ChiFRA

When looking back over 2014 we have to say that things have improved dramatically to previous years. Sales are well up, long term rentals are doing well but the holiday market has been a bit slow.

What do I think will happen next year? Well, I am hopeful that we can maintain and build on the bricks of recovery we have laid this year. Whether the upturn for 2015 will be as pronounced as it was for 2014 remains to be seen but hopefully we will see things continue to improve and perhaps even be able to start to raise the prices a little, but that will take a lot of confidence and I am not sure it is yet there. Basically, it is a wait and see scenario.

When looking back over 2014 we have to say that things have improved dramatically to previous years. Sales are well up, long term rentals are doing well but the holiday market has been a bit slow.

What do I think will happen next year? Well, I am hopeful that we can maintain and build on the bricks of recovery we have laid this year. Whether the upturn for 2015 will be as pronounced as it was for 2014 remains to be seen but hopefully we will see things continue to improve and perhaps even be able to start to raise the prices a little, but that will take a lot of confidence and I am not sure it is yet there. Basically, it is a wait and see scenario.

In this month´s issue, we have a great article from James Baxter at Foremost Currency on the money markets, plus a lovely insight to the Bodega ETU at Patria just outside of Vejer. As always we are trying to keep you up to date on new rules and regulations so we have a piece on Inheritance Tax and the newly introduced plans to lower income tax and an article on the discovery of the exact spot where Christopher Columbus left for the New Worlds in 1492.

As we always do at Christmas, we would like to give you the opportunity to sponsor Spanish Stray Dogs. A great charity who do so much to save abandoned dogs, get them off the streets and rehome them all over the world. Have a look at their website, a wristband is only 2.50€ or a calendar 6.50€; both can be bought on line. The donations are vital if they are to keep working so it´s only the price of a coffee or a glass of decent wine, please help them if you can.

All that remains for me to say is have a wonderful Christmas and New Year and we hope to see you here on the Costa de la Luz in 2015.

Lesley McEwan - Managing Director, Cadizcasa

STOP PRESS…STOP PRESS…STOP PRESS

A trendy beach bar in Zahara de los Atunes has been at the centre of a massive drugs ring. The ring included a Guardia Civil officer, a municipal policeman, a former Socialist councillor and three members of the military. In total 56 have been arrested and 716 kilos of cocaine plus 4 tonnes of hashish have been seized.

The ringleader, nicknamed El Longui, owned the bar in the popular resort, frequented during the summer months by both Spanish and international celebrities. He is said to have had contacts in both Morocco and the Zahara area. Recreational vessels were used to transport the drugs under the protection of the Guardia Civil officer and the municipal policeman who were both on his payroll. If there was too much surveillance in the area, the transport would be diverted to Punta Camiral, a military base, where the three servicemen would unload the drugs. In May of 2014 another delivery was attempted at Caños de Meca where investigators were able to take surveillance photos of the group at work.

An investigation began 11 months ago into the ring following drug seizures involving other law enforcement officers. Around 30 homes were searched in Seville, Cadiz and Valencia and firearms, 32,000 euros in cash and over 100 mobiles phones were seized.

Both El Longui and his top aides were said to have lived lavish lifestyles on their illegal wealth.

A COMEUPPANCE FOR THE SPANISH TAXMAN

We all like to have a bit of a moan about government taxation, a necessary evil without which, no country could function, but it has long been known that Spain likes to tax people and tax them heavily. The sums paid in Spain are considerably higher than in many other more prosperous countries but their comeuppance may have arrived regards inheritance tax. That said, they are biting back on second hand property sale tax.

It has been the custom in Spain to charge different rates of inheritance tax for residents and non-residents but the European Court of Justice has ruled against this system and say that non-residents who have been discriminated against by being asked to pay more tax than Spaniards for inheritances or gifts of property are likely to be due a refund on the difference taken from them.

Residents enjoy a very complex set of tax relief options which can in some cases reduce the tax paid to almost nothing but these options have not been available to non residents who may own, for instance, holiday homes and spend less than the required 183 days per year for residency in Spain.

The EU reckon that this disparity in charging goes against the spirit of the EU and they found that Spanish legislation was discriminatory and there was no justification for inheritance tax to be charged at a higher rate to non residents.

The case was originally referred to the court in 2012 after they decided that the legislation was incompatible with the free movement of people and money within the EU. The difference can be substantial, in some cases around 80%. The inheritance and gift tax is called succession tax in Spain and is governed by both the state and the 17 autonomous communities.

Some of the communities have already amended the state rules to make them more beneficial but only for residents, not non residents, and in order to classify as resident for this purpose, you have to have lived in Spain for 5 years.

As an example, in Murcia, Madrid, Valencia and the Balearic Island, up to 99% of the estate assets can be exempt from succession tax if the beneficiaries are children and/or the spouse of the deceased, but in Andalucia, 175,000 euros can be inherited by the spouse or children tax fee. In Catalonia this rises to 650,000 euros for the spouse and 400,000 euros for the child.

