The Spanish tax office has announced new measures to crack down
on tax fraud. Their tax inspections plan for 2017 revealed new IT tools and
processes that will make it much easier to investigate the tax affairs of
More access to
Now, the tax office (Agencia
Tributaria or Hacienda) will be
able to analyse and cross-reference data from a wider range of sources than
ever to detect possible tax fraud. This includes personal income and wealth tax
returns, Modelo 720 declarations and
information from the 2012 tax amnesty.
Tax authorities are already benefiting from the new
‘automatic exchange of information' regime. This year, Spain became one of over
100 countries who will be sharing information on taxpayers' assets and income. Financial
institutions reporting data across countries include banks, custodians,
investment funds, certain insurance companies, trusts and foundations.
Information being shared includes personal data such as your
name and address, country of tax residence and tax identification number. Information
about your accounts includes investment income you earned over the year, such
as interest, dividends, income from certain insurance contracts and annuities.
Account balances are also reported, as are gross proceeds from the sale of
With all this information combined, the new system in place will
work as a big data container capable of estimating the total wealth of each
taxpayer in Spain.
One focus for the Hacienda
will be clamping down on false claims of residency. They plan to catch out
those who actually live in Spain but do not declare their income and assets
here, usually claiming residency in a low taxation territory.
It is now much easier for the tax office to collect
information from utility providers, as well as paperwork for vehicles and property
ownership, to establish where individuals are effectively living. For example,
they can check electricity bills to confirm whether a property is being lived
in long enough to make someone a resident and disprove it is just for holiday
use. They can also use this information to identify if people have an income
arising from letting out property without declaring it.
It is likely they will look closely at those who have
declared themselves resident in lower taxation territories like Gibraltar, Andorra
and Portugal, but effectively are resident in Spain. This could also catch out
expatriates who declare themselves UK residents without realising they are actually
tax resident in Spain.
plan also revealed they will pay attention to VAT fraud to identify undeclared
funds from businesses, as well as targeting tax avoidance by multinational
Why the crackdown?
By identifying those who are not declaring all their income
and assets as required under Spanish tax law, the Spanish government can raise
revenue to bring down budget deficits. Wealthy individuals are the latest
target because the Hacienda sees them
as more likely to have opportunities to use aggressive tax planning.
According to Agencia
Tributaria chief, Santiago Menéndez, up to now their efforts have been
profitable. During the last five years, they collected €400 million from tax
inspections of individuals with wealth over €10 million.
With all the latest tools, locally and internationally, the
government has today, it is likely they will continue to profit from uncovering
more fraud in the future.
How might this affect
The new measures are designed to catch out those who have
been incorrectly declaring themselves and their income and assets in Spain.
There should be little to worry about if you have been declaring your finances
However, this fresh approach to tax evasion makes it more
important than ever to take personalised, professional advice on your financial
planning. If you live in Spain but have assets or receive income abroad, it may
be hard to determine what you should be declaring and where tax is due.
First, you need to make sure your arrangements are fully
compliant in Spain and anywhere else you have assets or heirs. This can be
particularly complex for expatriates with cross-border interests. Getting it
wrong may be easier than you think and result in costly fines and even
Second, your tax planning should suit your particular aims
and circumstances, and work well in both Spain and the UK. For example,
tax-efficient investment wrappers, offered through a Spanish compliant bond,
could legitimately reduce tax on savings and investments. However, while some
structures can seem similar, their tax benefits can vary significantly.
Spain can be a very tax-efficient place to live for
expatriates, but you need specialist, up-to-date knowledge of local, UK and
international tax regimes to achieve the best results. An adviser with
cross-border expertise can help you enjoy favourable tax treatment while
offering peace of mind that you are meeting your tax obligations, here and in
David Bowern, Partner, Blevins Franks
This e-mail address is
Tel: 952 809 212
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