Spanish Taxman On The Warpath

Just days after the Spanish government revealed the tax rises for 2012, it announced a new crackdown on tax evasion as another measure to help it rein in the budget deficit. You need

Just days after the Spanish government revealed the tax rises for 2012, it announced a new crackdown on tax evasion as another measure to help it rein in the budget deficit. You need to make sure that you declare everything you are obliged to in Spain if you are resident here or own Spanish assets, and if you are looking to lower your tax bill it is important to only use arrangements which are legitimate and compliant in Spain.

The administration is planning a raft of new measures to combat tax fraud, which it hopes will bring in additional revenue of ?8.2 billion this year alone.

The measures include more tax inspectors; greater scrutiny applied to personal and corporate tax returns; more workplace inspections and applying a ceiling on the use of cash payments for certain financial transactions.

It was also reported that the authorities will step up dialogue with jurisdictions which are no longer considered to be tax havens to get more information to aid their efforts against tax evasion. There will be more resources for detecting large scale fraud and measures to curb the black economy and money laundering.

We had already begun to see evidence of the tax authority?s increasing determination to trace tax evaders and collect unpaid taxes.

Many property owners in Spain were surprised last year to receive a letter from the Agencia Tributaria (AEAT) warning them that it is aware they held a Spanish property but did not submit tax returns for 2007, 2008 and 2009. This is in relation to income and wealth taxes (the later just for 2007) for residents.

The letter was also sent to non-residents who own property in Spain and who did not file a non-resident tax return as they are obliged to.

The letter is basically a warning, giving the recipient a brief opportunity to regularise their affairs by filing the missing tax returns and paying the taxes due. If they fail to do so the agency will proceed with an enquiry which could entail penalty charges.

The authorities used land registry records to establish who owns property in Spain and then cross referenced it with their own tax return records. They also receive information from electricity companies on consumption in every property in Spain.

We are also now hearing more stories about the Spanish tax office actively targeting residents who have not declared interest earnings from bank accounts in the UK and its offshore islands.

Every year the UK automatically forwards information on bank accounts owned by Spanish residents to Spain?s tax authority under the terms of the EU Savings Tax Directive. Spain would compare this with the information an individual supplies on his tax return, and it appears it has begun taking action where it has found discrepancies.

It will now be able to cast its net further as it will receive information from the Isle of Man and Guernsey. In July 2011 these offshore centres dropped the withholding tax option under the Savings Tax Directive and so now automatically disclose information on all Spanish owned bank accounts. Since the authorities know that accounts could have been previously undeclared, they will be particularly suspicious if they suddenly receive information on large cash deposits that did not appear to exist before.

Contact Blevins Franks for advice on legitimate and approved tax mitigation opportunities in Spain for your savings, investments, pensions, wealth and estate.

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 must take personalised advice.