SPAIN TO OFFER RESIDENCY TO FOREIGN HOUSE BUYERS

Spain is to offer foreigners residency permits if they buy houses worth more than 160,000 euro ($200,000) as part of an attempt to reduce the country's bloated stock of unsold homes. Trade Ministry secretary Jaime Garcia-Legaz said the plan, expected to be approved in the coming weeks, would be aimed principally at the Chinese and Russian markets as the domestic demand was stagnant and showed no sign of improving. Spain has more than 700,000 unsold houses following the collapse of its real estate market in 2008. The country's economy is struggling and is currently in recession with 25 percent unemployment. Thousands of houses have been repossessed by banks and their owners evicted because they cannot pay their mortgages. The government last week approved a decree under which evictions would be suspended for two years in specific cases of extreme need. The country's offer beats others in bailed-out countries such as Ireland and Portugal, where residency papers are offered to foreigners buying houses worth more the 400,000 euro and 500,000 euro, respectively. It was not immediately clear if the residency would only refer to Spain, and not the European Union. The stricken state of the country's real estate market was highlighted Monday by figures from the Bank of Spain which showed that the level of bad debt in the country's banks had risen to a record 10.7 percent of their loan total in September. The bank said the amount totaled 182 billion euro, up from 179 billion euro in August -- the 15th monthly increase in a row. The 16 other countries that use the euro have agreed to lend Spain up to 100 billion euro to help support the country's banks weighed down by these bad loans and investments. On top of the bank loan, Spain has been under pressure to apply for more outside financial aid to help it manage its debt and deficit. The European Central Bank has insisted on the move before it will make good on its pledge to buy the bonds of certain troubled countries to help lower their borrowing costs. Spain says it is waiting to know all the conditions that might come attached to the rescue package before making a decision. Source: MARTINEZ ECHEVARRIA I PEREZ I FERRERO ABOGADOS www.martinezechevarria.com

50% REDUCTION ON VALUE ADDED TAX DERIVED FROM NEW PROPERTY PURCHASES

Starting from 23rd May 2012 until the end of the year, the Government shall apply a 50% reduction on all value added tax derived from the purchase of a property, according to the Council of Ministers. This measure was announced 4 days ago at a press conference by Ana Pastor, Public Works & Development Minister, following the Council of Ministers. This implies that whoever purchases a property starting from today will receive a 50% reward bonus for any eventual value added tax generated by the sale of the same. The reduction applies to both individuals and corporations. The tax cuts therefore affect both individual as well as corporate tax returns. However, purchases made between parents and children will not be entitled to benefit from this measure. The change in policy is focused on revitalizing the anemic Spanish housing market as well as facilitating the sale of stock accumulated in the banks’ balance sheets, which is currently eroding their profit and loss accounts. Anyone who purchases a property as a second home will be able to benefit from this measure. At present, individuals are subject to 100% exemption on value added tax upon selling their main home. This will therefore optimize a stock clearance of all second homes (apartments on the coast etc.) and will aid large investors, speculators or profit-seeking property purchase bonds. SOURCE: MARTINEZ ECHEVARRIA I PEREZ I FERRERO ABOGADOS www.martinezechevarria.com