JULY & AUGUST 2012 |www.opp.org.uk


by such property. This is an unprecedented decision


in Portugal as until now handing over a property to settle the loan, whether by way of foreclosure or through court proceedings, was only possible when the actual value of the loan was at least equal to the property’s actual sale price.


In this case, the court has considered that the bank having the right to the remainder of the debt, considering the value of the property when it was acquired by the borrower and the value of the property when it was foreclosed by the bank, constitutes an unlawful and an “unjust enrichment” from the bank. This claim pertains to a a loan in the amount of €117,500 granted with the purpose of financing the acquisition of a property in 2006 by a couple who have failed to pay the


“Two companies in the group were taxable on what was economically the same receipt”


debt. For this reason, the bank has seized the property for 70% of the loan’s value (which is in accordance with the Portuguese laws) and acquired it due to the lack of offers in buying the property. Subsequently, the bank intended to force the borrowers to pay the remainder of the debt (balance on the loan and associated costs) to the amount of €46,356. It should also be noted that this decision stems from recent court rulings that have occurred in Spanish courts, who have also ruled that the foreclosure of a property to the lender, where the loan is solely secured by such property, is sufficient to settle the full amount of the loan. The Portuguese Legal System is


not based on the “Stare Decisis”, but this decision will certainly influence other courts to decide in the same direction. In the legislative field, a working


group including the Government and the Bank of Portugal is now evaluating the decision of the Court of Portalegre.


This group will review initiatives


already proposed by the other parliamentary groups with a view to consider a new legislative framework aimed to deal with problems arising with the default in loans related to property acquisition.


Rosemary de Rougemont, who is a partner at NdR, Portuguese advogados. E: n.derougemont@ndr.pt W: www.ndr.pt


LEGAL NEWS ‘Handing in your keys’ in Spain


Recently in Spain there has been a recommendation put forward by the Spanish Government in an attempt to address the many problems which have enveloped the property market in recent years. To date British buyers in particular have always been concerned with the consequences to their UK assets should they attempt to “hand back the keys” to the banks in Spain and walk away from their loans. This latest initiative may ease some of these concerns if the individual meets the criteria being used to assess potential positions. The directive is called a Dación en Pago.


Dación en Pago means: handing back the keys to the lender and in exchange the lender will fully discharge all mortgage debt, not holding the debtor liable in the future.


The lender will also renounce pursuing the debt in your home country or elsewhere against any other assets the debtor may hold. This procedure is based on Art 1175 of the Spanish Civil Code, which establishes that a borrower can cancel his creditors’ debt handing in exchange any of his assets. Recently this code of good practise


has been approved in Spain. All the principal banks are applying it and those banks must concede a Dación en Pago to those whose situation meets the following points: 1. All family members must be


unemployed and the mortgage fee must be higher than 60% of the net family income. 2. The property must be the only home owned in Spain. 3. The value of the purchase of the property is no higher than €200,000. 4. The mortgage must be free of a guarantor. Otherwise, the guarantor will be kept as backer of the loan. 5. The case cannot be amidst mortgage execution proceedings. 6. The family members cannot have any other property or patrimonial rights. If the family members do not apply to all this points, the bank can decide if it accepts the Dación en Pago. Peter Esders, who is a lawyer specialising in Spanish transactions at Chebsey & Co, English solicitors. E: pje@chebsey.com W: www.chebsey.com


Inheritance Tax in Spain After a comprehensive survey we have found that the majority of owners genuinely believe that a UK citizen will pay Inheritance Tax in the UK on their worldwide assets and that there will be a double taxation agreement in place. Wrong on both counts! UK Inheritance Tax is a tax on the estate of the deceased and in Spain it is a tax on the benefi ciary. Two different people being taxed and so there is no double taxation agreement in place at all regarding Spanish on Inheritance Tax. A UK citizen will, therefore, be subject to Inheritance Tax in Spain regardless of where they reside. That is how it is. So what are the tax rates, rules and thresholds? There is no inter-spouse exemption


in Spain and the tax free threshold is under €16,000 with a standard rate of 29.75% and rising. To add to this burden the tax must be paid within six months, during which period the property cannot be sold or mortgaged to pay the tax. Funds must be available or raised elsewhere. For unmarried couples the tax rate is doubled – they are classed as ‘unrelated people’ in Spain – so a standard rate of just under 60%. Thankfully, there is a solution.


Specialist accountancy practices have established a system to remove this problem by re-structuring the property into a UK based company, run and managed in the UK, thus lifting you the owners or prospective inheritors out of the Spanish tax system altogether. This is a fairly simple procedure, conforms to all EU legislation and


“For unmarried couples in Spain, the tax trate is doubled – they are classed as unrelated”


carries the full approval of both the Spanish Tax authorities and HMRC here in the UK. Anything you can do with the property now you can continue to do via a UK Limited Company. It will actually give your more control rather than less.


Spain is, at present, looking to raise revenue where it can so we would suggest you take your property out of their grasp by using a professional structure is sound advice. Coopers are accountants who advise on Spanish tax issues. E: ritchie@coopersaccountants.com W: www.coopersaccountants.com


ROUND UP | 21 Property tax revaluation in Portugal


There is a general revaluation underway this year by the Portuguese tax department – of all properties that have not been revalued under the IMI Code that came into effect in 2003. Under this IMI Code, all transfers of property occurring after 1 January 2004, implied the necessity of the purchaser lodging architectural plans with the Tax Department and requesting the revaluation of the property. From January 1 2012, this has no


longer been a requirement. However, for properties that were not valued under this system, a general revaluation is being undertaken by the Tax Department.


What is the ‘tax value’ of a property and what is its purpose? All properties are registered at


the Tax Department and at the Land Registry. The Tax Department attributes a ‘tax value’ or ‘valor patrimonial’ to the properties and this value will serve as a basis for determining, among other things, how much IMI (council tax) is payable each year.


The tax value does not necessarily


coincide with the market value – and traditionally, in older properties, has been extremely low in comparison with the market value. The idea, therefore, in revaluing the properties is that older properties with a very low tax value are updated and IMI tax will therefore seek to become a more equitable tax. What is the impact of this revaluation on properties that have not been revalued under the IMI Code? If your property has not been revalued under the IMI Code, you could see a substantial rise in your IMI bill The tax value is the value on which the Tax Department bases its calculation of the annual IMI tax.


The actual rate of council tax is determined by the councils, but will vary between 0.3 and 0.5%. If the base value is higher, the IMI tax payable will also subsequently be higher. Rosemary de Rougemont


For the full story see the news section at OPP Connect


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