The days of expats failing to report income and assets to foreign tax authorities are numbered.
America’s Foreign Account Tax Compliance Act (FATCA) and similar agreement between European Union states have put an end to expats keeping their heads below the parapets to avoid tax snipers.
A new era of co-operation has ushered in the automatic supply of financial information by banks and other financial institutions to tax authorities.
The information is then passed on to the tax authority where the expat is resident.
FATCA has garnered most of the headlines by gathering financial information from thousands of foreign financial institutions about accounts and investments controlled by US taxpayers.
Expats face Spanish tax inquisition
But few expats relaxing in the sunshine of Spain realise that their strategy of keeping mum has led to the Spanish tax authority launching almost 30,000 tax investigations into the financial affairs of foreigners in recent years.
The tax season is in full swing in Spain, and expats only have a month left to declare their worldwide assets to The Hacienda by filing their Modelo 720.
Many expats who have not filed the form in earlier tax years avoid declaring assets because they are worried about huge fines they can face for non-compliance.
Working out what to declare can be tricky – the law calls for each asset of more than 50,000 euros to be included on the form, but if several bank accounts hold more than 50,000 euros, that’s a multiple declaration, not a single one.
Filing a Modelo 720
Property worth more than 200,000 euros should also be declared, and for expat buy to let landlords, this is also a multiple declaration, rather than giving information about a single portfolio.
Spanish tax law says anyone who should file the form but fails to do so is guilty of tax avoidance until they can prove otherwise.
Expats suffer the most from this law because they may have a home or investments left in the UK when they decided to move to Spain.
These assets may be worth hundreds of thousands of pounds and with fines of 150% of undeclared net worth commonplace, many expats feel trying to stay out of the limelight is a better financial option than coming clean.
Find out more about Modelo 720 filings from the Spanish tax authority
What ARE you talking about? Most expats are low to middle income. Nina Olsen, the tax payer advocate has noted that upwards of 82 percent of expats would not owe any taxes to the U.S. at all. This article starts from the mythological premise that “most expats are rich, living on islands, sipping champagne on their yachts” That is patently false. One third live abroad due to marriage or family, another third moved abroad for a job, some of whom are military. Expats are not richer than homelanders. They are blue collar workers, they are housewives, they are in the military, they come from all walks of life. I’ve lived in Canada for thirty years, a place I might add where no one moves to escape taxes if you are from the U.S. where taxes are far lower. There are one million Americans living here, I’ve met hundreds over the years and not once have I met this “wealthy expat” you speak of. “The Spanish Inquisition” for innocent law abiding people is more like a McCarthy era witch hunt. Something no country should be proud of and not only does it go after expats but, our foreign spouses and children too. Many innocent families are suffering from this witch hunt and you should be ashamed writing such an ill informed, blatantly fear mongering article. I’m sick and tired of having it assumed that just because I married a Canadian I and my spouse should send our banking information to FINCIN in the U.S.A. ALL of our income comes from a Canadian who has never lived a day in the U.S. This article enrages me to no end. Come talk to expats, the majority of us aren’t “hiding wealth” If anything home landers are hiding far more than we ever could. After all they don’t send all their banking information to the U.S. financial crimes unit every year, they don’t have their banks automatically turn over account numbers, balances and transactions either. The UBS scandal was mostly people living inside the U.S. and using accounts out of the country. They were NOT expats but, we are paying the price for home lander actions. Go after Delaware why don’t you.
Time for Jim Atkins to reckon with the situation of US expats. It sounds like in Spain not only will the US chase them for US citizenship based taxation but also Spain will be more inquisitive for any assets and accounts in other countries. While Spain may back up the rhetoric for asset/account holders in other CRS countries, they will not have the information from the US which is increasingly called the greatest tax have in the world.
The situation of US persons tax resident abroad:
Double Taxation (county of residence + US tax via tax treaty gaps)
Without Representation (would never have agreed to it all)
Without US Government Services (that US resident US persons may receive)
Without a Care By The US Government For One’s Well Being (only about stick and compliance)
With Unfathomable Compliance (obligation to overlay the 74,000+ page US tax code on top of the tax code of one’s country of residence – with inevitable tax treaty gaps through which double taxation flows through).
With Excessive Compliance Cost (see above – it all requires highly specialized assistance and can’t be done with TurboTax, and you don’t use that because of the potentially bankrupting penalties (that US residents do not face for their everyday accounts in the US if not done right).
With Excessive Compliance Penalties (The U.S. tax rules punish accounts and investments that are foreign to the USA. The compliance penalties for not reporting accounts right could be bankrupting even if no US taxes are owed)
Is all UnAmerican!
Any US persons living overseas caught up in this must visit the message boards of The Isaac Brock Society and Facebook Citizenship Based Taxation and American Expatriates Groups; and consider donating to the FATCA IGA lawsuit and contribute to citizenshiptaxation.ca .
US citizenship should be about the greatest liberty in the world. Yet the truth is US persons living overseas are tremendously disadvantaged by the US government compared to nationals from all other OECD countries. The US should join the OECD and adopt Residence Based Taxation.
FATCA was not too find tax dodgers, FATCA was put in place to increase compliance of USC filings. That is it… Tax dodgers will not be affected, they have the means to avoid any hassle. The only people bothered are regular people that can no longer open a bank account…
The US taxes all its citizens regardless of where they reside (unlike the rest of the world). That means that a US expat working in the UK and paying UK taxes might be some more to the US under certain conditions. This means that wealth is extracted from the UK and sent to US via this procedure… Get it?
Jim just retire now, you are ignorant to say the least. We expats already pay taxes to the country we live in, and for those of us who know we need to pay or file US taxes we do it. Because I work for myself I end up paying 35% of my income to taxes in two different countries, why the heck should I have to do that when I don’t live in the US? I don’t receive any services from the US, and if I need a service guess what Jim? I have to pay for it at the embassy! I earn less than 30k a year so I pay 10k in taxes, leaving me with hardly enough to live. You homelanders have no idea what it is like, before you start spouting off ideas maybe you should actually go live abroad for a few years and WORK and understand the lifestyle and hardships that come along with it! Instead of spouting off ideas from your home toilet. What on Earth possessed you to write such article? All I can say is whatever negative criticism you get is going to be well deserved.
You obviously have no idea what you’re talking about. Of course, we are only saving our money from US authorities while paying approx. half of our gross income into taxes and/or mandatory Social Security because we live in Germany, France, Sweden, the Netherlands,… Have you ever looked into any figures about where most expats reside? And what their fiscal obligations are in those countries compared to the US? And how filing US taxes on top of that is an expensive non-sense burden? Really, you deserve a shitstorm for this article.
I make minimum wage in France (I’m a freelance journalist since 1995), and it costs me 2000 euros each year to have my French and American accountants fill out all of the required IRS forms etc, even though I don’t make enough to owe anything in the US (I pay French taxes). We’re not all rich.