DCN Would Generate 214,000 Jobs & Increase GDP By €14,000M

20 April 2017 – El Mundo

The Distrito Castellana Norte (DCN) project planned for the North of the city of Madrid, in what is known as Operación Chamartín, would generate 214,000 jobs in total, of which almost 120,000 would see the light during the construction of the project, whilst another 94,000 would be created once the building phase comes to an end. Moreover, the project, which would involve an investment of more than €6,000 million, would increase GDP by €14,000 million and would generate revenues of €3,340 million for the public administrations from the economic activity that this initiative would create.

These data are detailed in the report Effects on the creation of employment of the project to lengthen the Castellana, which has been prepared by two professors from the Universidad Autónoma de Madrid (UAM), Antonio Pulido and Julián Pérez.

The developers of the project, which group together BBVA and Grupo San José, understand that a “reductionist” project, such as the one proposed by the Town Hall would “not only deprive Madrid of the necessary infrastructure to ensure an optimum quality of life for its inhabitants and visitors, it would also inevitably have a lower capacity to generate jobs”.
During the forecast 19-year construction period, almost 120,000 full-time jobs would be created, equivalent to 0.6% of total national employment, of which 52,650 would be direct jobs, 42,037 would be indirect jobs and 23,104 would be related jobs. Of those, 80,445 would be created in the Community of Madrid.

Once the neighbourhood has been constructed, the experts calculate that the new activities that would arise in the area would result in the creation of another 94,000 jobs, of which 63,000 would be direct and 31,000 would be indirect. These would be full-time jobs, which would likely be maintained over the long term.

The development of DCN would allow the creation of 6,200 jobs each year, on average. This job creation rate would mean an average reduction in employment in Spain of 0.03%. In the Community of Madrid, the decrease would amount to 0.12% and in the city of Madrid to 0.27%.

Focus on wealth

In their report, Pulido and Pérez calculate that the construction of the DCN project, with an investment of almost €6,050 million, a figure equivalent to nearly 0.6% of Spain’s GDP, would increase domestic production by €14,000 million and would generate new income amounting to €5,400 million. 78% of the new wealth generated would remain in the Community of Madrid.

That means that the project’s contribution to GDP would amount to €286 million each year, which represents an average of €117 per Spaniard per annum. Specifically, the annual income would be €71 for every inhabitant of Madrid, €35 for every inhabitant of the Community and €1.5 for every inhabitant of Spain.

Meanwhile, the public administrations involved in the project would receive tax revenues amounting to €3,340 million, a figure equivalent to 0.6% of the annual state budget for Spain. (…).

Original story: El Mundo

Translation: Carmel Drake

Sareb Requests Permission To Deduct Its Input VAT

11 July 2016 – Expansión

Operations / The company known as the bad bank states that value added tax is designed to be charged to end consumers and asks that it be allowed to deduct it on its incoming assets.

The bad bank was born when it received foreclosed properties and developer loans from the rescued saving banks; and its mission is to gradually divest all of the assets in its possession, before it is wound up in 2027.

The company chaired by Jaime Echegoyen has to pay VAT on the homes that it acquires and for the new properties that enter onto its balance sheet, those that are foreclosed due defaulted developer loans, but it is planning to file a request for permission to deduct this tax in light of the entity’s special nature.

That it what it will ask of the new Government that is created following the next elections, according to official sources. Its objective is that the future Government will refer its request to the European state, where, it seems, it will not face any regulatory problems in terms of its harmonised tax configuration.

The institution argues, firstly, that this tax is designed to be borne by the end consumer, but that the current wording of Law 37/1992 governing VAT, forces it to bear the cost during the exercise of its activity, in operations of a commercial nature.

Secondly, it states that given that it is not able to deduct the VAT, it is forced to pass the charge onto end consumers through its house prices, in such a way that buyers “suffers from an unjustified increase in the tax charge”, since they also have to pay tax on the asset transfer itself. In its opinion, “this bias may be overcome”.

Legal experts at the institution also maintain that allowing the bad bank to deduct VAT from its foreclosed properties, as well as from those received by means of “dación en pago” would not result in a decrease in the funds raised by the autonomous governments. By contrast, they consider that it would boost said amount, given that Sareb would no longer charge VAT that it has been allowed to deduct from the house prices and that decrease would result in an increase in the volume of operations and therefore in the number of properties sold, which means that income from taxes on property transfers would rise.

In terms of the change to regulations in Europe, Sareb argues that Directive 2006/112/CE provides for the possibility of exempting the payment of VAT: In general, it establishes that it is not possible to exempt the sale of properties from VAT before their first occupancy, but that any transfers that are carried out after that first occupancy should be exempt. Sareb hopes that this possible amendment will be accompanied by a transitory regime for second and subsequent sales of unoccupied homes acquired before the change enters into force.

Original story: Expansión (by A. Crespo and S. Arancibia)

Translation: Carmel Drake

Podemos Positions Itself Against Socimis & The RE Recovery

26 April 2016 – Negocios.com

The political party led by Pablo Iglesias (pictured above) wants to put a stop to these investment companies, which are responsible for investing billions of euros each year.

