REPORTING LAW OF OVERSEAS ASSETS FOR SPANISH FISCAL RESIDENTS
Tax residents in Spain – generally speaking that’s anyone who spends more than 183 days a year here – must report any overseas assets they hold worth more than 50,000 euros (either of an individual type or a total of different assets) to the Spanish tax authorities. This is an obligation for fiscal Residents.
Why was this introduced?
The Spanish Government launched a new anti fraud plan to prevent tax evasion.
The law was really to catch Spanish nationals not declaring large bank accounts overseas, however tax residency is usually based on the time we spend each year in a particular country, and the onus is on individuals to be able to prove to the authorities should they investigate, that they do not in fact reside in Spain and should be paying tax in Spain, but have elected to remain taxpayers in their home country.
WHO HAS TO REPORT?
Any person, permanent establishment or company who is tax resident in Spain (but NOT a non resident tax payer) and who is the owner, titleholder, authorised person or beneficiary of assets located outside of Spain worth more than €50,000, MUST report the value of these assets (converted to Euros when held in other currencies) as at 31 December, or the year declared for future tax years.
WHEN?
Between 1 January and 31 March of the following tax year on which information is submitted.
This is an ‘information return’ designed to record worldwide assets so the authorities are aware of them and does not necessarily have to be completed every year. It should be completed in any particular tax year only if:
– there are new assets or rights that have not previously been reported.
– the values of assets or rights already reported have increased by 20,000€,
– in certain cases in which ownership in those assets or rights is relinquished.
WHICH ASSETS MUST BE REPORTED?
There are various descriptions of exactly what must be reported, but they can be categorised broadly under the following headings:
– Bank/Building Society accounts located outside of Spain (if you have a number of accounts that are each under €50,000, but together they total more than €50,000 they must ALL be reported.
– Any values, assets, securities or rights representing capital, equity or assets of all types of entities, or the transfer to third parties of capital which is held or deposited or located abroad. This includes fiduciary agreements and trusts.
– Life or disability insurance in which the taxpayer is the policyholder. This includes Life Assurance Bonds (Surrender value of the Bond) and Straight Life Policies.
– Annuities in which the taxpayer is a beneficiary, contracted with entities established abroad.
– Real estate and property rights of the holder located abroad, worth more than €50,000 (including timeshare rights, usufruct, and other rights to use properties).
Please remember if you have 20,000€ worth of assets in each type, you must report as the total exceeds 50,000€.
WHAT ARE THE PENALTIES FOR NOT REPORTING?
A system of penalties applies for cases in which the filing is:
– not submitted on time,
– submitted with incomplete, inaccurate or false information
These are considered very serious offences.
Penalties in these cases are fixed, generally in an amount of €5,000 per item or set of data on the same asset, with a minimum of €10,000.
The penalty per amount of data is reduced though if the information model is filed late without prior notification.
WHAT HAPPENS IF THE INFORMATION MODEL IS NOT FILED AT ALL?
For Personal Income Tax, rights and assets located abroad that have not been reported in time to the authorities could be considered as a taxable capital gain and might serve to increase the taxpayer’s general taxable base in respect of the “oldest” year open to tax audit.
‘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,’ has said a spokesman.
It means paying very high penalties.
This will only be avoided if the taxpayer can prove that those rights or assets were acquired:
-With declared income, which would include income regularised by the Royal Decree-Law 12/2012, also known as “tax amnesty”.
– With income earned in tax years in which the tax payer was not a taxpayer in Spain of the Personal Income Tax respectively.
If the tax defrauded exceeds €120,000, it would be considered a criminal offence.
The reporting law will allow 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 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.
People should not be tempted to try and remain ‘under the radar’, as tax authorities and other government departments and financial institutions now, 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 other countries.
To complete a Return we need:
1.- Information about bank accounts:
Bank name and address.
Accounts IBAN code and BIC.
Account opening date.
Account balance at Dec 31st. as well as average balance during 4th quarter.
Account owners, authorized persons, beneficiaries etc. at Dec. 31st. .
Your Bank will provide this information to you upon request:-
2.- Information about Companies or Trusts shares:
Company / Trust name and address.
Valuation at Dec. 31st. of the shares on a proper letter.
Companies / Trusts shares number and class.
Balance at Dec. 31st. of the securities transferred to third parties for capital.
3.- Information about life insurances and temporary or annuities income:
Endowment or Life insurances, with their value at Dec. 31st.
Temporary or annuity income obtained due to invested capital, (money or assets).
Insurance company name and address.
4.- Information about properties:
Property description.
Property location with full address, town, city, province, region and country, zip code..
Purchase date and price.
Valuation at Dec 31st (Either provided as a letter of value by an estate agent, or a recent valuation from a financial institution, or we can use the original purchase proof document).
Please email us all this information on
office@spanishsolutions.net and we will arrange the Return or contact us to arrange an appointment.