedoms of Aliens in Spain, which required that “a court decision or administrative order confirming an act of infringement by the employer established by the Labour and Social Security Inspection” was required for legalisation by employment. The Supreme Court rejected the appeal of the State Bar against the judgment of the Andalusian Supreme Court, which had granted a woman of Moroccan origin a residence permit on the basis of a certificate of employment (“vida laboral”), even though the applicant had previously been refused by the immigration office and the Almeria court. The High Court stresses that “any other evidence” is not excluded to prove labour settlement, a concept that would be unduly restricted by the definition of the Regulation of the Law on the Rights and Freedoms of Aliens itself. The Supreme Court points out that the requirements arising both from the right of proof and from the very concept of labour settlement contained in the Regulation “indicate that labour settlement may be proved by any evidentiary means, including a certificate of employment which confirms an employment relationship based on a previous residence permit which has expired”.

The Spanish Supreme Court says that non-payment of alimonies constitutes economic violence.

On 24 March 2021, the Criminal Chamber of the Spanish Supreme Court sentenced a man to six months’ imprisonment for failing to pay maintenance to his two children when he had the financial means to pay. The Supreme Court found that failure to pay child support is “economic violence” and entails double victimisation: victimisation of minors whose needs are not being met, and victimisation of the other parent who must shoulder the excessive economic care of the children for two. The Supreme Court stresses that the payment of maintenance is a “moral and natural obligation” and when one parent fails to meet these obligations, the other parent is “forced to make excessive efforts to care and attend to the children, depriving himself of the opportunity to meet his own needs by dealing with the other parent’s obligations”. “All this defines what we can call economic violence related to non-payment of maintenance,” the Supreme Court stressed, arguing that obtaining maintenance is a need of minors, not their desire or preference. The Supreme Court also imposed a 14-month fine of €10 per day and sentenced the debtor parent to one year and six months in prison for the offence of false deprimonisation of property.

Spain approves a law on euthanasia and becomes the fifth country in the world to regulate it. Candidates must “suffer from a serious and incurable disease or a serious chronic illness resulting in incapacity to work”.

Spain joined the Netherlands, Belgium, Luxembourg and Canada on Thursday 18 March 2021 in becoming one of the first countries in the world to regulate euthanasia. By 202 votes in favour, 141 against and two abstentions, the congress of deputies approved the PSOE’s proposed law, which will come into force within three months. To request euthanasia, the victim must “suffer from a serious and incurable illness or a serious, chronic and incapacitating condition” that causes “unbearable suffering”. The norm regulates both euthanasia itself – “the direct administration of a substance to a patient by a competent health professional” – and medically assisted suicide – “the provision by a health professional of a substance to a patient so that the patient can inject it himself, causing his own death”. With the adoption of the norm, Spain joins the small group of countries in which euthanasia is already regulated by law. In Portugal, the Constitutional Court has opposed the law, while in Colombia the practice is legal according to a Constitutional Court ruling but not regulated. In New Zealand, the law is scheduled to come into force in November. Parts of the US and Australia also allow the practice.

The euthanasia ordinance will come into force from the summer.

The regulation of euthanasia, approved by an overwhelming absolute majority in Congress, stipulates that the law “shall enter into force three months after its publication in the Official State Gazette,” which is scheduled for March 2021. Spain’s Congress of Deputies (lower house of parliament) approved a bill on euthanasia in December 2020. In a vote it was supported by 198 out of 350 MPs. The bill will next be considered in the Senate (the upper house of parliament) due to enter into force in June 2021. The initiative was presented by the Spanish Socialist Workers’ Party. The law is designed to regulate the right to euthanasia for the terminally ill or suffering from a serious, chronic and disabling illness that causes “unbearable physical or mental suffering” without the possibility of cure or improvement. Under the initiative, a request for euthanasia could be made by an adult Spanish national or a person with a residence permit in Spain. The decision has to be taken only by the patient, and he would have to confirm his desire for at least four times. In addition, a person who has requested euthanasia will be able to withdraw their request at any time or request a postponement. The request will be evaluated by doctors as well as by a special committee that will monitor compliance with the law. If all the requirements are properly met, the patient will be able to exercise their right by taking the necessary medication or with the help of a doctor.

