A new era In tax reporting
The Isle of Man has agreed to automaticallyexchange tax information with the UK. Jersey and Guernsey want to make this a global initiative. The US is forcing financial centres to automatically report on American clients. Spanish residents need to get ready to report their overseas assets to the Spanish government.
We are entering another new era in local and inter-national efforts against tax evasion and fiscal fraud. Sharing and reporting informa-tion will play a major role. There is very little financial confidentiality left today, and it cannot be relied upon to hide income and assets from the authorities.
There have been major developments in international tax planning over the last de-cade. There are still more to come. Many expatriates are affected, and it is important to keep up to date with all the changes to ensure your tax planning is fully compliant and as effective as it legitimately can be.
If you hold savings and investments outside Spain, if you have not already done so, for peace of mind ask an experienced tax and wealth management advisory com-pany like Blevins Franks to look over your assets and how they are structured. Not only can they advise you regarding reporting requirements, they can advise you how to structure your assets to minimise tax and maximise income.
Spain’s new reporting law
By 30th April 2013 (31st March in future years), Spain residents need to report their overseas assets to the autho-rities. This includes bank accounts, shares, bonds, funds, life assurances, pro-perty etc, including those held in trust, where you are the owner, beneficiary or autho-rised signatory, and where the assets in each class amount to €50,000 or more.
When anyone is found to have not declared an asset, the penalties will be punitive and the authorities will be able to go back indefinitely to review unpaid tax. Given the amount of exchange of information between countries these days, attempting to hide assets is very risky.
The new US Foreign Account Tax Compliance Act (FATCA)
FATCA was enacted by Congress in March 2010, to fully come into effect in 2014. It aims to ensure that the US tax authorities, the Internal Revenue Service (IRS), obtains information on financial accounts held by US taxpayers anywhere in the world.
Foreign Financial Institutions have to report their American clients’ affairs to the IRS.
In other words, the US is attempting to force financial centres to automatically ex-change tax information on US clients.
The incentive for them to do so is pretty high. If they fail to comply their revenues from US sources will suffer a 30% with-holding tax.
Isle of Man’s new agreement with UK
The Isle of Man announ-ced in December that it will enter into an automatic tax information sharing agree-ment with the UK, similar to the agreement it intends to sign with the US to comply with FATCA.
Once in place, it will give HM Revenue & Customs (HMRC) access to more information about potentially taxable money held in the Isle of Man.
HM Treasury Secretary David Gauke commented: “For years people said this couldn’t be done”. The go-vernment is now pressuring the other Crown Dependen-cies (Jersey and Guernsey) and British Overseas Terri-tories (British Virgin and Cay-man Islands), to accept simi-lar agreements.
I would expect other coun-tries to later expect similar agreements with offshore centres. This is why attempt-ing to hide assets from local tax authorities is so risky – one day, somehow, they will come to light.
Speaking to the Tynwald, the Isle of Man’ legislative assembly, Chief Minister Allan Bell said that its agree-ment with the UK will serve to demonstrate the island’s superior level of regulation and improve growth pros-pects for the local economy.
This stance could well be taken by other financial jurisdictions as they aim to prove they are reputable and well regulated centres.
“The US Foreign Account Tax Compliance Act is a game changer in relation to transparency and the automatic exchange of information agenda”, Bell explained. “It will be used as the lever and model by many countries for equivalent information to be provided to them.”
“Such is its reach and effect, FATCA may even overtake the proposed changes in the EU savings directive. This government considers, there-fore, that automatic exchange of tax information in something like the volume and form re-quired by the USA under FATCA will become part of the international standard. It is clear that the next two years will see massive changes in the way in which nations co-operate in the field of inter-national taxation issues.”
Jersey and Guernsey have held exploratory talks with the UK authorities but have so far said they will not implement anything yet. They are not against this automatic exchange of information as such, but rather want the UK to target a global adoption of the regime (as the US is doing).
In a joint statement, the islands said they share a common commitment with the UK to combat tax evasion and participate in interna-tional efforts to combat fiscal crime, and explained:
“In our ongoing dis-cussions with the UK govern-ment we will be pressing them to make clear the steps they are taking to promote the adoption of automatic ex-change of information world-wide to ensure that a level playing field is achieved for all finance centres compet-ing in the global market place.”
For the time being, they will continue to share information with the UK on request, under the Organ-isation for Economic Coope-ration and Develop-ment tax information exchange frame-work. Guernsey also shares infor-mation under the EU Savings Tax Directive.
For clarification on the latest local and international tax regulation develop-ments, and advice on the most effective legitimate tax mitigation arrangements for you, speak to an advisory firm like Blevins Franks which keeps fully up to date and has decades of expe-rience advising expatriates in Spain.
The tax rates, scope and reliefs may change. Any statements concerning taxa-tion are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual should take personalised advice.
To keep in touch with the latest developments in the offshore world, check out the latest news on our website www.blevinsfranks.com
You may also contact our partner Paul Montague on Tel: 922 716 079 or Email: email@example.com