November 2013 Archive

Spanish Driving Laws

This is not "hot off the press” news – in fact it concerns law that came into effect some time ago.. However, since it relates to your driving license (licencia de conduccion), a reminder was thought to be a worthwhile topic.

The rules for driving licenses in Spain, concern your country of origin. Drivers from some countries are allowed to keep their own or simply exchange it for a Spanish one. Some are required to exchange it, and some cannot be exchanged. This latter group of drivers need to take a Spanish driving test, which has both theoretical and practical sections.

People with an EU License are allowed to drive using that license in Spain – providing the holder is at least 18 years of age. There is no need for a license exchange unless the holder wishes it. However, those that choose to keep their EU License should not forget that Spanish conditions apply while they are in Spain. This covers the period of validity, the need for medical examinations, tax payments and any penalties that have been incurred. If penalties have been incurred, the authorities may insist that the holder obtains a Spanish license to make the process easier.

Although there is no legal requirement for EU license holders to change their license, there is a requirement to register with the traffic authorities within 6 months of arrival in Spain. This should be done at the Central Register of Drivers at their local traffic office. This registration involves a medical examination which can be done at authorized centres. The test will be for both mental and physical fitness.

Despite it being legal to drive in Spain on an EU license, the issuing country will not allow a change of address to another country, Spanish authorities recognize that a license may not carry the actual address of the holder and are happy to take this into account.

If the driver feels that a change of license is the best option, then it’s necessary to go to the local traffic office and make an application. ID proof needs to be presented – a passport for example, along with proof of residency status, a written declaration confirming no suspension from driving, a declaration confirming the holder has no license in another country and finally 2 recent passport-sized photographs.

The Spanish driving license is plastic and the size of a credit card, and bears a list of the vehicles the holder is entitled to drive. Included too is the holder’s date of birth, name and NIE number plus the holder’s photograph. All in all, since it has to be carried when driving, it’s a useful piece of ID. For holders under 45 years of age, license renewal needs to occur every 10 years – every 5 years for those between 45 and 70 years – and every 2 years for those over 70.

People from countries outside the EU are able to drive on their original license for up to 6 months after they have obtained Spanish residency status. While driving on this original license, it is a legal requirement to carry a Spanish translation at all times.

The documentation for exchanging a license from a non-EU country is similar to that for an EU license, but also includes a certificate of psychological aptitude which has been issued following medical examination, and written confirmation that the original license is authentic.

Every driver starts off with an allocation of 12 points and with no offences this can be raised to 15 points. Points are deducted for any driving transgression. A list of offences and the points penalty involved can be obtained from the local traffic office. Their website also allows drivers to check their points tally at any time.

Those who are not officially resident in Spain will simply be fined for traffic offences, with an expectation that these will be paid on the spot.

Other related articles   Getting from Alicante Airport to your Villa

 

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Posted by on Sunday 24th November 2013

Spainish Property Update Nov 2013

Statistics released by the Central Government Public Works on property purchase during the second quarter indicate a resurgence of interest in buying property in Spain. Figures demonstrated an increase in sales in five of Spain’s 18 autonomous regions. The province of Alicante saw a total of 3,543 properties purchased making it the most popular province.

Interestingly, 54% of buyers in the province of Alicante came from abroad compared to a national average of 17% across Spain. The British are the principal buyers, mainly retirees, followed by Belgian, French and Russian purchasers. Furthermore, according to figures from the National Council of Notaries up to June 2013, 70% of the homes purchased in Spain were paid for without mortgages, whereas, prior to the economic crisis only 37% of Spanish homes were bought with no loan. One reason for this adjustment can be attributed to the lower prices of property since the economic crisis. Indeed, a study conducted by the Pompeu Fabra University revealed some areas of Spain have seen price reductions of up to 50%. These price corrections have stimulated investors to consider property as a viable option when planning their financial future. You will see that this graph clearly indicates what has been happening since the property crisis in Spain. Spanish Property Sales graph 2006-2012

There has been a change in the financial tide and as the banks lose both trust and credibility, investors are beginning to modify their attitude and behavior towards their investments. In addition, the precarious state of stocks and shares has left investors facing the challenge to find the foundation for a more resilient investment. Furthermore, the ridiculously low interest rates currently offered to savers leaves no doubt that a more constructive approach to investment is required. In short, the lost rapport, damaged trust and jaded attitude towards traditional avenues of saving and investing has resulted in a revolution as individuals search for a healthier return on their money.

