Spain Targeting Offshore Assets

It is clear that the Spanish tax authorities are now keeping a close eye on overseas assets and will investigate any suspicions of non-disclosure.

It is clear that the Spanish tax authorities are now keeping a close eye on overseas assets and will investigate any suspicions of non-disclosure.

A tax amnesty in 2012 gave taxpayers the opportunity to voluntarily disclose unreported foreign assets with the benefit of reduced penalties. According to reports, the Agencia Tributaria has been sending official requests to people who used the facility, asking for proof of source of funds or clarification on discrepancies with the data already on file.  The requests are more numerous and detailed than usual. Regular taxpayers are also being targeted.

We can expect much more of this as the authorities go through the 720 forms, looking both at those who submitted reports and those who did not.

An editorial on the Sur in English website in June 2013 suggested that only 4.9% of tax residents declared assets on Form 720. According to GESTHA, the union of tax inspectors, 131,411 people submitted forms, but it estimates there are 2.6 million foreign residents alone in Spain.

The Secretary General of GESTHA, José María Mollinedo, warned that the government will now specifically target certain nationalities. Expatriates from other EU Member States and the US will come under close scrutiny. Spain has or will soon have automatic exchange of information agreements with both.

The government published guidelines about its new anti-fraud law in March 2013. The new reporting obligation will play a large part in the fight against tax fraud. One of the priorities will be to analyse new information on overseas assets and to look at taxpayers who did not submit Form 720.

It is only a matter of time before the taxman discovers unreported or misrepresented assets. The tax assessments could 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.

It is not all doom and gloom. At Blevins Franks we provide clients with peace of mind by structuring your financial affairs so that you, legitimately, pay the least amount of tax possible.

23 September 2013

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 and generalised; an individual is advised to seek personalised professional tax advice.