We are all paying more tax in Spain this year, and it does not look like there is going to be any respite any time soon.
The scale rates of income tax increased across the board, ranging from an additional 0.75% for income below €17,007 to an extra 7% on income over €300,000. This takes the top rate of tax up to 52%.
Your investment income has also been hit. Tax on savings income (bank interest, capital gains, dividends etc) was hiked to 21% for income up to €6,000, then 25% on the next €18,000 and 27% on the excess over €24,000.
When announced, the government said these higher taxes would only apply for 2012 and 2013 income. However, they were implemented as part of the measures to reduce the budget deficit down to 3% in 2013, and as we already know this will take at least a year longer than previously expected, it is possible that the higher taxes will be around for longer too. With the possibility of a bailout for Spain looming, we cannot rule out further tax rises either.
Higher taxes mean more people are looking to protect their wealth from tax, but you do need to very careful with your tax planning and always ensure it is fully compliant with Spanish tax law. You need to fulfill all your Spanish tax obligations and only use legitimate arrangements to lower your tax liabilities.
The government is seriously cracking down on tax evasion and now has a number of effective tools to trace people who have not been paying tax correctly.
We are already hearing reports about the authorities contacting expatriates living in Spain about undeclared offshore deposit accounts, and we will hear more of this in future.
The government has promised to get even tougher on tax fraud once the current tax amnesty (the “Voluntary Disclosure Procedure”) closes on 30th November 2012.
We also know that it is proposing to introduce an anti-fraud law, which if approved could increase penalties for tax evasion. Another proposed measure is to oblige all Spanish residents to report all bank accounts and assets held abroad. According to reports earlier this year, the penalty for non-compliance would be €5,000 per each undeclared piece of information or set of data, with a minimum of €10,000. There would be no statute of limitations for collecting tax on such undeclared income.
The landscape for tax planning in Spain has changed significantly over recent years, and more than ever you need professional guidance to first of all make sure you are paying tax correctly, and then to establish what legitimate opportunities are available to you to lower your tax liabilities in Spain. A firm like Blevins Franks has decades of experience advising British expatriates in Spain on their tax planning and wealth management.
Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should take personalised advice.
For more information and personalised advice, contact Blevins Franks on +34 971 719 181.
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This article was written on the 04th of October, 2015.