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The new obligation to declare property and funds in other countries is designed to reduce tax evasion
22.04.13 - 11:46 -
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Declare overseas assets, warns Hacienda
The Hacienda building in Malaga. :: SUR
In a little over a week’s time anyone who lives in Spain for more than 183 days per tax year - and is, therefore, almost always categorised as being a ‘tax resident of Spain’ - and who has overseas assets worth more than 50,000 euros in any single asset class, should have declared them to the Spanish tax authorities.
Those offshore assets (that exceed 50,000 euros) that must be reported to the tax office, popularly referred to as ‘Hacienda’, via the 720 tax form before 30th April, include bank accounts, property, investments, annuities and assets in trust, amongst others.
The initiative, which is set to become an annual obligation from now on, is an attempt to cut tax evasion, according to government officials. Failure to comply could see the tax resident receive hefty penalties.
Speaking exclusively to SUR in English on this issue, José María Mollinedo, the Secretary General of GESTHA, an 8,000-strong collective of taxation specialists within ‘Hacienda’ says: “We believe that this will significantly reduce fraud.
“This is because, together with the tough sanctions that will be issued for any omissions on the 720 form, a modification to the IRPF and corporation tax acts has been approved, allowing Hacienda to hand down a serious infringement penalty of 150 per cent on the value of any capital gains that are not justified and which are then detected.”
There are, says Mollinedo, some exceptions to that, but he is equally keen to stress that anyone who is now tax resident in Spain and who is found to be in possession of undeclared overseas assets will face “a sanction of 5,000 euros per omission or falsification in the reporting duties, with a minimum [fine] of 10,000 euros.”
So, how will ‘Hacienda’ catch those who do not declare, or fully declare, their offshore assets?
“Within the EU, a pilot scheme has just been announced that will enable the automatic exchange of information between the tax authorities of Spain, the UK, Germany, France and Italy. In all likelihood, this will soon be extended to other EU countries too,” explains José María Mollinedo.
“Also, an agreement has been signed between Spain and the US to improve international tax compliance issues, which include the implementation of the Foreign Account Tax Compliance Act, known as ‘FATCA’.
“Moreover, other agreements are being finalised to increase the tax information exchange with countries classified as ‘tax havens’ and ‘offshore centres’, although in this case the information shall be [specifically] requested by the Spanish authorities.”
The 720 document
The form to report assets of 50,000 euros in any single asset class is called the ‘Modelo 720’ and must be filed electronically through the Ministry of Finance and Public Administration’s website,
Whilst many people will use the services of financial advisers to do this, others will opt to do it themselves. Speaking to this newspaper last month, a Fuengirola-based accountant explained the process of how this is to be done. “Firstly, using your NIE, or ‘Número de Identidad de Extranjero,’ you will need to retrieve an electronic code from the Ministry’s website, then you will be required to take that to your local tax office which will subsequently present you with another number that you must then go back on to the Ministry’s website with, in order to fill in the 720 tax form.
“The 720 form is, to all intents and purposes, purely informative, meaning that no tax will need to be calculated in the first instance.”
GESTHA rejects claims that foreign residents are being targeted
José María Mollinedo says the obligation to provide the required information equally affects Spanish nationals and foreigners
With these new reporting requirements affecting overseas assets, it is widely expected that it is Spain’s foreign residents who are likely to be most affected by them.
GESTHA’s José María Mollinedo, when asked by SUR in English about the ratio of Spanish nationals to foreigners submitting the 720 declaration forms, answered that this information was not in the public domain.
As the 30th April deadline approaches, some expatriates contacted by this newspaper earlier this week, expressed their annoyance over ‘Hacienda’s’ new declaration regime.
One Dutch citizen speaking from her Los Álamos home, who declined to be named, said: “I’m appalled that the Spanish government would do this.
“The vast majority of foreigners here in Spain are not crooks, they are not keeping their money in secret offshore havens, but simply in their own ‘home’ countries.
“For me, this whole measure seems very against the spirit of the European Union which promoted the idea of people’s freedom of movement across borders.”
Similarly, a British-born Mijas Costa resident and business owner, opined: “To my mind, this is a fiscal attack on foreigners here in Spain.
“Like many other people, I resent the fact that my British assets - on which I have already paid tax in the UK - are now going to be within the grasp of the Spanish taxman.
“It’s widely known that foreigners and foreign money is helping to prop-up Spain economically and this is what we get in return.
“It’s an ill-thought-through, overreaching and abusive tax policy that will, I suspect, simply encourage people to withdraw from Spain and the Spanish system completely, resulting in even less revenue for ‘Hacienda’.”
This is an argument utterly rejected by Mollinedo.
He says: “We do not believe this is a fiscal attack on foreigners who reside in Spain because the obligation to provide the required information, as well as the tough consequences for those who fail to do so, are extended to all residents in our country, whether they be [Spanish] nationals or foreigners.”
He continues: “The measure aims to reduce the high levels of tax evasion in Spain, where the ‘submerged’ economy is equivalent to 23.3 per cent of Spanish GDP, which is more than double the EU average [currently between 10 and 13 per cent].
“However, at GESTHA, we consider that the minimum sanction is too high and that there should be greater distinctions made between those who are hiding large and small fortunes in overseas locations.”
In conclusion, GESTHA’s Secretary General José María Mollinedo adds: “We also believe that the Spanish government should be implementing awareness campaigns to inform people, especially foreign residents via the consulates, of their obligations to contribute to the Spanish system [in this way] so they can enjoy [the benefits of] ‘sanitised’ accounts.”


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