Spanish taxes are higher than they used to be and when combined with the unpopular Form 720 some expatriates are considering leaving Spain. However Spain actually remains a tax efficient country for British expatriates if you take specialist advice. Form 720 need not necessarily be such a concern either. You should review your assets now to make sure they are in the best structures going forward.
The government received 131,411 asset declarations in 2013, and the government praised the quality of information received. Spain’s Vice President of the Government, Soraya Sáenz de Santamaria, said it had “enabled assets valued at €87.7 billion to be identified”, and that the resulting increase in the tax bases will have “a fundamental effect in the collection made by the Spanish Tax Office”.
Your tax position
If you have declared all your income and assets correctly on your annual tax returns, your tax position should not change.
However many taxpayers will find they pay more tax going forward. This particularly affects those who declared assets for the first time, or incorrectly declared them previously. These assets will now be assessed for wealth tax, and any income they produce for income tax, and you have to declare them accordingly.
You can minimize taxes by placing funds into legitimate tax efficient vehicles that allow you to mitigate tax in Spain, sometimes significantly.
The next submission deadline is 31st March. In most cases, the values you report are those as at 31st December 2013.
In summary, if the value of your assets in a particular category amounts to over €50,000, you need to report all of them. You are obliged to report assets if you are the owner, beneficiary, authorised signatory, or have the authority to dispose of the asset. This includes those held by trusts, companies or fiduciaries.
If you submitted Form 720 in 2013, you only need to report again if:
• The value of an existing asset grew by more than €20,000, or
• You sold an asset/closed an account, or
• You obtained a new asset.
If you became resident in Spain in 2013, you need to file your first, complete Form 720 by the end of March.
It is clear that the Spanish government is keeping a close eye on offshore assets, both those declared on Form 720 and those which should have been included but were omitted. It already receives information from abroad, and this will increase over the coming years.
Spain is committed to multilateral automatic exchange of information. Along with the rest of the G5, it is working with the Organisation for Economic Cooperation and Development (OECD) to pilot a scheme on a global scale. The G20 has also pledged to have all members automatically sharing information on tax matters by the end of 2015.
The EU also has plans to extend its automatic exchange of information from savings income to cover a wide range of income, including investment funds, pensions, trusts, life insurance, employment and property.
Spain is also working to boost its bilateral agreements on the exchange of tax information. In November the government confirmed that agreements for exchange of information with the Isle of Man, Jersey, Guernsey and Monaco were in progress.
All in all, it is really only a matter of time before the authorities discover undeclared foreign assets. With the new asset reporting rules, the penalties for non-disclosure can be devastating, so it is important to declare all your overseas assets according to the rules.
Seek specialist advice on effective and legitimate arrangements to hold your assets in, that are taxed in an efficient manner in Spain.
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 is advised to seek personalised advice.
For more information and personalised advice, contact Blevins Franks on +34 971 719 181.
To keep in touch with the latest developments in the offshore world, check out the latest news on Blevins Franks Tax & Wealth Management Specialists.
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This article was written on the 04th of February, 2014.