Wealth Tax Abolition —
Final Approval

We are pleased to confirm that the necessary legislation to suppress this tax was finally approved on 23 December 2008.

Wealth Tax law has not been derogated but a new 100% exemption has been provided. The main consequences are as follows:

1. Both resident and non-resident individuals will not have to pay wealth tax with effect from 1 January 2008.
   
   
2. Both resident and non-resident individuals will not be obliged to submit wealth tax returns as the Spanish Government has decided that the annual declaration of assets and liabilities is no longer required.

The way that this tax has been suppressed is curious and the fact that Wealth Tax law remains can only mean that the Spanish Government is reserving its position and might at some time in the future change its mind which could be easily done by inversing the exemption. Perhaps this is not so surprising given the economic conditions and uncertain future.

Non Spanish residents should note that the annual income tax on theoretical rental income applicable to second/holiday homes remains and so the annual filing and tax payment obligation will continue. The 2008 year filing will be due as usual before the end of this year and the total tax payable will subsequently reduce.

Spanish residents remain similarly subject to assessment for second homes which is part of their normal annual income tax returns.