Spain clamps down on tax residents with overseas assets
Residents of Spain with assets outside it worth over €50,000 (around £41,500) are being reminded they are to declare everything by 30 April 2013 – with hefty penalties in store for those who don’t.
The new decree is designed to allow those sitting ‘under the radar’ to declare funds worth over €50,000 held overseas in all bank accounts, shares, life assurance policies and real estate assets as of 31 December 2012.
It is part of a range of measures to allow Spain to become better at collecting tax, and address the fiscal deficit that is the partial cause of the country’s current economic crisis.
“This is part of legislation aimed at rounding everybody up so that all residents are aware of their obligation to declare any income-yielding assets,” said financial advisor Richard Alexander, from LJ Financial Planning in Malaga.
“They are throwing out a net in order to gather information about investments overseas to ensure everything is being declared.”
“Lots of people are currently sitting under the radar, and this is all part of the increased vigilance of the tax authorities, and the information sharing which will allow them to look at every angle where there might be tax to collect.”
The deadline for declaring is usually 31 March but this year it has been extended to the end of April. Those who choose not to declare could face big fines which could potentially wipe out their overseas bank account completely – and leave them indebted to the Spanish government.
For example, a resident discovered to have more than €50,000 in an undeclared overseas account would be taxed at the top rate – 52% (54% in Andalucía). But the fine for failing to declare the account would be 150% of the 52%, on top of the tax itself.
In addition, a minimum €10,000 fee will be payable if the tax authorities discover data has been omitted from a resident’s declaration.
The new regulations follow a tax amnesty which finished in November 2012, which allowed tax residents declaring previously undeclared overseas assets to pay no more than a flat rate of 10% tax on them and offered immunity against criminal or civil investigations into them. The Spanish government warned the penalties for those who missed it would be stiff – and they are.
Tax residents of Spain include anybody spending over 183 days a year in Spain, as well as anyone with their main professional activity in Spain, and anyone with dependants or a spouse resident in Spain.
Expats who think they may be affected are advised to contact their financial advisor.
By Eloise Horsfield | Property News | February 14th, 2013