The emerging savvy investor is recognising the value of a tangible investment. For example, in Moraira and Javea you can purchase a stunning 5-6 bedroom villa in a prime rental location for around 483,000 to 647,000 euros including the 12.5% purchase cost. The historical income of a property of this nature is around 40,000-50,000 euros gross, per annum. Or perhaps you could consider a property with four bedrooms offering an income of 25,000-30,000 euros annually for a purchase price of circa 400,000 euros.

The highly desirable areas of Moraira and Javea offer unspoilt resorts with beautiful coastline backed by spectacular mountain ranges. The wealth of charm and tradition is maintained by strict conservation rules ensuring the area remains unblemished. Attracted by the sun-soaked, fun-filled promises of the Northern Costa Blanca area visitors are also treated to surprisingly stunning countryside with dramatic landscapes, green vineyards, almond groves and orange orchards. A short drive from the coastal towns leads you to between craggy mountains dotted with traditional white-washed villages. Follow the narrow mountain passes and head high to be rewarded with breath-taking views. As you ascend you may be lucky enough to discover, nestling on the mountain side, traditional family run restaurants offering simple delicious food and wine menus to satisfy the hungry traveller. These unique experiences along with one of the best climates in the world offering 300 days of sunshine each year ensure visitors repeatedly return to the unspoilt area of North Costa Blanca.

In order to maintain a healthy return on your investment you will need to consider how to manage the property. Some owners choose to hire a property management company who offer a complete package acting as the lynchpin between property owners and rental guests. They take responsibility for advertising, bookings, maintenance, cleaning and pool care. A reputable company will offer good service resulting in repeat bookings. A letting agent of this nature typically charge 30-40% for their service. On a property costing 438,000 as mentioned above, this offers you an income of around 24,000-28,000 euros, a return on investment of 5-6%. Alternatively, you could maximise your return on investment, increasing it to 7-8% by choosing to orchestrate bookings and advertising yourself. There are many small businesses in the area that you could arrange to take care of the changeover and pool care.

The chances of capital growth in the highly desirable Javea and Moraira area is very realistic. Prices have now stabilised and inflation alone will guarantee growth in your investment. Furthermore, vendors are pricing their properties realistically and are willing to negotiate. Javea, Moraira and the Bennisa Coast have sustained reasonable property sales throughout the crisis. The outlook is positive for this beautiful area of the Northern Costa Blanca.

If you are considering a purchase there are a number of elements to consider. For example, a north facing villa may rent well but if in the future you wish to sell it, you risk excluding Northern European buyers as they crave sunshine all year round. Engaging the services of a professional property investment advisor will ensure all gems of information are brought to light. By covering the complete market of properties available they will be able offer you the much needed insight and reveal the excellent opportunities available.

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Posted by on Saturday 16th November 2013

Rental Income targeted by UK Taxman

Worldwide tax authorities are trying to increase tax revenue and income from renting is coming under close scrutiny. If you are the owner of a property that is rented out, whether the property is in Spain, the UK or somewhere else, you need to ensure that tax is being correctly calculated and paid.

It’s not hard to make mistakes, especially if the property is located in one country and you reside in another.

In the UK, HM Revenue and Customs (HMRC) reckons that some £500 million is lost each year through tax underpayment on rental income. It has launched a "Let Property Campaign” to encourage landlords to put their declarations in order, whether errors have been made genuinely or income has not been declared deliberately. The campaign covers UK resident landlords, and includes holiday lettings abroad in countries like Spain.

In a recent press release, HMRC declared "HMRC will use information it holds about property rental in the UK and abroad, along with information already held on HMRC’s digital intelligence system Connect, to identify people who have not paid what they owe. For those that fail to come forward, higher penalties – or even criminal prosecution – could follow”. Well, there seems little doubt about HMRC’s attitudes there.

Undoubtedly, there is an ever-increasing exchange of information, so you can expect UK authorities to find out about Spanish property and vice versa. Certainly, co-operation with tax collection will occur between UK and Spanish tax authorities.

So what are your tax obligations if you are a UK resident who owns a Spanish property? As a UK taxpayer, you need to declare Spanish property rent on your annual UK tax return. Expenses can be deducted. Any gains on sale need to be declared and taxed in the UK. Overseas property must also be declared as part of your estate for UK inheritance tax purposes.

In Spain, rental income from property owned by non-residents is taxed at 24.75% (on net income after allowable expenses for EU residents).

