A new reporting regime in Spain means that expats with assets outside the country worth over €50,000 who are taxpayers will need to declare them in 2013. Failure to do so would have very costly consequences, according to wealth management group Blevin Franks which specialises in tax and estate planning for expats.
Under a recently introduced anti fraud law, Ley 7/2012, the Spanish government has increased the penalties for those who commit tax fraud, increased tax collection and set out new measures to collect tax debts. The firm says that the most important measure for most expats is the new obligation for Spanish taxpayers to report assets located outside Spain. If the tax defrauded exceeds €120,000, it would be considered a criminal offence.
‘This is a new, additional requirement for Spanish taxpayers. You remain obliged, as always, to also fully declare your annual worldwide income for income tax purposes, and your taxable worldwide assets for wealth tax purposes,’ said a spokesman. ‘From now on, anyone who is tax resident in Spain must declare all the assets they own outside Spain. The authorities will be very strict with anyone who incorrectly declares their offshore assets,’ he explained.
There is a new official form and reporting must be done by the end of the first trimester each year, although the deadline has been extended for reporting assets held as at 31st December 2012, so that the first deadline is 30 April 2013. For future years, the deadline will be 31 March for the previous 31 December.
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Assets that need to be declared include accounts held with financial institutions; all types of immovable property (real estate) and rights over such property; shares and securities; life insurance policies; temporary or lifetime income generated from the lending of money, rights or other assets (including immovables) to foreign entities. ‘You need to declare these assets if you are the owner, the beneficiary, or an authorised signatory. This includes assets held by a trust or fiduciary. If the value of your total assets in each class is less than €50,000, you are not obliged to report,’ explained the spokesman.
‘Once you have reported the assets the first time, you do not need to report them again each year if the value of all your reportable assets increased by less than €20,000. Where their value has risen by €20,000 or more, you will need to report them again by the next annual deadline,’ he added.
He also pointed out that in the case of accounts with financial institutions, tax payers also need to report the average balance over the last three months of the year. This category includes all types of bank accounts and deposits, including credit accounts, in all currencies, regardless of whether you have the right to withdraw the funds or not. For immovable property, the value is the cost of acquisition, they also need to provide information on the type of property, its location, and date of acquisition.
‘If you fail to report any assets as required by the new law, the costs will be very high once discovered. The undeclared income arising from the asset will be deemed to arise in the last tax year which is not statute barred, four years in most cases. This effectively abolishes the statute of limitations,’ said the spokesman.
It would mean paying all of the following: Income tax at the income tax scale rates where the top rate is over 50%, even if the income would normally be taxed under the savings income regime; late payment interest for the last four years; penalties as high as 150% of the total tax due on the asset; a fine of €5,000 per each piece of unreported data, with a minimum of €10,000.