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The Tightening Tax Net 

 

By 30th April, you need to declare all your offshore assets to the Spanish authorities under the new reporting obligation, or face costly penalties.

This is Spain’s latest initiative to increase tax revenue, which it is doing with both higher tax rates and a crackdown on tax evasion – a trend we are seeing in many European countries.  I have been covering these developments for well over a decade, over which time the tax environment has changed dramatically. 

Your tax planning needs to be fully up-to-date. You should seek advice from a specialist firm like Blevins Franks on how best to structure your assets to be tax efficient under today’s tax rules.

 

Here is a summary of key tax events since 2000.

2000, June–EU starts negotiations on its Savings Tax Directive, resolving that “with a view to implementing the principle that all citizens resident in a Member State should pay the tax due on all their savings income, exchange of information on as wide a basis as possible shall be the ultimate objective of the EU”.

2001, April– UK banks start passing details of all new accounts opened by non-residents to over 25 countries.

2002, July– Spanish tax authorities reach agreement with Jersey regarding information exchange.

2003, January– EU ministers reach agreement on the Savings Tax Directive.

2004, March– UK regulated professionals now have to report suspicions of tax evasion under the UK Money Laundering Regulations and Proceeds of Crime Act amendments.

2005, July– Savings Tax Directive comes into force. Most EU countries start to automatically exchange information.  Austria, Belgium, Luxembourg, Isle of Man, Channel Islands, Switzerland, Liechtenstein, Andorra, Monaco and San Marino start deducting a 15% withholding tax from savings income.

2006, April– Barclays Bank is forced to disclose details of its offshore customers to HM Revenue & Customs (HMRC).

2007, February- Four major UK banks are made to reveal details of offshore customers to HMRC.

2008, July– Savings Tax Directive withholding tax rate increases to 20%.

2009, March– International pressure builds on offshore financial centres in wake of the financial crisis. Several offshore financial centres say they will cooperate with the Organisation for Economic Cooperation and Development (OECD) principles on exchange of information on tax matters.  Switzerland agrees to relax its banking secrecy rules and exchange more information on suspected tax evaders.

2009, April– At the G20 Summit, world leaders declare the “era of banking secrecy is over” and threaten offshore financial centres with sanctions and blacklisting if they fail to comply.

2009, June– Isle of Man announces it will start to automatically exchange information in 2011 under the Savings Tax Directive, ending banking secrecy for EU residents.

2009, August– 308 UK and offshore banks are ordered to give HMRC details about customers with offshore accounts.

2009, August– Liechtenstein signs landmark tax agreement with the UK.

2010, January– Spanish tax rate on savings income increases from 18% to 19% on the first €6,000 and 21% after that.

2010, June– Spanish government says it has received details of 3,000 Swiss bank accounts owned by Spanish taxpayers, and has started to investigate.  The information came from stolen data handed to the French authorities.

2010, June– Swiss parliament agrees to hand over names of 4,450 UBS bank’s American clients to US government.

2010, October– Switzerland and the UK agree to negotiate an accord to tax Swiss bank accounts owned by UK taxpayers.

2011, January– Spain introduces two additional income tax bands, taking the top rate to 45%.

2011, February– Electricity companies are now obliged to provide information to the Spanish tax authorities regarding the electricity usage and ownership of every property in Spain.

2011, July– Savings Tax Directive withholding tax rate jumps from 20% to 35%.  Isle of Man and Guernsey abolish the withholding tax option for EU residents and start to automatically report on interest earnings.

2011, September– Wealth tax is re-introduced in Spain for 2011 and 2012.

2011, October– The Spanish tax office starts writing to around 300,000 property owners, warning them it is aware they have not submitted tax returns.

2012, January– Income tax rates increase for everyone in Spain, by up to 7% for higher earners, taking the top rate up to 52% (54% in Andalucía and 56% in Cataluña).  The fixed rate on savings income increases to 21%, 25% and 27% depending on amount earned.

2012, January– Spanish government announces a new crackdown on tax evasion.

2012, April– Valenciana (Valencia, Alicante and Castellon provinces) says it will start to charge wealth tax again as per the state rules.

2012, April– Spain’s tax amnesty is approved.  The government promises to get tough on tax evaders after it closes.

2012, April– Spanish government publishes its draft anti-fraud plan, including a measure to oblige all residents to report bank account and other assets located overseas.

2012, September– The government announces that wealth tax will be extended for 2013.  Short term capital gains will be taxed as general income, instead of savings income, from January 2013.

2012, October/November– Spain’s anti-fraud plan, including the new asset reporting requirement, is passed into law.

2013, 30 April– First deadline to report your offshore assets.

Tax rates and rules will continue to change, and the tax net will get tighter.  To make sure your tax planning is up to date and you do not fall foul of any tax rules, take professional advice from a specialist firm like Blevins Franks which has decades of experience advising British expatriates in Spain.

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: paul.montague@blevinsfranks.com