The government prohibits the eviction of “ocupas” as long as they move in without “intimidation or violence”.

The Spanish government has amended a law published in December allowing eviction from illegally occupied housing if it was done by criminal means, excluding the possibility of evicting squatters “if the entry into the property occurred without “intimidation or violence” . Thus, the new wording introduced by the Decree-Law for the Protection of Vulnerable Consumers states that eviction will only be allowed “if the entry or stay in the property has been through intimidation or violence against persons”. The innovation was published in the Official State Gazette (BOE) of the Royal Decree-Law for the Protection of Vulnerable Consumers, which thus made this change to another Royal Decree-Law on additional urgent social and economic measures to combat Covid-19 approved in December 2020.

The Constitutional Court has annulled the plusvalue tax on unprofitable property sales.

The Constitutional Court has ruled that certain articles of the municipal regulation governing the tax on the increase in value of urban land (also known as plusvalía municipal or “municipal plusvalía” levied by town halls on the sale of real estate) are unconstitutional.   In particular, it has been made illegal to levy this tax if the sale did not result in any profit and, on the contrary, the sale of the property was unprofitable, as it contravenes the principle of economic capacity enumerated in Article 31.1 of the Spanish Constitution. The tax plusvalue is payable at the time of sale of the property and is calculated on the cadastral value of the property and the number of years of possession of the property – minimum one year and maximum 20 years. The judgment of the Constitutional Court declares that “it is not possible to impose a tax where the economic capacity taken into account in payment is not even potential but not existing or virtual”. The court ruling concludes that the tax plusvalue is generated in such a way that the ownership of a property for a number of years leads to an increase in its value: “(…) a false increase in the value of plots is established by automatically applying coefficients to the cadastral value of the property at the time of its sale, without taking into account an increase or decrease in the real value of the property”. Municipalities receive around 2,000 million euros a year from the plusvalue tax. The tax collection has not stopped increasing despite the crisis on the property market, indicating that this tax does not follow the logic of the market. Following the decision of the Constitutional Court, citizens who have paid the plusvale tax can claim it back from the municipality using stronger arguments. The first step to claim is to send a letter of complaint to the City Hall, thereby opening an administrative route. If the claim is rejected administratively, it can be taken to court, where the chances of winning are significantly increased. It is advisable to assess each individual case separately before filing a lawsuit, as it is not always worth pursuing in court. Contact our office and we will assess your situation and help you draft a letter of complaint to the mayor’s office, followed by administrative and court-administrative proceedings.

EU High Court of Justice orders return of funds by Banks since the start of clausula suelo

On 21 December 2016, the Supreme Court of the European Union ruled that banks will have to refund customers all the money they received as a result of the “clausula suelo” clause in mortgage lending agreements, thanks to which some bank customers overpaid and continue to overpay their mortgage payments despite the fall in the Euribor interest rate. Recall that in 2013 the Spanish Supreme Tribunal ruled against clausulas suelo, understanding them “grammatically incomprehensible to consumers”, but at the same time limited the payment of compensation since May 2013. All the sums overpaid by the victims from the time the contracts were signed until May 2013 could only be claimed before the courts on a case-by-case basis. The Supreme Court explained this decision by the unfavourable financial consequences for the country. However, the Luxembourg Supreme Court ruled that Spanish jurisprudence contradicted EU law and that the banking institutions were obliged to refund all the money from the beginning of the contract. As expected, the EU tribunal’s decision increased the number of legal actions from consumers demanding the refund of overpaid funds. Consequently, on 20 January 2017. The government passed Decree-Law 1/2017 on “clausulas suelo”, setting out urgent measures to reduce the “avalanche” of civil suits involving high public costs for the justice system. The judgment of the EU Supreme Court applies to around three million individual consumers, which according to Bank of Spain calculations entails the recovery of around 4,500 million euros illegally earned by banks. The Decree-Law establishes a system of pre-court settlement, which is voluntary for the consumer and mandatory for the bank.

