Fighting Tax Evasion In Spain

14.04.16

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

Alongside other European authorities, the Spanish government has been stepping up its crackdown on tax evasion over recent years. It has implemented new measures to find those who are not declaring all their income and assets as required under Spanish tax law.

Alongside other European authorities, the Spanish government has been stepping up its crackdown on tax evasion over recent years. As part of its efforts to raise revenue to bring down budget deficits, it has implemented new measures to find those who are not declaring all their income and assets as required under Spanish tax law, and not paying all the tax they should be.

The internet and technological developments now make it easier for the Spanish tax office (Agencia Tributaria – commonly known as Hacienda) to get information from and about taxpayers. It receives data from about 800 different sources, ranging from tax returns to mandatory data provided by employers, banks and utilities providers. Between 2011 and 2012 the sources of information increased by 60%.

Data tracking

The tax office analyses and cross-references this data to detect and prevent tax fraud. We produce a trail of data in our daily lives that can be used by the tax office for this specific purpose; for example if you are paid a salary, buy or sell a property, register a car – or even if you turn on the lights in your house.

Electricity companies are obliged to provide information to the Hacienda regarding the electricity consumption of every property in Spain. This includes the name of the person on the invoice; the name of the holder of the bank account payments are made from; the property address and registration details; and the electricity usage.

The authorities use this data to determine if a property that is declared as empty is in fact being rented out or used for business purposes, or if it is being declared as a primary residence when it is a secondary one. Electricity data can even catch people who are living in Spain permanently but have not registered as such and have not been paying tax in Spain.

Highest fraud takings in history

Between June 2012 and 2015 it is estimated that the Spanish tax office has collected more than €40bn in its fight against tax fraud. These are the highest results of the fight against fraud in history and were due to a number of measures.

Additionally, since 2012, it has been able to track your overseas assets with the Modelo 720, which Spanish residents with assets outside Spain exceeding €50,000 are obliged to fill in each year. With this informative return, it has already detected more than €12bn in assets abroad.

Also since 2012, cash payments of over €2,500 have been prohibited when at least one of the parties is a company or a professional. In 2015, about 1,313 cases were sanctioned for this purpose in Spain.

Modelo 720 will continue to play a major role in the search for offshore wealth, but the tax authorities also have the new automatic exchange of information regime. Under the Common Reporting Standard, your local tax authority now receives information about your worldwide assets every year, without asking for it, regardless of how compliant or not you are.

Tax law reforms

In a reform of the General Tax Law (Ley General Tributaria), the names of taxpayers with more than €1m tax debt are now published in a list. And anyone convicted of tax offences has their identity published in the daily Spanish Official Gazette – Boletín Oficial del Estado (BOE).

The authorities have also created a new aggravated offence for more than €600,000 tax fraud. The prison term for this type of offence was increased to six years and the statute of limitation lengthened from four to 10 years.

Tax control plan

This year, the tax office has renewed the 2015 Tax Control Plan to improve results in the fight against tax fraud. In 2015, it collected €15,600mn – 27% more than expected – and similar results are expected in 2016. In addition, measures to fight tax evasion will increase by 1% this year. These include inspections and incentives to encourage staff at the Hacienda to pursue tax fraud. All staff members who volunteer to join the 2016 Tax Control Plan will receive a bonus if targets set in the plan are reached.

All these measures mean more revenue will be generated, as people realise it is now virtually impossible to get away with tax evasion. With all the tools, locally and internationally, the government has to hand, it is only a matter of time before tax evasion and hidden assets are uncovered.

It is your responsibility to understand and comply with all the Spanish tax regulations if you are resident in Spain. The same applies if you are not resident but own property here or receive an income from Spain. Any tax planning you use needs to be fully legitimate. Spain is still a tax efficient country for retired British expatriates, if you take expert advice. Using compliant tax planning structures can save you tax and provide peace of mind.

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; individuals should seek personalised advice.

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