Confirmation Where you Live for Tax Purposes (Updated)

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Posted and filed under General Articles of Interest, Legal Issues in Spain, Taxes in Spain.

Have you received a letter from a bank (perhaps in your home country) asking you to confirm where you live for tax purposes?

There have been many enquiries on Facebook and forums mentioning this subject.

So what is it all about? Well, these letters often say something like ‘There has been a change in the international tax legislation which has introduced the Common Reporting Standard (CRS). It means financial institutions are required to report customers’ account information based on their tax residence, to the tax authorities local to where their financial accounts are held.’

Probably many people take one look at the letter and put it in the bin, but it is legal and you should be complying.

The Common Reporting Standard (CRS) is a standard for the automatic exchange of information developed by the Organisation for Economic Co-operation and Development (OECD). It is shared with the jurisdiction in which the person is tax resident.

As at 2107, each participating country now has to automatically exchange annually with the other countries information for each account, such as the name, address, Taxpayer Identification Number, date and place of birth of each person, plus the account number, and the account balance or value as of the end of the relevant period or, if the account was closed during such year or period, the closure of the account.

This, in conjunction with the annual return of declaring overseas assets, can have an impact on anyone not declaring properly their foreign assets! 

There are fifty-four jurisdictions who are providing exchanges of information in 2017 and a further forty-seven in 2018. Spain, Ireland and the United Kingdom were all included in the initial jurisdictions exchanging information.

Many people feel that the letter appears suspicious, and especially as it mentions a ‘TIN’. which is a Taxpayer Identification Number. However, you do have a duty to inform your bank if asked where you are tax resident.

You can give your national insurance number or your unique taxpayer reference that you use on self-assessment tax returns if you do them. Both can be used as a taxpayer identifying number (TIN). The letter will probably explain what you need to reply and where to send it.

Nearly all countries have tax ID numbers for individuals but they call them different things so the banks tend to caption them using a generic term because if they use the wrong description for someone living in another country they might not think they need to fill it out and in reality, they do.

The Common Reporting Standard is legal and the regulations are being introduced across the world, so it is simply the banks making sure they know exactly where their customers are resident to support ongoing reporting. We are only going to see more of this I am afraid.

If you are unsure where to find your TIN for your particular country then please see this link:- http://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-identification-numbers/#d.en.347759

For people in the UK, NI numbers and tax references are both valid types of TIN.  In Ireland, the number used to identify taxpayers is the Personal Public Service Number (PPS No). This number is issued by the Department of Social Protection but is also used by the Revenue Commissioners to identify taxpayers. In Spain, generally, the Tax Identification Number (TIN) for non-Spaniards is the Foreigners’ Identification Number (NIE).

I have received a letter from a Bank asking me to fill in the form and send it back to them.  If I agree I am Resident, I only send the form. If I disagree and want to prove that I am non-resident I have to complete the form and send my passport (presumably they will do some checks). This needs to be certified, for example, by a Bank Manager, or Notary.

Even since yesterday, we have had a few enquiries from people saying I am resident in Spain, but they have chosen to say non-resident (which obviously they know they cannot elect to do as there are rules as to whether you are classed as resident or not ), and I have been paying tax in the UK, but what is going to happen now that Spain is going to be able to look at my financial position in the UK?  Are my bank accounts in the UK and Spain going to be frozen?

Well, I have telephoned my Bank in the UK today and if I forget to return the form, they send two reminders and then they provide all the information about my account on file. I was told verbally that accounts do not get frozen in the UK for not providing the information.

Another client said to us that they are Resident but they had been worried about paying taxes in both countries and so are paying them in their home country, as they were not sure what to do. Ana explained that they need to do a fiscal Residence Certificate for Spain, which then gets sent to their home countries, such as the UK or Ireland, to stop taxes being deducted at source there.  Everyone is going to have different situations as some people have civil servant pensions (which are taxed at source in the UK), but the main thing is to discuss this with a tax adviser, such as in our advice.  But in summary, if you are Resident in a country, such as Spain, generally, you should be paying tax there and not in the Uk or Ireland, unless a very good reason.  Alex Sanchez is our tax advisor so please make sure you are speaking to someone with his level of knowledge.

Everyone is going to have different situations as some people have civil servant pensions (which are taxed at source in the UK), but the main thing is to discuss this with a tax adviser, such as in our advice.  But in summary, if you are Resident in a country, such as Spain, generally, you should be paying tax there and not in the Uk or Ireland, unless a very good reason. And with all this new reporting through the CRS soon it will be impossible to hide the fact of where your income and assets go.

Amanda Thomas

 

 

 

4 Comments

  • Liz

    I am non resident in Spain as have a holiday house for personnel use only. Shall I use my NIE number or my British NI number for the TIN when filling in the requested CRS -FATCA from my Spanish bank?

    • Nicola Ryan

      Good Morning Liz,

      Thank you for your enquiry.

      As you are not resident in Spain, the bank will need your TIN number. This is your tax number issued in the country where you pay taxes. We hope this helps.

      Kind regards
      Nicola

  • Denise

    I am on a social welfare payment from Ireland
    If I give my prsi no will I be taxed for having a property in Spain even though I pay fees and taxes due in Spain in spain

    • Nicola Ryan

      Morning Denise,

      Thank you for your enquiry.

      We think you are referring to the Irish authorities, if so we would not be able to comment. It would be best to contact a tax advisor in Ireland. We hope this helps.

      Kind regards
      Nicola

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