Spanish economy shrinks by 0.3 percent in the third quarter

The Spanish economy contracted for the fifth quarter in a row in the period July-September but by slightly less than expected as this summer’s value-added tax hike continued to push inflation higher in October.

According to a flash estimate released Tuesday by the National Statistics Institute (INE), GDP in the third quarter shrank by 0.3 percent from the previous three months. Both the Bank of Spain and the Economy Ministry had predicted a contraction of 0.4 percent, equal to the magnitude of the decline in output in the second quarter.

Labor Minister Fátima Báñez said Monday that the Spanish economy was “emerging from the crisis,” although she produced no data to confirm this impression. The government is still debating whether to seek a bailout from the European Stability Mechanism. This would trigger purchases of sovereign debt by the European Central Bank with a view to lowering the country’s borrowing costs. Prime Minister Mariano Rajoy said Monday he believes a bailout is not “essential” at the moment.

On an annual basis, the fall in activity accelerated to 1.6 percent from 1.3 percent. In the period January-September, GDP shrank 1.2 percent, in line with the government’s prediction of a contraction of 1.5 percent for the full year.

UK Citizens. Access to healthcare: S1

If you are in receipt of a UK State Pension or a long term incapacity benefit and you decide to move to Spain permanently, ask for your S1 (previously E121) from the International Pension Centre (IPC) in Newcastle.

Once registered with the Spanish authorities, the S1 gives you and your dependants the same medical cover in Spain as a Spanish national under the Spanish state-run health scheme. This cover may not be the same as you received on the NHS in the UK so you may have to pay for some treatments or services. Remember that:

• treatment given privately and repatriation costs to the UK are not covered. Think about whether you want to take out private health insurance.
• some social services may not be available.

For further details don't hesitate to contact to us.

www.vpadvisers.com

Rajoy still undecided on bailout

Prime Minister Mariano Rajoy said Friday he had yet to make his mind up on whether to ask for a second bailout to ease Spain’s borrowing costs, and denied he came under pressure to decide at the European Union summit meeting on Thursday in Brussels.

“I have to take this decision as head of the government and it hasn´t been taken,” Rajoy told reporters. “If I have to take it, I will take it.”

Rajoy said it was important that the bailout mechanisms exists. The most likely option for Spain would be to seek a precautionary credit line from the European Stability Mechanism (ESM), which in turn would trigger the purchase of Spanish sovereign debt in the secondary market by the European Central Bank (ECB).

The summit in Brussels postponed creating a pan-European banking union under the sole supervision of ECB that would allow the direct recapitalization of the bloc’s banks until 2014. Both Rajoy and French President François Hollande had called for the union to be in place earlier but German Chancellor Angela Merkel was opposed to this.

Spain shoots up the wealth disparity charts

There has always been a sizeable gap between rich and poor in Spain, but that gap has now become a chasm. Fueled by the crisis and unemployment, Spain has shot to the top of the wealth disparity charts.

The so-called Gini coefficient, which measures a nation's income differential, is a clear indication of this change. If a country scores zero on the scale, it enjoys perfect income harmony; 100 would be complete disparity. Spain received a 34 on its report card, the second-highest score among the 16 EU countries that have so far handed in their data for this year. Only Lithuania, with 35.2, exceeded Spain.

But the Gini is not the only statistic that shows Spain's ill-balanced wealth spread. Eurostat's so-called 80/20 ratio is a gauge of the relation between the 20 percent who earn most and the 20 percent who earn least. In this data Spain broke the record with a 7.5, the highest figure in the EU.

IMF fears Spain’s risk premium may rise to 750 basis points

IMF officials on Tuesday raised concerns about the chance of a renewed spike in Spain and Italy's risk premium if their governments do not trigger intervention by the European Central Bank.

"The issue here is why the yields on Italian and Spanish bonds have come down," the IMF's Chief Economist Olivier Blanchard said during a press conference held in Tokyo on Tuesday. Blanchard suggested that this may have happened because investors are anticipating that their governments would request assistance from the European rescue funds. "If this is the case, we cannot be sure that the yields will remain low," he said.

The director of the IMF's monetary and capital markets department, José Viñals, a former deputy governor of the Bank of Spain, on Tuesday presented a report suggesting Spain's risk premium could hit 750 basis points if the European authorities do not take the right decisions on time.

Spain's risk premium was up 11 basis points from Monday's close at 434 on Tuesday after the IMF revised its estimate for the contraction in the Spanish economy this year by 0.1 points to 1.3 percent, almost triple the government's figure of 0.5 percent. It also predicted Spain would miss its deficit-reduction targets for this year and the next, and forecast the average jobless rate would rise to 25.1 percent when the government expects it to fall.

Labor Minister Fátima Báñez insisted the government's economic forecasts are "credible" and that the economy could start creating jobs at the end of next year.

FISCAL CHANGES FROM SEPTEMBER 1st

FISCAL CHANGES FROM SEPTEMBER 1st
IVA RATES UPDATED

Form September 1st. All the IVA rates are going to be as follows:

GENERAL                  18% -> 21%
REDUCED                  8%   -> 10%
SUPER REDUCED                 4%  no changed

Some of the activies that were included on the reduced level and will be now on the normal level are:

• Hairdresser:(Only big brands, not little businesses).
  
• Spectacles:Cinema, Theatre,Circus..
• Disco and dancing rooms
• Gym
• Funeral and decease services 
• Exhibitions
• Some health assistance services

INCOME TAX REFUND DEADLINE

In case you are fiscal resident in Spain and one of the taxpayers who is able to get a refund from his Annual Income tax, you need to know that in order to get that money back in your bank account, the Spanish Tax Office has 6 months from the last day of the tax declaration period (2nd July this year) in order to refund the money to the citizens.

