No one can fail to have noticed just how heavily impacted certain nations have been by the global recession. Spain is one of the most badly affected countries: unemployment, and in particular youth unemployment, is running at a record level for example, and poverty is impacting growing numbers of citizens.
As a result of the dire state of the Spanish economy, the government of Spain is desperately looking around for ways to raise much needed tax revenue. And following hot on the heels of what happened in Cyprus earlier this year, everyone is concerned that the Spanish may launch an asset grab of their own.
These are particularly worrying times for British expats living in Spain – compounded by new declaration rules which came into effect at the beginning of this month, and which require anyone with overseas assets worth in excess of EUR 50,000 to declare them to the authorities. A great deal of confusion abounds about these new rules, so we hope to clarify them and explain how Britons can potentially protect their position in this article.
The first thing to note is that there has been a great deal of uproar about the rules. Whilst they have been implemented, the amount of furore they have created does mean that they may yet be scrapped. However, no one can bank on that at the moment…
So, in the meantime, what do the new rules mean for you if you’re living in Spain? Well, firstly the rules aren’t entirely new – you have always had to declare assets – there is a new Decree however, that means that failure to report, or incorrect reporting will incur much harsher penalties than before.
So, any resident of Spain – i.e., anyone who lives in Spain for more than 183 days in any single tax year – must declare overseas assets if they are worth over 50,000 euro in the following 3 categories: –
– Savings or deposits (which include annuities – therefore this affects many pensioners)
– Shares or investments
The information you have to disclose includes a raft of personal data, any information about mortgages you owe on property assets for example, as well as any assets you are an authorised signatory for, or designated beneficiary of.
All the information required has to be posted online – something everyone is very concerned about, because there is probably no such thing as a government agency or even a bank that has a perfect track record of data security.
What’s more, it has to be presented by a professional tax adviser, you can’t just fill in the forms yourself – no matter how good your level of Spanish is. An additional concern is that some British or international account structures and investment products and solutions aren’t recognised or understood in Spain, therefore things like bonds or trusts could be miscategorised and push someone over the 50,000 euro threshold for declaration.
Ultimately, because no one knows what the Spanish government and tax authorities plan to do with this information there is a lot of fear among the expatriate community. Could Spain decide to heavily tax or asset grab from those who have money abroad? Some expats have left Spain, some are reducing the amount of time they spend in their new adopted home nation so that they remain below the threshold for residency, and some are attempting to sell up and leave Spain quickly before the Spanish authorities steal their hard earned assets.
We can quite understand the fear – and to bury your head in the sand and hope that this problem goes away is not an option worth taking. There are hefty fines for those who fail to declare assets, or who wrongly declare information. What’s more, even if the declaration requirements are scrapped at some point in the future, that doesn’t stop them from existing and being law today.
The good news is that some expats may be able to legitimately restructure their assets to ensure they remain below the threshold for declaration. For example, if you have 49,950 euro in savings, 49,500 euro in investments, and 49,950 in property you don’t need to declare them…you fall below the 50,000 euro limit for each category.
Other expats living in Spain can potentially utilise different holding structures to protect their assets.
Naturally enough, expert advice is required and we would strongly urge potentially affected expats to speak to an independent financial advisory, regulated to operate in Spain, whose advisers are qualified and experienced, as soon as possible. If you want us to put you in touch with such an advisory just get in touch.
Don’t take a wait and see approach to this problem. Tackle it head on an protect your position.