Tax experts in Spain are reminding expats that under new rules they must inform the Spanish tax authorities of any assets they have outside the country including property and pensions. Expats have until the end of this month to report the information under new provisions in the General Tax Law which have been introduced as part of a wider anti fraud plan aimed at preventing tax evasion.
Normally assets and rights abroad will need to be reported by the end of March for each tax year but as this is the first year of the new scheme expats have until the end of April to report their assets for the 2012 tax year. Expats are required to report assets worth over €50,000 including deposits in bank accounts abroad; equity and capital including fiduciary agreements and trusts; shares: annuities; and property including rental income.
Everything should be declared and then the following year it is only necessary to report new assets and an increase in the value of existing assets. Stiff penalties are being proposed for those who fail to do so. These include a fine of €10,000 per item or set of data that is not declared and a minimum fine of €1,500 if the information is late without notification or not filed correctly. There is also a fine of 150% of any tax owed that is not declared and 4% annual interest as well as having to repay the tax owed.
The tax authorities are eager that expats understand their obligations and a number of seminars are being held across the country for those who have questions in the next couple of weeks. However, tax experts are concerned that expats, especially pensioners, may not be aware of just how stiff the penalties are which could see people paying more than what the actual assets is worth.
Quote from ExpatForum.com : "I'm looking to move to Spain next year. I will be buying a property outright in Spain after selling my property in the UK. I'm doing lots of research about living in Spain, and making sure it's the right decision. I'm sure you've had many threads about " taxes in Spain ". It seems difficult to pin point certain tax information."
Calculations carried out by financial management firm Blevins Franks suggests that someone with €300,000 in an undeclared overseas account would incur the minimum penalty of €10,000 and see the amount taxed at the top interest rate of 52%. On top of this they would also be fined 150% of the tax owed and 4% interest going back four years, meaning they would owe the Spanish taxman €424,960. Unpaid tax as a result of undeclared overseas assets worth more than €120,000 could also be considered a criminal offence of tax fraud.
According to calculations by Lex Tax Consulting, failure to declare a house outside Spain worth €150,000 could lead to a fine of €162,000. Wealth management company Totus believes that an expat living in Spain who was discovered to have €300,000 in an undeclared offshore account would face major problems. These include the funds being taxed at the top rate of 52%, a penalty for non payment of 150% of the 52%, meaning that they would not only lose all of their savings, but they would owe the tax authority an additional €90,000.