If you are lucky you may not have to wait until 2013 to get the money, but you should know that in case the Tax Office has not pay you the money back, from that 6 months period on, they will pay you interest over the amount you have to receive. (Now the interest rate is set at 5%).

In case you need to check the status of your refund during the year, visit us and we will glad to offer you our services.

GOVERNMENT UNVEILS AUSTERITY PACKAGE

The Cabinet on Friday approved 27.3 billion euros of savings for the rest of the year — the biggest austerity package seen in Spain’s modern democracy — with the hopes that the country will stay on track to meet its deficit-reduction goal for the end of 2012 and avoid the same bailout fate that was suffered by Greece, Ireland and Portugal.

Speaking after a meeting of the Cabinet, Finance Minister Cristóbal Montoro described the country’s finances as “critical,” and reiterated that the government’s aim is to bring down the deficit by the end of the year from the current 8.51 percent of GDP to 5.3 percent, in line with Brussels’ demands.

“Spain will keep its good faith by ending the year with a solid deficit figure, as we pledged \[to Brussels\],” Montoro said.

The government plans drastic cuts in all the ministries with an average reduction of 16.9 percent of spending — two percentage points higher than the figure Prime Minister Mariano Rajoy cited on Tuesday. In all, 17.8 billion euros will be slashed from the central government’s expenditures.

The biggest cuts will be made in overseas aid through international cooperation and development programs, with 594 million euros of cuts.

The Cabinet also approved hiking taxes on big businesses and increasing court and other legal fees as new sources of projected revenue. The government hopes to rake in some 12.3 billion euros by eliminating corporate tax deductions, including suppressing a controversial goodwill tax break that made it easier for Spanish companies to purchase foreign firms and expand overseas.

Deputy Prime Minister Soraya Sáenz de Santamaría ruled out new taxes, including another hike in value-added tax (VAT), which was increased in 2010 from 16 percent to 18 percent.

“We are in a desperate situation when it comes to the fiscal outlook,” Sáenz de Santamaría told a news conference after the Cabinet meeting. “We are looking to turn the situation around as well as laying the foundations for growth and job creation.”

Montoro also announced that Spaniards who have overseas accounts to avoid paying taxes or currently have domestic earnings being paid under the table will be given a chance to regularize their finances by paying a 10-percent fee on the revenue declared, without any other fines or sanctions. The finance chief said he hopes to bring in another 25 billion euros with this amnesty.

The Cabinet also approved a seven-percent hike in electricity rates, and a five-percent hike in gas rates beginning Sunday.

The government’s plans will go to parliament on Tuesday, and are expected to be formally passed in June.

Spain’s new financial goals come as European finance and economy ministers, meeting in Copenhagen Friday, agreed to create a permanent bailout fund for the euro zone with a temporary lending capacity of about 700 billion euros for member states.

Economy Minister Luis de Guindos, who was in Denmark for the meeting, said that “Spain will no longer be a problem for the Union” as he presented his colleagues with the Spanish budget plans.

The budget was presented months later than usual given that the Popular Party took office in December.

Source: ELPAIS

FASTER OPENING LICENCES

Government is planning to cancel the obligation of applying for an opening licence for small businesses from June 2012 on.

Once the measure is approved, a person who wants to open a small business only will need to do 3 steps, avoiding between 6 and 18 months of delays on the obtention of the final licence.

This measure will be applied only for businesses like small stores, butchers, bakers...and it is important to have the requeriments needed:

• Premises smaller than 300 square meters.
• Annual takings lower than 50 million euros.
  
• Having less than 250 workers.

The negative point is that the measure will not be applied to bars, restaurants, hotels and companies which manage dangerous materials.

The process is the following:

• Presenting a technical report produced by an engineer or technician where it is shown that the business has the requirements.
  
  
• Presenting a document called Declaración Responsable. With that document, the manager is saying that his business has the requeriments needed to run the kind of business presented.

• The fees for the townhall have to be paid. Each townhall has different fees depending on the kind of business.
  

Then once the 3 steps are done, the business can be opened while you are waiting for the final resolution,until that moment, the administration can start inspections in order to check that there are no illegal features in the business. In case of detecting something illegal, the townhall could fine the business and stop or cancel the final licence process.

So this process is like Self-Licencing, because is the company who is declaring that the business has everything right and then the townhall can check it in future. At the moment, many businesses are working without the final resolution approved, because lot of people cannot wait many months or more than a year until they get the licence to open.

Activities Unit to control the businesses licences

The Department of Planning has decreed the creation of the Unit Activities, which has set up human and material resources. Specifically, two civil servants of town hall are part of that Brigade focused over the census of activities and supervising the holding of licenses and payment of fees. This unit will be authorized to visit and check establishments. As material resources will be provided with a vehicle attached to this unit and protocols.

Officials visiting establishments will be identified and credited as officers of the City of Orihuela and never ask for payment of any amount. The guideline is as follows: the unit visits the facility and is identified and requires you to show them the license or the license application and payment of fees. Then they will record your business in a census data and specify the activity data (if is licensed and if fees have been paid). If everything is correct, the establishment becomes final census.

If you only have the application then will be required to pass through the activities department to drive the process and finally obtain the final license and remedy deficiencies for finally obtaining the license. If it is not licensed, disciplinary proceedings will be opened and you will be prompted to initiate the procedures that apply.

"The penalties can range from suspension of activity, from fines to closure of the establishment," said the Town Planning, who has insisted that the goal of creation is to enforce the law, since the City must monitor that all activities are conducted under the rules of safety.