Decree-Law 1/2017 regarding “clausulas suelo”

20 January 2017. The government has adopted Decree-Law 1/2017 on “clausulas suelo”, establishing urgent measures to reduce the “avalanche” of civil claims involving high public spending on the justice system. The judgment of the EU Supreme Court applies to around three million individual consumers, which according to Bank of Spain calculations entails the recovery of around 4,500 million euros illegally earned by banks. The Decree-Law establishes a system of out-of-court settlement, which is voluntary for the consumer and mandatory for the bank. The pre-court settlement process begins with a consumer filing a complaint with the Bank, setting a deadline of three months. The Bank may or may not accept the complaint. In case of rejection, the Bank is obliged to explain the reason, leaving the consumer with the right to go to court. If the complaint is accepted, the Bank is obliged to inform the consumer of the refundable amount along with the interest for the delay. The consumer who does not agree with the Bank’s calculations has the right to appeal to a court of law. If the consumer has already repaid his/her loan to the Bank, he/she has the possibility to claim compensation within the limitation period. If the consumer went to court due to a disagreement with the bank’s calculations, because in the consumer’s opinion the amount to be repaid should be higher, and the court ruled in favour of the consumer, the bank will be sentenced to legal costs. However, if the consumer decided to go to court immediately without resorting to a pre-trial settlement system and the bank accepted the claim immediately, the bank will not be sentenced to court costs: each party will pay its own costs. The decree adds that banks will be obliged to warn customers that repayment may entail tax liabilities, which will mainly apply to those consumers who have offset mortgage quotas on their income tax returns. This government measure has disadvantages as well: Firstly, the pre-settlement system will only be controlled by the banks. Therefore, in order to avoid being cheated again by the banking institutions, we advise not to be shy about legal aid. Second: The decree increases the time frame for pre-trial claims from two to three months. Thirdly: The Decree forces the consumer to resort to a system of pre-trial settlement in order to avoid the risk of paying “his” legal costs, despite the supposedly “voluntary” nature of the system. Fourthly: this legal provision does not guarantee that the notarial and banking costs arising from the settlement agreement with the bank will not be free of charge for the consumer. Fifth: no sanctions regime is established for banks.   If you intend to file a claim against the bank using the out-of-court settlement system described in the Decree, we advise you to seek legal advice to avoid further abuse by the Bank and, of course, please remember that you always have the option of going to court. For more information on clausulas suelo, please contact our office.

The European Court of Justice overturns the 720 tax form that obliges taxpayers to declare assets abroad.

It concludes that Spanish legislation is “contrary to EU law” and that the measures applied are “disproportionate”.

Firstly, it considers that “Spain has failed to comply with its obligations under the free movement of capital”. The reason is that the options chosen “with regard to the statute of limitations are disproportionate in the light of those objectives, since they allow the tax authorities to proceed without time limitation to regularise the tax due”. In other words, the EUCJ rejects the non-applicability of the statute of limitations provided for in Form 720.

In addition, the Court also criticises the fact that the 150% fines provided for in Spanish legislation represent a “very high” rate which gives the penalty “an extremely repressive character”.

Thirdly, it also rejects the fact that, in addition to that penalty, fines of EUR 5 000 for each item of information or set of information which is omitted, incomplete, inaccurate or false, with a minimum of EUR 10 000, and EUR 100 for each item of information or set of information declared after the deadline or not declared by electronic means, should be applied.

In this way, the EUCJ overturns the controversial Form 720, introduced by Cristóbal Montoro, which obliges all taxpayers who accumulate more than 50,000 euros in assets abroad to make an informative declaration. The model provoked complaints and lawsuits almost as soon as it was introduced. Many tax experts have strongly criticised legislation that they considered abusive and that the current government has continued to apply.

The European Commission had already warned in 2017. It said then that the fines imposed by the Treasury on those who do not correctly declare their assets abroad were “disproportionate”, “discriminatory” and “in conflict with the fundamental freedoms of the EU”, so it demanded immediate changes or threatened to go to the EU Court of Justice.

Andalusia Wealth Tax: Abolition takes effect form 2023

At its meeting on 20 September 2022, the Governing Council of the Regional Government of Andalusia decided to completely abolish the Wealth Tax in the Autonomous Community of Andalusia. In this way, Andalusia will be, after Madrid, the second Community in Spain to completely abolish this tax.

