Tax residents in Spain - generally speaking that’s anyone who spends more than 183 days a year here - must now begin reporting any overseas assets they hold worth more than 50,000 euros to the Spanish tax authorities, after new declaration rules came into force at the beginning of this year.
Most experts agree that the measure is an attempt by the Spanish government to bolster its coffers and/or catch tax evaders and as such, after the deadline for the first declaration on 31st March, it will be an annual obligation.
Offshore assets which must now be declared include bank accounts, property, investments, annuities and assets in trust, amongst others.
“Spain has shown a clear intent that it wishes to be better at collecting more taxes in order to reduce the fiscal deficit. As a result, expatriates can no longer pretend that they are ‘fiscal nomads’, which doesn’t exist in law. Nor can they ignore the fact that if they don’t declare all foreign assets they could be subject to severe penalties and fines,” explains deVere Group’s Senior Managing Partner in Spain, Andrew Oliver.
He continues: “Failure to declare any amount worth more than 50,000 euros in any single asset class, or to report on any offshore entities which name the individual in question as a beneficiary, could result in a combination of a tax and fine that could not only empty out the offshore account completely, but could leave the individual owing the Spanish tax authority, ‘Hacienda’, even more.”
Bill Blevins, Blevins Franks Financial Correspondent, comments: “The reporting law enables them [the government] to track and monitor assets, so that they get a better overview of an individual’s wealth and, more importantly, any changes in the individual’s circumstances, such as increased or reduced wealth.
“The information provided under this law will enable the Spanish tax authorities to compare the assets with those declared in an individual’s wealth tax return (where relevant), and possibly his or her income tax return. Where it appears that an individual has wealth that clearly exceeds his or her declared income, they are likely to start asking questions.”
In the wake of the country’s new tax regime, all the experts contacted by SUR in English on this issue assert that tax residents should seek advice. Richard Alexander from Richard Alexander Financial Planning says: “The only sensible advice is to ensure that you speak to your normal tax adviser and complete your filing before the end of March.
He adds: “People should not be tempted to try and remain ‘under the radar’, if indeed, that has been their strategy historically.
“We know that tax authorities, and other government departments and financial institutions, are all sharing more and more data and finding more ingenious ways to identify where people have funds, or are earning interest or making capital gains, which are not being declared either in Spain or the UK.”
But not everyone, it would appear, views the situation in such a clear-cut way.
A British-born resident of Fuengirola, who asked not to be named, tells this newspaper that he is considering turning down a job promotion due to the new reporting rules.
“Even though I’m physically based in Spain, the company I work for pays my salary, usually in the form of a lump sum, into an account in the UK. At the moment, this account never shows more than 50,000 euros, however, if I accept the promotion and earn more money, it would push it over the threshold. As a result, I’m having to think if it will be worth my while.
“I intend to speak to my financial adviser as soon as possible to discuss possible ‘solutions’.”