Podemos has proposed an attack on the Socimis (listed real estate investment companies), whose appearance has helped the recovery of the real estate sector in recent times. Pablo Iglesias has put the tax structures of Socimis, private equity firms and entities holding foreign securities (ETVE) in the firing line; he says that he wants to “ensure productive investment and tax equity”. And it is true that the tax treatment of Socimis is different to the rules that apply to other companies, but the Socimis also have to comply with certain requirements, such as holding share capital of €5 million, and not €3,000 like an SL, and listing on the stock exchange, such as the MAB, IBEX 35 or Main Market.

– Tax rate of 0%. Socimis are taxed at a rate of 0% for Corporation Tax purposes.

– Special rules need to be taken into account for entities that have been taxed under a general regime that start paying tax under the Socimi regime: if ownership of a property is transferred prior to the application of the Socimi regime, then the rental income shall be understood to be generated on a linear basis (unless proven otherwise) during the holding period, and so the previous tax regime and the Socimi regime will be applied to the rental income on a proportional basis.

In addition, Podemos also wants to axe Sicavs, control the shareholders and the money in cash, limit the maximum percentages per shareholder and have them monitored by the Tax Authorities and not by the CNMV like now.

Encourage “informers” and allow tax inspectors to work under cover in order to combat tax fraud. The informer would be rewarded with some of the economic fine imposed on the offender, whilst a fund would be created for paying tax confidants.

This is part of the Comprehensive Plan to Combat Fraud that will be presented to the Economic Committee on Wednesday. According to the text, tax revenues would increase by between 1% and 1.5%.

Moreover, Podemos considers that it would be worthwhile to integrate all of the networks of the Tax Authorities and the regional and state Social Security departments for greater coordination.

Meanwhile, Podemos’s proposals also include lowering the criminal liability threshold for tax offences to €50,000, as well as increasing, in general, the “prescription period” to ten years, applying the penalties currently provided for when the defrauded amount exceeds €120,000.

Original story: Negocios.com

Translation: Carmel Drake

Tax Collections From Property Taxes To Rise By 7.2% In 2016

8 January 2016 – Expansión

BUDGET 2016 / Spain’s autonomous regions are forecasting a 7.2% increase in tax collections relating to house purchases in 2016, with Navarra, the Balearic Islands and Madrid leading the way.

Spain’s autonomous regional governments are predicting significant increases in house sales and consumption in their budgets for 2016. A report prepared by the Ministry of Finance based on the accounts submitted by the autonomous regional governments, shows that income from the Property Transfer Tax and Stamp Duty (ITP and AJD, respectively), which are levied on the purchase of second-hand and new homes, will grow by 7.27% in 2016, to amount to €5,865 million, representing an increase of €400 million. Meanwhile, the autonomous regions expect to raise €21,959.35 million from VAT, an increase of 14.1% compared with the previous year.

The autonomous regions forecasting the highest rates of growth are: Navarra (26.7%), the Balearic Islands (18.2%) and Madrid (13.3%), followed by Castilla y León (10.7%), Galicia (10.1%), Andalucía (9.2%), the Canary Islands (9.1%) and Cantabria (2.2%). By contrast, revenues from the same taxes are expected to decrease in Murcia (12.1%), La Rioja (4.4%), Valencia (2.9%) and Aragón (1.8%).

The Ministry of Finance has analysed the projections submitted by all of the autonomous regions, with the exception of Cataluña, Asturias, Castilla-La Mancha and Extremadura, because either they have not submitted their budgets or their budgets have been rejected.

These forecasts show that the autonomous regions forecast an increase in the sale of second-hand homes, on which ITP is levied, as well as new homes (AJD and VAT). They are also predicting a significant increase in consumption, equivalent to more than three times the rise forecast by the State’s General Budget for 2016.

The forecasts made by the Institute of Business Practice (IPE) in its Real Estate Pulsometer (published in December) show that house sales will increase by 17% in 2016 and house prices will rise by 6.6%. The Balearic Islands (24.5%), Madrid (23.5%) and Cataluña (22%) are expected to lead these increases.

These percentages are consistent with the projections made by the autonomous regions in their own budgets, given that the majority of the regions are not going to increase their rates of ITP-AJD; instead they expect revenue growth to stem from increases in activity. In fact, Navarra, the region that forecasts the highest increase, plans only to make a technical change to ITP, despite increasing other (non property-related) taxes in 2016. These tax rates are not forecast to rise in Madrid, Castilla y León or Galicia, nevertheless revenues are projected to grow by more than 10% this year.

The rate of ITP is forecast to rise in Aragón only, from 7% to 8% – and AJD will increase from 1% to 1.5% there too. In the Balearic Islands, the regional government has created a new ITP band for properties worth more than €1 million, which will be levied at a rate of 11%.

The collection of taxes from housing increased during the first half of 2014 for the first time since the beginning of the crisis, by 5.9%; these same revenues plummeted by 40% in 2008. Experts at Fedea (‘Fundación de Estudios de Economía Aplicada’ or the Foundation for Applied Economic Studies) have warned against the danger of inflating earnings forecasts on the basis of real estate activity.

Original story: Expansión (by Mercedes Serraller)

Translation: Carmel Drake