The data for this tax, with figures for 2020, were as follows:

– Impact on total regional revenue, 0.6%.
– Collection for this tax, 93,341,786 euros.
– Number of taxpayers paying the tax, 16,785.
– Percentage of the population affected by the measure, 0.2%.
– Average declared wealth, 2.74 million euros.

With data from the Tax Agency referring to 2022, the revenue figure rises to 120 million euros and the number of taxpayers affected to 20,661.

Until now, the minimum exemption from Wealth Tax in Andalusia was 700,000 euros and the tax base included movable and immovable assets, except for the main residence up to 300,000 euros.

The measure will take effect from 2023 and from then on Andalusian taxpayers will not have to pay any of this tax.

Reform of the Foreigners Regulation

The reform of the Foreigners Regulation came into force on 15 August 2022. It will allow undocumented immigrants who have been in Spain for two years to regularise their situation if they complete an “educational residency” programme.

The Official State Gazette (BOE) published a Royal Decree amending the Regulation of the Law on the Rights and Freedoms of Foreigners in Spain and their Social Integration, which will affect both immigrants in an irregular situation in Spain and those who can be employed in their country of origin.

The decree relaxes work permit procedures and will allow undocumented immigrants who have been in Spain for two years to regularise their situation if they undergo an “arraigo para la formación” (residency training programme), a measure aimed at filling vacancies for which there is little demand.

The reform relaxes requirements to encourage foreign students to stay in Spain: they will be allowed to combine study with work, provided they work no more than 30 hours a week, and the restrictions that now exist for entry into the labour market after graduation will be abolished.

The main provisions of the royal decree, which will come into force on 15 August.

MEASURES FOR FOREIGNERS ALREADY IN SPAIN

-Labour, social and family sedentarization.

In the case of labour sedentarisation (¨arraigo laboral¨), the requirement of two years’ residence in Spain and six months’ work remains, but the ways of proving this work become more flexible, in line with case law. To encourage complaints, work permits will be granted to those who cooperate with the Labour Inspectorate and prove at least six months of illegal work.

The three-year period of residence in Spain is also retained for obtaining social residency documents (arraigo social), but the required contract must no longer have a minimum duration of one year (after the labour reform it is assumed that it will be indefinite), but must guarantee a minimum wage. The contract can be for fewer hours if there are dependent minors.

With regard to family sedentariness (¨arraigo familiar¨), work permits are granted to parents of minors of Spanish citizens as well as to spouses or unmarried partners and their dependent ascendants or descendants.

– A new figure of residency for study purposes (“arraigo para formación”). A temporary permit can be granted for twelve months, renewable for another twelve months, to those who can prove a continuous residence in Spain for two years and commit themselves to a regulated course of study for employment, whether it be university, vocational training or a public employment service course.

Once you have completed your studies, you can apply for a residence and work permit for two years, subject to the provision of a signed contract guaranteeing a minimum wage.

– The residence permit for family reunification will now entitle you to both employment and self-employment.

– It facilitates the possibility for foreign students to work (maximum 30 hours per week) and their inclusion in the labour market without restrictions after graduation.

REFORMS TO STRENGTHEN LEGAL LABOUR MIGRATION

– The Catalogue of Hard-to-reach Occupations has been reformed to provide a more accurate picture of labour market needs, as a foreign worker can now not be recruited if there are unemployed people in Spain who can be trained.

Jobs in economic sectors offered by the Ministry of Inclusion, Social Security and Migration will be added to the catalogue.

If the vacancy is not in the catalogue, the employer can also request the recruitment of a foreigner if he proves urgency and the Public Employment Service confirms that there are no suitable candidates within eight days (the current deadline is thirty days).

– Improved procedures for recruitment by origin and circular migration: four-year permits may be issued, allowing for a maximum of nine months of work per year in the same sector, provided the worker returns to his or her country of origin.

Those who can prove that they have fulfilled their obligation to return within the four-year period will be able to apply for a two-year residence and work permit.

– Procedures for self-employed workers are simplified. Documentary requirements are waived and, for example, there will be no need to prove a minimum investment or its impact on job creation!

The renewal of these permits makes it possible to combine employment and self-employment.