Spanish tax office targeting expats with offshore accounts, say experts

Expats in Spain who have undeclared bank accounts in tax havens are now being routinely pursued by the Spanish tax authority, warn personal finance experts.

“‘Hacienda’, through the Ministry of Finance, has new measures in order to make tax residents in Spain, that is people who live in Spain for more than 182 days a year, bring their offshore monies into the Spanish system, as they have the obligation to declare their worldwide interests,” explains Manuel Ubeda Casteñeda, a Costa del Sol-based tax lawyer.

“For the first time, they are sending out standard letters, to all the people who appear on any of their databases, ‘inviting’ them to appear and declare their assets and income.”

With all forms of investment and pension income from overseas now being investigated, it is understood that Hacienda is acting on information provided by banks in the jurisdictions concerned.

Mr Ubeda Castañeda says: “Although tax havens on principle respect ‘banking confidentiality’, known in Spanish as ‘secreto bancario’, but there have been, in the past, ‘lists of people’, who had undeclared accounts in their own countries.”

It is a view shared by a retired, now Spain-based, HM Revenue & Customs inspector, who has asked not to be named. He explains: “I know of several expats who have recently received such letters. It is, I imagine, assumed that foreigners are more likely to have offshore assets than Spanish citizens in Spain.

“It is the first time, that I know of, that the Spanish tax office is using information from tax havens and other OECD (Organisation for Economic Co-operation and Development) tax authorities in this way.

“In these times of economic crisis, when governments are actively seeking money wherever they can, it is becoming increasingly difficult to hide finances. The financial world is becoming more transparent.

“And, in addition, I would not be surprised if the authorities started to use other official sources to gather information on people suspected of not declaring all their assets and income.

“In this respect, I would urge people to sort their financial affairs sooner rather than later or face potentially steep penalties.”

The application of such penalties, confirms Manuel Ubeda Castañeda, have been announced but not yet enshrined in law.

Mr Ubeda Castañeda, like the former HMRC inspector, suggests that the first ever tax amnesty, which is in effect now, might be a “good way (for those affected) to bring their offshore monies into Spain.”

The trust amnesty, approved by the Government in April, allows individual and corporate taxpayers to voluntarily disclose unreported income or assets by paying a special 10 per cent levy on the amount or acquisition value, with no criminal or administrative penalties, surcharges, or interest, until 30th November.

After that date, the Ministry of Finance has said that new anti-avoidance measures will be employed and the penalties for tax fraud will be raised.

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