The news that the European Court of Justice obliged Gibraltar to share financial information with Spain is important for anyone who is resident in Spain and holds assets in Gibraltar.
With all the headlines and discussions about Spain’s new asset reporting law, the news that the European Court of Justice obliged Gibraltar to share financial information with Spain slipped under the radar. However this is important news for anyone who is resident in Spain and holds assets in Gibraltar, especially those who indirectly own property in Spain via corporate or other fiduciary structures resident in Gibraltar.
As a result of the ruling, the Spanish tax authorities may now easily obtain information relating to such structures from Gibraltar banks.
This news came amid, though is not specifically related to, a surge in information exchange agreements, both bilateral between two countries and multilateral between groups of countries. All this will lead to governments having much greater information on your assets and wealth, making financial confidentiality a luxury of the past. To ensure that you are up-to-date on all the news that affects you, you should talk to a specialist tax advisory firm like Blevins Franks to establish if your tax planning is current, and if your assets are structured to be as tax efficient as they can be in a fully legitimate manner.
The Spanish government is determined that no-one resident in Spain should be able to hide assets away from the tax authorities. It issued warning about its new stance and gave residents ample time to come clean to the taxman.
It offered a year-long tax amnesty in 2012, during which time those living in Spain and holding unreported foreign assets could come forward and make a voluntary disclosure with the benefit of reduced penalties. When it closed in December 2012 the normal penalties were re-instated.
As part of the government’s new anti-fraud law, it then created a new obligation for all Spanish residents, of any nationality, to report all the assets they own abroad worth over €50,000. You are obliged to report assets where you are the owner, a beneficiary, an authorised signatory or have the authority to dispose of the asset. This includes assets held by a company, a trust or fiduciary. The first deadline was 30th April 2013. Failure to report an asset will attract large penalties.
There may be people who believe that the government will not be able to find out about some of their overseas assets. As we can see from the Gibraltar ruling, current rules can be overturned, resulting in previously secret information being disclosed.
Recent Gibraltar ruling
In the case of Jyske Bank Gibraltar Ltd v Administracion del Estado C-212/11, the Spanish tax authorities requested information from a bank in Gibraltar which would allow them to trace monies used to purchase a Spanish property.
As yet, the tax information exchange agreement between Spain and Gibraltar has not been signed and formalised. The bank refused to pass over the requested information, citing banking secrecy laws. In response the Spanish tax authorities levied substantial penalties upon the bank to the combined value of €1,700,000.
The case was eventually referred to the European Court of Justice, which ruled that there was no law that prevented the bank from sharing information with the Spanish tax authorities.
The European Court of Justice ruling found that Spanish law allowing law enforcement agencies to access financial information did not contradict the EU directive on money laundering and terrorist financing.
Effect of the ruling
The effect of this ruling is that any Spanish residents who are concealing assets in Gibraltar, especially by use of corporate wrappers, are now likely to be exposed to the Spanish tax authorities. Banks in Gibraltar are not legally protected from any requests for information by those authorities.
Spanish tax authorities have created a special task force which is charged with scrutinising any tax transactions which arise through Gibraltar. The task force will pay special attention to companies incorporated in Gibraltar as well as transfers from Gibraltar banks.
The aim of the task force is to target Gibraltar corporate structures holding Spanish properties which have been devised to conceal the identity of the owner of the property.
Gibraltar and Spain have not yet signed their tax information exchange agreement, but this relates to the historic tensions between the two jurisdictions. Hundreds of bilateral Tax Information Exchange Agreements have been agreed over recent years, and the latest move to multilateral automatic exchange of information, on a wide range of financial assets, is going to escalate over the coming years. Attempting to hide assets from the tax authorities is very risky, because at some point the assets will be discovered.
Speak to a wealth management firm like Blevins Franks, which keeps fully up-to-date on both Spanish and international tax matters, for advice on compliant, effective and forward looking tax planning opportunities in Spain.
16 May 2013
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.