The current figures suggest that around 60,000 UK families have been hit for inheritance tax amounting to some 400 million pounds. Meaning that the recent verdict could lead to thousands of claims by ex pats. So far, the Spanish government has kept silent on the ruling but they have 6 months in which to make the changes to their laws, so standby for fireworks.

Claims need to be perfect regards paperwork as the tax authorities will certainly be looking for ways to wriggle out of this one. There will be time limits to making an appeal but the amount outstanding if repaid will be repaid with interest.

But, before we all crack open the bubbly to celebrate the thought of the Spanish Tax Authorities raiding the office petty cash to drum up enough money to replay all the over payments, consider the following:-

A new tax on property about to come in to effect stands to have a significant impact on the property market. Some will gain but some will most definitely lose.

The new law is set to get rid of the restatements and abatement coefficients which were previously applied to the IRPF for the purpose of calculating capital gains generated in the sale of a property. The new law effective from January 2015 will especially affect those who bought the property prior to 1994.

A rough example of the difference this new law makes was produced by Cinco Dias, the Spanish newspaper. A property bought in 1976 for 12,020 euros and sold now for 220,000 euros would, under the current legislation attract a tax of 10,869 euros but under the new laws, this would rise to 43,995 euros, a considerable difference of 33,216 euros.

The new reforms will see the disappearance of inflation and abatement coefficients which effectively meant that a property acquired before 1986 would not pay tax for capital gains and those bought between 1986 and 1994 would benefit from reductions in their tax liability.

With the coefficients and tax reform of 1996, capital gains generated by the sale would be reduced by 11.1% for every year after the second year. This effectively meant that after 11 years, no tax would be due.

The new ruling means that taxes applied to capital gains from 31 December 2014 are indirectly increasing. Another example given is a property acquired in 1980 for 9,000 euros and sold in 2015 for 245,000 euros would attract a tax of 55,520 euros but if the buyer and seller could bring forward the sale date to within 2014, the tax paid would drop to 15,359 euros.

So all those sitting on inherited property which they have owned for many years are about to get a nasty shock when deciding to sell. Even a house bought in the year 2000 for 150,000 euros and sold now for 200,000 euros will be paying 8,220 euros more in 2015 than if sold this year.

Will this help the Spanish property market, NO, I am afraid it is back to the gun and foot days which all agents hoped to leave behind in 2014. What will people with old property most likely do? I suspect they will just hang on to the family inheritance and hope that when the government changes this law might get kicked in to touch.

Feeling a bit depressed? I can´t leave you like that just before Christmas so here is some good news about income and corporate tax. Of course, it only helps you if you work or own a company but we must be thankful for any allowances.

The Economy Minister Luis de Guindos has given his support for plans to lower income tax. That said, his government did say when they came to power that no increases would be made in the first place but then politicians have short memories for such things, as we all know. He says that he aims to make income tax “much more reasonable” in the future and to get the government to remove as he describes them “disincentives” for economic growth. He then went on to say that saving should be encouraged and the tax burden lowered.

In an aim to achieve this, they are looking at reducing corporate tax from 30 to 25% by 2016 and those earning less than 12,450 euros per annum would see their tax reduced from 24.75% to 19% in the same time period. Initial reductions coming in during 2015 with a final reduction in 2016 to take us to these figures.

Tax brackets will reduce from 7 to 5 under the new reforms to simplify matters and make income tax calculation easier and it is thought that 62% of tax payers, i.e. those earning less than 24,000 euros per year will see a tax rebate of 23.5% by 2016.

So a little bit of light at the end of the tunnel.

STOP PRESS…STOP PRESS…STOP PRESS

It has been claimed that inexperienced and newly qualified nurses were recruited to deal with Ebola patients and threatened with the loss of their career if they refused the work.

The report has been made by the Madrid Area North Healthcare Workers Board. It says it was ordered to draft in brand new professionals straight out of college on the nurses jobseekers register.

There are further claims that existing nurses were to be threatened with disciplinary proceedings or sacking if they refused to carry out duties for Ebola patients, even if they insisted that they did not have the required knowledge or experience. It is unclear whether these instructions came from the regional or national ministry of health.

The register is used for newly qualified doctors, nurses and other professionals such as teachers. A points system operates and when, either permanent or temporary jobs arise, they are contracted in order of the highest points first. Anyone refusing to take up the post offered are normally removed permanently from the list, effectively ending their chances of working in their chosen profession.

According to the Madrid Area North Healthcare Workers Board, the medical authorities were relying on these newly qualified professionals desperation not to be delisted to force them to bolster staffing levels to deal with treating Ebola patients.

The need for the extra staff has been due to the mass redundancies at the Carlos III Hospital in Madrid which has Spain´s only specialised tropical and infectious disease unit. The staff cuts were made in May two months after the Ebola outbreak had been identified in West Africa.

Criticism has been damning in Spain about their handling of the outbreak, with claims from one nurse, about to treat Teresa Romero, who contracted the virus while nursing the missionary Manuel Garcia Viejo, that she had not even been taught how to put on and take off the bodysuit supplied to protect her. The bodysuit itself has come under criticism with claims that it falls far short of the World Health Organisation required standards.

