The Spanish government and other European authorities have been stepping up their crackdown on tax evasion as part of their efforts to raise revenue to bring down their budget deficits. The Spanish authorities, in particular, have raised their game over recent years, implementing a number of 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.
Their biggest recent measure is of course the new obligation to report all assets held outside Spain. The new form, Modelo 720, needs to be submitted by the end of this month if you were resident in Spain last year. This new obligation is a significant development in Spain, and it will reap rewards for the government over the years to come, but in the meantime the tax office has other tools it has been using with success.
It is important 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, and you should seek advice from Blevins Franks on what would be effective for you.
They led to a 10.1% increase in the total revenues attributed to the fight against tax fraud, with the total income from these measures standing at €11.52 billion for the year.
There was a 32% increase, to €1.54 billion, in revenue generated by taxpayers utilising voluntary regularisation procedures. I suspect we will see more revenue generated this way, 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.
In accordance with the guidelines of the Tax Control Plan, the tax office noticeably increased inspection activity in relation to new sources of information. It issued over 400 requests for information on the transfer of currency to countries that are no longer considered tax havens.
Another key source of information was the data provided by electricity companies on consumption. This helped them track down undeclared leases and secondary residences.
Electricity companies are now obliged to provide information to the Hacienda regarding the electricity consumption of every property in Spain. Analysis of the data led to 4,700 investigations on rented properties last year. It was found that, in some parts of the country, 75% of leases had not been declared.
The authorities can also use the electricity data to catch people who are living in Spain permanently but have not registered as such and have not been paying tax in Spain each year.
Looking ahead, Spain’s new anti-fraud law will be the fundamental pillar in the tax office control strategy in 2013. General guidelines were published in the Official State Gazette on 12th March.
The new foreign asset reporting obligation will play a large part. One of the priorities will be to analyse new information on goods and accounts overseas.
The tax office will look at taxpayers who did not submit Modelo 720, but who appear to conduct transactions abroad that imply that they do have hidden assets and rights outside Spain’s borders.
In the case of debtor taxpayers, the information submitted on the form will be used to seek mutual assistance from other EU member states.
For advice on the most tax efficient – and fully compliant – ways to hold your assets in Spain, talk to Blevins Franks which has been providing effective tax mitigation advice to British expatriates in Spain for decades.
For more information and personalised advice, contact Blevins Franks on +34 971 719 181.
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This article was written on the 14th of April, 2013.