April 30th, deadline to file your first declaration under Spain’s new overseas asset reporting law is fast approaching. This year you need to declare your assets as at 31st December 2012, where the value of the assets in each of the three listed categories amount to over €50,000.
The Spanish tax authority, the Hacienda, has published a list of Q&As and since ABC Mallorca readers will find them useful, we have paraphrased some of the key points of interest below. There are a number of other aspects which we could not cover here, and you will probably have more queries yourself on what you need to report and how.
Looking ahead, this is the time to review if your assets are in the right place to be as tax efficient as possible. You could be paying more tax than you need to. Ask specialist advisory firm Blevins Franks to review your current arrangements and discuss the tax efficient vehicles available in Spain.
If an overseas bank has joint or multiple owners, does it still need to be reported?
The obligation to report exists where the balance of the account is over €50,000 regardless of how many account holders there are. Each account holder should declare the total balance (not pro-rated), indicating the percentage they hold.
If, for example, an individual ceases to be the account holder in June 2012, is there an obligation to make the declaration?
Yes, if the balance on that date is over €50,000 (when combined with other overseas accounts). Full details need to be given about the account, the bank it was held with, and the balance on the date the individual ceased to be the account holder.
Do overseas pension plans need to be declared?
There is no obligation to provide information on pension plans situated overseas provided that they do not give rise to a temporary or lifetime annuity. Where there is an annuity, the capitalised value, as calculated for wealth tax purposes, should be declared.
If an individual moves overseas once the tax year has started and he has to file an income tax declaration as a resident for this period, does he need to file a reporting Form?
Yes, provided that the conditions for reporting are met.
If a property is acquired as a gift or an inheritance, what acquisition value needs to be declared?
The real value of the asset at the time of its original acquisition.
Where an account is held in a different currency, what is the exchange rate that should be used?
The exchange rate should be that in force at 31st December each year. The same rate should be used for valuing the average balance of the last quarter. If the account was closed during the year, you should use the exchange rate at the date of closure.
In relation to assets declared on Form 720, in the event that they relate to undeclared income, can this be regularised?
If the asset was purchased with undeclared income, this can be regularised under the normal regularisation procedures.
What are the penalties for failing to report:
a) One overseas account, two other movable assets, and three immovable properties?
The minimum penalty for failing to file a Form 720 in this example (where all three categories should have been reported) will be €30,000.
b) Assets in just one category?
Where only one category of information should have been reported, the minimum penalty is €10,000.
Note that this last question just covers the fines for failing to make a report; there are more consequences. Any undeclared income will be deemed to arise in the last tax year that is not statute barred, so the Hacienda can look back indefinitely to review unpaid tax. It will charge income tax on any undeclared income, plus late payment interest, plus penalties as high as 150% of the total tax due on the asset. It is possible that the total amount is more than the value of the asset.
While you should use an accountant for help filling in your form, for peace of mind about your overall tax planning speak to Blevins Franks who are Spanish tax experts. With its in depth understanding of Spanish taxation and law, Blevins Franks will advise you on what you need to include in the form and at the same time guide you through the opportunities to legitimately lower your tax liabilities in Spain on your offshore assets.
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.
Written By: Bill Blevins
For more information and personalised advice, contact Blevins Franks on +34 971 719 181.
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This article was written on the 10th of March, 2013.