The 31st March deadline for submitting declarations of offshore assets in Spain is fast approaching. If you are resident in Spain and own assets worth over €50,000, you cannot ignore this deadline. The consequences for failing to report are very high, and the authorities have an increasing number of tools to find hidden assets and those not declaring themselves for tax.
The 31st March deadline for submitting declarations of offshore assets in Spain is fast approaching. If you are resident in Spain and own assets worth over €50,000, you cannot ignore this deadline. The consequences for failing to report are very high, and the authorities have an increasing number of tools to find hidden assets and those not declaring themselves for tax.
If you were resident here last year, you need to report the assets you own outside Spain as at 31st December 2013.
If you submitted a report in 2013, you do not need to report in subsequent years if you do not acquire any new assets or dispose of existing ones, and the value of those already reported does not increase by more than €20,000.
Although last year’s deadline was 30th April, from now on it is 31st March. The form you need to submit is Modelo 720, which must be completed online. It is not in standard format and has a series of drop down menus, with little room for clarifications. It is recommended you use an accountant, but you do first need to acquaint yourself with what needs to be reported.
You still need to submit your annual income tax and wealth tax returns under the usual Spanish tax rules, and pay tax accordingly.
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. This only applies to assets located outside Spain.
- Accounts held with financial institutions (all cash and deposit accounts)
- Shares, securities, life assurance policies, annuity income, income generated from loans, rights or other assets
- Immovable property and rights over such property.
You are obliged to report assets if you are the owner, beneficiary, authorised signatory, or you have the authority to dispose of the asset. This includes assets held by a company, a trust or fiduciary.
You need to report even if your personal share of assets is less than €50,000. With joint assets, each owner needs to declare the full value (not pro-rated) and indicate their percentage.
In most cases, assets are valued using the wealth tax rules as at 31st December each year. For assets held within financial institutions, you also need to declare the average balance over the last three months of the year. You need to provide full details of the bank account.
When it comes to property, you declare the cost and date of acquisition, the current value, and sale proceeds if sold during the year.
When declaring shares, unit trusts etc, you use the value as at 31st December and provide details of the investment company, number of shares, ISIN number where available, date of acquisition etc.
With regards to pension plans, there is no obligation to report overseas funds provided they do not give rise to a temporary or lifetime annuity. Where there is an annuity, the capitalised value should be declared.
If you sold an asset, be it a property, shares etc during 2013, or closed a bank account, you need to report the value at the date of disposal.
The consequences of not reporting
Do not bury your head in the sand. The Spanish tax authorities mean business. They are using information received from abroad to check whether people have declared all their overseas assets, and with automatic exchange of information increasing, there is no hiding place.
If you are found to not have declared an asset, the fines and penalties can be devastating.
Unlike normal investigations, the Spanish taxman can go back much further than four and a half years. Potential penalties include the income tax on the unassessed assets up to 52% (56% in Andalucía and Cataluña), plus interest on late payment and penalties of up to 150% of the tax due, as well as fines starting at a minimum of €10,000. This could add up to more than the value of the asset itself.
The unpaid tax could give rise to the criminal offence of ‘tax fraud’ if it exceeds €120,000.
This is the time to review if your assets are in the right place to be as tax efficient as they can be. You could be paying more tax than you need to. Ask an expert adviser to review your arrangements and discuss the most tax efficient vehicles available in Spain. This is a specialised area, and you need professional advice to ensure you avoid any of the consequences of getting it wrong.
31 January 2014
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.