If you do not rent out the property, or when it is un-let, a notional income is deemed to arise and tax is due on this. When you sell the property, you will pay tax on the capital gain under the savings income regime, at rates of between 21% and 27%.

The net equity value of the property is currently liable to wealth tax if valued at over 700000 euros for individuals and 1400000 euros for couples owning in joint names. A mortgage can reduce its taxable value.

The property will be subject to succession tax, and that can be expensive for non-residents in Spain.

UK and Spain apply their own tax rules so the taxable amount is different in each country. You do not have to pay tax twice, however. You can offset the Spanish tax paid, against the UK liability, to avoid double taxation. If the UK tax is higher, further tax will be due in the UK. If the UK tax is lower, you do not get a refund for the difference.

This has looked at Spanish rental income and gains for UK residents, but there will be similar tax considerations if you are resident in Spain and own a UK property. If that is the case, you are urged to take advice from an expert who specializes in both Spanish and UK taxation.

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Posted by on Friday 15th November 2013

buying insurance online if so take care

Undoubtedly, people are increasingly opting to shop on-line for insurance on-line, to cover our cars, holidays, homes and phones. Indeed in the past year some 75% of new car insurance policies were bought over the internet. Certainly, comparing prices on-line can save hundreds of pounds, but there are a number of traps that we need to be careful of.

The rejection of insurance claims is on the increase because of exclusions or escape clauses that were never spotted by the policy holders. They simply went for the cheapest deal.

A big mistake people when buying on-line is to think it will save time – but remember, you are trying to so the same job as an insurance broker, so you should carry out all the checks they would carry out.

Keep in mind that if you make the wrong decision, your claim could be turned down, costing you many thousands of pounds. If you want to save time, then use a broker, and let him do the work for you. There’s nothing wrong with consulting a comparison site, as long as you ensure you are comparing like for like, because the levels of cover can vary greatly.

Insurance experts seem to agree that buying on-line can give greater access to information and allows consumers to compare products conveniently. However, all too often a consumer will just jump at the cheapest product.

A spokesman from the Financial Ombudsman Service warns that cheaper does not always mean better. He also urges you to look at what the insurance does not cover.

So, how can you best protect yourself? First ensure you really know who you are actually buying from and whether or not they are regulated – otherwise, they could just run off with your money. Somewhere on the company’s web page should be the confirmation of regulation by the Financial Conduct Authority. Take care to note if it also says it is the appointed representative of another company. If so, this means the other firm, is responsible for complying with the law. So, in that case go to their website and check for FCA regulation here too. Then, look the organization up on the Financial Services Register, to make sure it is what it says it is. You can check them out on fca.org.uk/register  However, it’s not simply enough to know who’s selling you the policy – you’ll also want to know who’ll pay up if you want to make a claim. This will be the underwriter, the one who may turn down your claim and to whom you may need to complain.

Generally it‘s the seller of the policy who’s responsible for ensuring all is clearly explained and all the major terms and exclusions are highlighted. It’s the underwriter who decides whether a claim should be paid.

Look at the phone numbers of all the firms you are planning to deal with – do you really want to call an expensive 0870 or 0844 number every time you speak to them? If there’s no contact number shown, or the number shown remains unanswered when you try to make contact – then go elsewhere.

Next, make sure you know how much the excess is (the amount of each claim you will have to pay yourself). Some car insurers often have compulsory excesses on top of the agreed voluntary excess – making the total excess over £500. Additionally, some firms may limit your access to a hire car if yours is out of action, or insist you take a much smaller car then your own insured one.

Ensure you disclose everything, even speeding offences, when applying for car insurance. Failure to do so may result in a blue pencil going through any future claim. Be as diligent in your check for exclusions on all kinds of insurance. In the case of medical insurance, declare existing medical conditions on all those to be insured, and be frank about any treatment, scans, or referrals in the pipeline. Holidaymakers may not consider hang gliding or snorkelling to be extreme sports – but some travel insurance policies do, so please check carefully.

Check too on personal possessions limits. Will the policy include or exclude jewellery or a huge flat screen TV or hi-fi or computer equipment? Additionally will the policy provide a new replacement or reduce the value for wear and tear?

Finally, your job as a consumer is to read the policies when they arrive, and not just toss them in a drawer somewhere.  Read them carefully to make sure they say what you expect them to say following your pre-buying research.

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Posted by on Monday 11th November 2013