A tax crackdown by Spanish authorities on residents holding assets worth more than £40,580 offshore could lead to massive fines – and expats are in the firing line.
Some expats could lose everything – and still owe the Spanish taxman money.
Anyone who is liable for Spanish taxes has until the end of March to declare their assets or face stringent fines and penalties.
Spain classes anyone as a resident who spends 183 days in a calendar year in the country – or spends that time living on a boat within 12 nautical miles of their coastline.
The rule also covers anyone who has Spain as the ‘centre of their economic activity’ and if they have a spouse or children living in the country – regardless of how many days they may spend their with their family.
Fines and penalties
Until recently there was an amnesty for people to declare their assets which were taxed at a flat rate of 10% to encourage people to come forward.
However, the new rules are particularly harsh and failure to declare £40,580 in any class will lead to a tax and hefty fine.
For example, an expat with assets of around £243,500 in an undeclared offshore account will see this taxed at a top rate of 52% once the taxman catches up with them.
But to make matters worse, there is also a 150% fine which means that all of the assets would be taken – and the expat would still owe the taxman around £73,000.
To comply with the new rules, expats will have to reveal where their assets are, all of their account numbers, dates the accounts were opened and balances of them at certain times of the year.
One of the biggest issues facing expats is that the new tax rules weren’t announced until October and many people will either be unaware of the changes – or won’t have the time to organise themselves.
The amnesty which ended recently also protected people making a declaration from criminal or administrative penalties and covered any asset which should have been declared for corporate or personal incomes tax.
Spain is looking for fresh tax revenues because it is still suffering from the global economic downturn and among its recent moves is the recent well-publicised targeting of online poker players who haven’t been declaring their winnings.
Spain’s move to crackdown on offshore holdings follows that of several other countries – including the UK – to find and tax undeclared assets held by taxpaying residents.