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    September 8, 2010
 

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Buying In SpainMoneySpanish Banking  

How the Spanish Banking System Works

There are a great number of Banks in Spain and since April in the year 1994 any European Union Bank can open branches in Spain with few bureaucratic formalities. The Ministry of Finance (Hacienda) oversees the Spanish financial system in general, and the Banco de Espana is its instrument of monetary policy as well as the overseer of the banks

Types of Accounts

Fiscal residents in Spain can open a current and savings account for residents. Non-residents can only open current and savings account for non-residents, please note that it is in your own interest as far as the banking system goes to become a resident as soon as possible as far as tax liabilities, charges & interest go.

To open a bank account in Spain you will only need your passport or residence permit, and will be asked to fill out a form from the bank which will also set out the banks general terms and conditions. You will also be asked for your NIE number.

A Current account (cuenta corrente) usually carries a very low interest rate, if any. You can ask for a cheque book.

A fixed deposit account (cuenta de imposicion a plazo) will give you interest depending on the time period of the deposit and the amount deposited. Banks CAN be bargained with about these conditions.

A Savings book account (libreta de ahorro ) also carries a low interest rate but does give you a continuous record of your account. In some banks these books can be used in cash machines for withdrawing money.

The bank is obliged to retain 18% of the interest you earn but not on a fixed deposit by a non-resident.

The bank should also prepare a statement giving your average balance for the year to be used in your wealth tax return.

Notes for Non-Residents

Ábaco Asesores, legal and tax experts in Spain, would like to comment on recent media articles stating that non-residents must provide their bank with a non-resident certificate to ensure that their account will not be blocked. It has been reported that non-residents failing to comply with this new directive, issued by the bank of Spain, will find their direct-debits for utility services, council tax and mortgage payments remain unpaid causing serious problems.
We have contacted the various sources of information mentioned in the articles including the Bank of Spain, the Spanish Ministry of the Interior and a selection of high street banks and we can now provide you with the following information, which we trust, will address your concerns and put your minds at rest.
Why have some non-residents accounts been blocked?
As the media articles state it is due to a crack down on tax evasion targeting non-resident accounts that exist without proof of the non-residence status of the account holder i.e. no N.I.E. and no certificate of non-residence. Non-resident accounts are different from resident accounts because they benefit from being tax-free in Spain (interest earned must be declared in the home country). Residents are obliged to declare and pay tax on any interest earned in their annual Income Tax declaration. This explains why the Tax Authorities are auditing non-resident accounts in order to check whether the account holders are in fact residents using the accounts fraudulently.
How do I prove I am a non-resident?
Most of you will have opened your account or provided your bank at a later date with your N.I.E. number and this has been sufficient. To date the certificate of non-residence, highlighted by the media, is substituted by the non-resident account holder signing a Declaration of Fiscal Residency issued by his/her bank every two years confirming their continued non-resident status. This has been the approved system between the Tax Authorities and the banks to control that every account holders is using the correct type of account.
All the banks we have contacted in the area confirm they are still operating the Declaration of Fiscal Residency system as opposed to requiring a non-resident certificate to present to the tax authorities. When asked about accounts being blocked we were told that one or two cases occurred because the account holders had initiated the procedure to become residents but were unaware that they were considered residents by the tax authorities. Either they had never received the approval notification or they had changed their minds mid-way but had failed to cancel the application. Not being aware that they were actually residents they continued with their non-resident bank accounts which were duly blocked until their status was clarified.
What action should I take?
  • If you are concerned that your bank may not have your N.I.E. number or you cannot remember completing and returning the non-resident status declaration form issued by your bank sometime during the last two years please contact your bank to confirm that you are still a non-resident.
  • Until you receive further notice from us or your bank it is not necessary to obtain a non-resident certificate.
We hope this information allays your fears that your Spanish Bank account is about to be frozen and you will suffer the problematic consequences of unpaid utility bills etc. We will continue to monitor the situation and will issue new advice if and when necessary.
 

Transfer of Funds

There are now no restrictions on transferring funds to and from Spain from other countries of the European Union and the ESS. If you want to make transfers to or from countries outside the EU area, you need to consult you own bank. However if you want to take out more than 13,353 euros from Spain to another country, or move more than 80,000 euros within Spain, you are obliged to communicate it with the authorities (which the bank will also advise you about).

Some banks are still charging heavy commissions on transfers of pensions from abroad while other banks do not - so it is advisable to “shop” around. The EU has decided to eliminate the commissions when using cash machines outside your own country, but inside the EU area……At last!

The Cheque in Spain

Write cheques only in ball point pen or ink. Write (or accept) a cheque to the person or business that is to receive payment and not to the bearer (al portador). To ensure that a cheque can only be deposited into the account of the person or business to whom it is made, write "to be credited to the account of " (a abonar en cuenta) before the name of the recipient, or cross the cheque with two parallel lines. Do not leave blank spaces, which could be used to increase the amount.

Keep blank cheques, destroy excess cheques, and never leave a blank signed cheque for anyone. Writing a cheque without enough funds in the bank is illegal.

To fill-in your Spanish cheque using Spanish numbers use the Euro Cheque website

Bank Statements

Most banks are willing to send your statements to any address you want whether in Spain or your home country. The identifying number is the same as on your cheques - with the first four digits giving the banks number, the next four the branch number then two control numbers and the last ten your own account number, it is recommended you use this whole number to avoid any confusion. 

Other Bank Services

Standing orders (Domicilliaciones). You can order the bank to regularly pay certain bills when they become due but you must make sure that you have sufficient funds in the account to cover these.

Do not expect to get anything free from the bank! Ask for their list of fees which must be approved by the Bank of Spain (el Banco de Espana) 

Mortgages (“Hipotecas”)

A resident or a non-resident foreigner may take out a mortgage in Spain, including on State-subsidized housing (“VPO” or Vivienda de Proteccion Oficial). You may use either Spanish or a foreign mortgage holder, and the mortgage may be either in euros or foreign currency. A resident may finance up to the whole value of a property, however It is now getting harder for a non resident to do the same.

Interests on mortgages in Spain are low, however not as low as they have been a few years before. Variable interest mortgages can be had at around the late 4.´s to 5% per annum, and fixed interest mortgages can be had at 5-7% per annum, however, if you want to obtain a good interest rate you have to visit many banks and be prepared to shop around and do some waiting around. Always check redemption penalties though as these also differ. and often there is a redemption for the life of the mortage unlike in the UK where there is a term for the same. If you want to take out a mortgage with variable interest, the best reference for the variations is the IRMH (Indice de Referencia del Mercado) published by El Banco de Espana.

There are a whole host of mortgage lenders and rates with different banks and with a mortgage calculator here and there is everything you could think of to ask about mortgages. Most lenders charge the Euribor rate with an additional percentage amount added to this, for example 'Euribor plus 1%'.

So what is the Euribor?

Euribor is short for Euro Interbank Offered Rate. The Euribor rates are based on the average interest rates at which a panel of more than 50 European banks borrow funds form one another. There are different maturities, ranging from one week to one year. The Euribor rates are considered to be the most important reference rates in the European money market. The Euribor rates provide the basis for the prices and interest rates for all kinds of financial products like interest rate swaps, interest rate futures, saving accounts and mortgages. 

More information on Eurobor rates here

 

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