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The draft bill presented by Cristóbal Montoro does not include the measures that are called for by the Costa del Sol or proposals from the report by a group of experts
27.06.14 - 11:32 -
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Tax reform ignores recommendations aimed at encouraging residential tourism
Houses at La Zagaleta, a luxury residential development in Benahavís. :: JOSELE-LANZA
At present, this appears to be a lost opportunity. The draft law for income tax reform has ignored the demands of businesses which are linked to residential tourism for changes in the law which would permit the Costa del Sol and other Spanish coastal regions to compete on equal terms with other European destinations to attract investors and wealthy residents.
This has been a serious and unexpected setback, because the substance of their demands had been included in a report by experts which had been commissioned by the Ministry of Finance when the new bill was being drawn up. The details were presented by the Minister, Cristóbal Montoro, on Monday, who recently mentioned at a conference in Malaga that the new bill would take into account the experts’ recommendations for boosting residential tourism and would also include special treatment for foreign residents.
In February, a committee of experts led by professor Manuel Lagares delivered its report for the reform of the Spanish tax system, which had been requested by the Minister himself. Its 444 pages included 125 proposals for reform and 270 tax changes, among them the creation of the figure of a non-habitual resident, with the aim of encouraging the development of residential tourism and the ability to compete with other European destinations in this sector.
The study, as well as recognising the importance of residential tourism and indicating that the present tax regime is an obstacle which is beginning to have a decisively negative effect when competing with other countries to attract property invesment and wealthy residents, proposed specific meaures to make Spain a fiscally attractive destination.
The experts recommended permitting residential tourists to declare only income arising in Spain, a more favourable tax rate during their first ten years of residence and no tax on income from property, among other measures. However, the fiscal reform document presented by Montoro earlier this week only made reference to a special tax regime for people who transfer to Spain to work, thereby specifically excluding pensioners, people who earn and business owners, whether they are the owners of companies which operate abroad or those who want to set up new companies in Spain.
For Pedro Fernández, of the Garrigues firm, who is a specialist in tax matters, the new regulations “don’t go far enough” because they don’t include pensioners or entrepreneurs. “What they were trying to do was make the Costa del Sol a centre for business, where international investors would be able to come to not only to create companies, but to live here and continue to manage their businesses abroad”, he explains, “but this new law will not achieve that”.
Pedro Fernández stresses that Hacienda’s new proposal does offer important advantages for people who come here with work contracts or as the administrators of companies, such as a favourable tax rate of 24 per cent for those earning up to 600,000 euros, but as it does not apply to the owners of these companies it excludes one of the most interesting sectors for the Costa del Sol.
Incomprehensible
Bernard Fay, of the international consulting firm UHY, says it is incomprehensible that the changes aim to encourage executives to come here, but not investors.
“If an investor goes to Albacete and says he wants to set up a factory that will create 700 jobs, logically he will be given every facility, but with residential tourism, which can create thousands of jobs, the same does not apply. It is incomprehensible”, he says.
Fay believes that the failure to listen to the team of experts could have very negative consequences on the future economy of the province.
The president of the Centro de Iniciativas Turísticas (CIT) in Marbella, Juan José González, is also surprised. He says that the exclusion of the recommendations made by the group of experts is a severe blow for the expectations that they had created on the Costa del Sol.
In the opinion of González, compared with destinations such as Portugal, which has taken the lead on this issue, Malta or even Italy, Spain is now unable to compete.
However, Juan José González points out that what is needed now is for efforts to be made to try to influence the parliamentary process so that the the recommendations by the group of experts are taken into account.

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