EXCHANGE RATE OUTLOOK

It’s been an interesting three months for the GBP/EUR cross, with sterling reaching a near 6-year high against the floundering single currency. In the weeks that preceded the Scottish referendum the pound was sold off as speculation mounted over the future of the United Kingdom, as momentum behind the ‘Yes’ campaign grew. Investors feared the economic impact of a ‘Yes’ vote and the pound dropped as a result. Following the vote, confidence in the pound was restored and the GBP/EUR pair subsequently soared to the mid-1.28’s, a level not seen since August 2012.

Recently, the strength of the pound has been determined by the Bank of England’s ever-changing stance on monetary policy, particularly when the UK will see the much anticipated interest rate rise. Earlier in the year there had been speculation that this may come towards the end of this year. Over the last few months inflation in the UK has slowed significantly, forcing the Bank of England to push back the rate hike, which is now not expected to happen until the last quarter of 2014 at the very earliest. In the Bank of England’s latest quarterly inflation report Mark Carney said he expected inflation to fall below 1% in the next six months, well below the bank’s 2% target.

With inflation slowing, the Bank would be unwise to raise interest rates. In fact, the European Central Bank and the Swedish Riksbank have both just cut their interest rates in an attempt to combat the inflation problems they’re facing. If the Bank were to raise interest rates now, people would be encouraged to save rather than spend. With people spending less, prices will fall as retailers try to encourage spending. Mortgage and other debt repayments would also increase after an interest rate hike. This too would compound the problem of slowing inflation as consumers are left with less real disposable income. All of this would be made worse as real wages continue to fall.

As it now looks as though we won’t see interest rates raised until late 2015, the pound has started losing ground against its major counterparts, dropping from 1.2850 to the high 1.24’s against the euro, and from 1.71 to 1.56 against the US dollar. The potential interest rate hike had been supporting sterling, but the pound has now weakened accordingly.

It’s a rosier picture in Spain at the moment, with figures in October showing the Spanish economy grew for the fifth consecutive quarter, despite economic growth in the rest of the Eurozone remaining subdued. The Spanish economy, the Eurozone’s fourth largest, has been growing modestly since pulling itself out of recession last year and is now one of the fastest growing economies in Europe. The Bank of Spain said that consumer spending has been driving the economic growth, coupled with falling unemployment and an increase in consumer and business confidence. Mariano Rajoy will be breathing a sigh of relief as Spain seems finally to be over the worst of it.

The relatively strong pound and the improvement in economic conditions in Spain, not to mention rock-bottom property prices, should surely be a mouth-watering prospect for Brits looking for that place in the sun, either as an investment, holiday home or a place to retire. For those looking to repatriate funds to the UK after selling in Spain, the recent movement in GBP/EUR should be seen as a good opportunity to make the most of that currency conversion after the pound lost three pence to the euro in November.

STOP PRESS…STOP PRESS…STOP PRESS

Isidoro Alvarez, the Chairman of El Corte Ingles, aged 79, has died following his admission to hospital with breathing difficulties. Isidoro has always kept out of the press and is widely credited with making the brand a household name across Spain. The privately owned company had sales of 14.2 billion euros in 2013 and employs 93,000 staff. Isidoro only turned to the financial markets in 2013 for help, having run the business through the economic down turn in Spain.

His death comes days after Emilio Botin, the Head of the Banco Santander. Both men died while still controlling their companies and it is widely thought that his successor will be his nephew, Dimas Gimeno. Also recently appointed to strengthen the board is Manuel Pizarro the former Chairman of ENDESA.

Isidoro took over the business from his uncle who started it as a tailors in central Madrid in the 1930´s. The company grew to be the darling of Spain in the 1970´s with its ground breaking promise of a no questions asked product return policy. The company operated as a department store but also expanded in to insurance, travel, information technology and ticketing for concerts and theatres.

If any criticism was to be levelled at Isidoro´s running of the empire it was that he had been slow to implement a more professional corporate structure such as Amancio Ortega had done at Zara.

CHRISTOPHER COLUMBUS OR CRISTOBAL COLON AS WE LIKE TO CALL HIM HERE

Could archaeologists have found the exact spot where Christopher Columbus or Cristobal Colon, as the Spanish call him, set sail for the New World in 1492? Well, Professor Juan Manuel Campos, of Huelva University who is leading the archaeology team certainly believes that is what they have found in the Huelva town of La Fontanilla de Palos. The excavations have been ongoing for some months and their discovery is hailed as one of the most important and significant relating to the history of the day.

The port did come to light in the last century when Enrique Martínez Iruño, the Argentinian Consul to Spain, settled in the town and his passion for the town lead him to speak of searching for and restoring the historic port as early as 1908 but various factors put the project on hold for nearly 80 years. By 1992, researchers had deduced, through indirect data, that the port was located somewhere in the “vaguada” or trough area but it took another 24 years and Professor Campos to confirm that the hunch was indeed correct.