Automatic exchange of information is almost here. What does it mean for you, as an expatriate living in Mallorca?
This loss of financial privacy affects us all. If we live in one country and have assets in another, our information will be shared between countries. Tax authorities will be able to track our wealth like never before.
If you are a Spanish tax resident and have, for example, investments in the Isle of Man, or bank accounts in Switzerland, or pension funds in the UK, the Spanish tax authorities will receive information about these assets. This will include your name, address, tax identification number (where applicable) and the account and income details.
Peter Worthington, Senior Partner at Blevins Franks, explains the new implications of the tax reform that will start applying in 2015. […] Update On The Spanish Tax Reform by Blevins Franks
Almost a hundred countries have committed to automatic exchange of information so far. They will follow the Common Reporting Standard developed by the Economic Co-operation and Development (OECD). Information will be shared annually between governments, and this will happen automatically, for everyone who owns assets outside their country of residence – so not only where tax evasion is suspected.
The information to be exchanged includes account balances, interest, dividends and sales proceeds from financial assets. This covers entities like trusts as well as individuals.
Reporting financial institutions include banks, certain collective investment vehicles, certain insurance companies, custodians and guardians. They will determine your residence, collect data on your assets and income, and forward it to the Spanish tax authorities.
The tradition of banking secrecy in Switzerland is coming to an end. Peter Worthington, Senior Partner at Blevins Franks, explains what this means for you living in Mallorca. […] ‘Switzerland Pledges To End Banking Secrecy’ by Blevins Franks
The ‘early adopters’ group, which includes Spain along with the rest of the EU, will start sharing information in 2017. However they start collecting data next year. Other countries will join the following year. The list includes so called ‘tax havens’ like Switzerland, Channel Islands, Isle of Man, Cayman Islands, Monaco and Singapore.
In Europe, the Common Reporting Standard will be implemented through the Administrative Cooperation Directive. This provides for automatic exchange of information on interest, dividends, other investment income, sales proceeds from financial assets, income from employment, directors’ fees, life insurance, pensions and property.
Once the Spanish tax authorities receive this data, they will be able to compare it to your annual income and wealth tax returns.
They can also compare it to your Form 720, to see if you failed to declare any overseas assets.
The Spanish Laws have changed for wealth assets held outside of Spain, by residence. If you live in Spain and hold assets outside then this information is very important for you. […] New tax reporting laws of wealth assets in Spain
It is essential you understand which assets and income need to be declared in Spain. As a tax resident you are liable to Spanish tax on your worldwide income, gains and wealth. This includes most income which is also taxed elsewhere (eg UK rental income) and UK private pensions. I often meet British expatriates who believe they can pay UK tax on their private pensions even though they are Spanish residents. This is incorrect. If the Spanish authorities become aware of undeclared pensions it could have serious consequences.
We still have the right to structure our assets in the most tax efficient way, but you have to be careful to only use arrangements which are compliant in Spain. There are arrangements which can be very effective, but take specialist advice to make sure you get it right.
Contact Peter Worthington, Senior Partner at Blevins Franks, on +34 971 719 181 or firstname.lastname@example.org.
To keep in touch with the latest developments in the offshore world, check out the latest news on Blevins Franks Tax & Wealth Management Specialists.
Related articles to tax for foreigners living in Spain.
Foreginers who spend more than 180 days on Mallorca are cosnidered resident. That means you will need to pay wealth tax on your worldwide assets. Attend this seminar to find out more. […] Spanish wealth tax. How does it affect you and what can you do?
Blevins Franks has launched the 11th edition of their ‘Guide to Living in Spain’. Get your copy now! […] The Blevins Franks Guide to Living in Spain
Blevins Franks Mallorca specialises in giving advice for tax-driven, wealth management investments. […] Blevins Franks Tax & Wealth Management Specialists