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Are you ready to declare your offshore assets under Spain?s new reporting obligation?
Do you understand exactly how the new law impacts you?
There may be a couple of months to go until the 30th April deadline, but since this is the first time you will fill in this form, and you need to understand which assets to declare and how, do not risk leaving it to the last minute. The penalties for failing to report an asset will be punitive, so you should start considering your report now to avoid mistakes.
For peace of mind, contact an expert tax advisory firm Blevins Franks which specialises in Spanish tax planning for British expatriates. We could guide you through what needs to be declared, and review your assets to see if they are structured as tax efficiently as they could be.
If you were resident in Spain in 2012, you need to report the assets you own outside Spain as at 31st December 2012.
The reporting deadline will be 31st March each year. Exceptionally, for this first time, the deadline is extended to 30th April 2013, and reports can be submitted in March or April.
There are three reporting categories, and you have to report all assets in a particular category if the value of your total assets in that category amounts to over ?50,000.
1. Accounts held with financial institutions (all cash and deposit accounts)
2. Shares, securities, life assurance policies, annuity income, income generated from loans, rights or other assets
3. Immovable property and rights over such property.
You are obliged to report assets if you are the owner, a beneficiary, an authorised signatory, or if you have the authority to dispose of the asset. This includes assets held in a trust.
You will only need to report the assets again in following years if the total value of the category has increased by more than ?20,000.
When you fill in your form, in most cases the values to be declared are the same as those used on wealth tax returns. In other words, assets are valued using the wealth tax rules as at 31st December each year.
In the case of assets held within financial institutions, besides the end of year value you also need to declare the average balance over the last three months of the year. You have to include the date the account was opened, and if you have closed it, that date too.
When it comes to property, you need to declare the cost and date of acquisition, and the current value as per the wealth tax rules, plus the sale proceeds if you sold it during the year. This way, the tax office will be able to calculate the gain on sale.
If you sold an asset, be it a property, shares etc, during 2012, or closed a bank account, you need to report the value at the date of disposal.
You still need to submit your income tax and wealth tax returns (if applicable) each year. This new reporting obligation is entirely separate. A new form will be released soon for this purpose. It will be mandatory to file it online. If you do not have the facility yourself an accountant can do it for you.
The consequences of failing to report
There is a great deal of exchange of information between countries these days, and this is increasing, so anyone who fails to report an asset is likely to be found out at some point. The fines are so heavy that you could easily have to pay more than the value of the asset itself.
Any unreported asset may be treated as an ?unjustified increase in wealth?. In this case, the undeclared asset will be taxed as general income at the scale rates, so up to 52% (54% in Andaluc? and 56% in Catalu?), plus late payment interest, plus penalties of up to 150% of the tax payable. The authorities will be able to look back indefinitely over past years to assess the unpaid tax on the unreported asset.
On top of this, you would have to pay a fine for non-compliance, which is ?5,000 for each reportable asset, with a minimum fine of ?10,000.
What will the authorities do with the information?
The authorities are looking at ways of raising revenue and cracking down on tax evasion. Once they have your information from this report, they will be able to monitor your assets, for all tax purposes, to make sure you are paying the correct amount of tax. They are highly likely to compare your reporting declaration against your wealth tax, and possibly income tax, returns.
Provided you declare everything you should, and only use approved arrangements to lower your tax liabilities in Spain, you should have nothing to worry about.
For peace of mind, you should speak to tax planning and wealth management firm Blevins Franks who are Spanish tax experts. With its in depth understanding of Spanish taxation and law, its local Partners will advise you on what you need to include in the form. At the same time they will guide you through the opportunities to legitimately lower your tax liabilities in Spain on your offshore assets.
11 January 2013
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual should take personalised advice.