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Assets situated outside Spain and the obligation of having to report them.

A new law to fight against tax fraud came into force on 31st October 2012. This law was processed urgently as a way of encouraging the tax amnesty in its final stretch.

Although the amnesty has raised only 1,200 million Euros, the whole process has brought about new tools to enable the government to uncover assets, undeclared bank accounts and hidden capital that will start to be taxed on and thus make a contribution to the national budget.

This amnesty has brought about the feasibility of regularizing undeclared assets, and at a very low levy of 10%.

Those taxpayers who have taken the advantage of the fiscal amnesty, have also been obliged to make complementary tax returns for those taxes which were not under the amnesty procedure such as: inheritance tax, wealth tax, VAT etc.

This new law designed to fight against tax fraud, contemplates a new obligation for Spanish tax residents who will have to inform the authorities of their assets situated abroad.

Spanish Tax residents will have to declare these assets if they are owners, duly empowered representatives, authorised signatories, or ultimate beneficiaries as indicated in the Spanish Prevention of Money Laundering Law (10/2010 of 28th April).

Furthermore, this new law also mentions “trusts” or other analogous legal figures in relation to the obligation of reporting. We highly recommend that Spanish tax residents, who may have any type of connection with trusts or other analogous legal figures, that hold assets abroad, seek personal advice in order to clarify whether the relevant informative declaration should be submitted.

The foreign assets to be reported not only refer to bank deposits but also comprise others such as shares, bonds, properties, life insurances, annuities, pension schemes etc

This informative declaration must be provided to the Spanish Tax Office, within the first quarter of 2.013, detailing all the assets situated abroad at 31st of December 2.012 as from 50.000€. This amount will have to be calculated in accordance with a classification of each type of asset. For subsequent years, the declaration will have to be submitted, only if the figure of 20.000€, per each type of asset, is exceeded. Spanish resident taxpayers who are obliged to file this declaration and do not comply with this obligation will be penalized with a minimum fine of 10.000€, that will be increased by 5.000€ for each type of information not provided.

Furthermore, these undeclared assets, together with their undeclared related accumulated earnings, will be subject to the top income tax rate, moreover 150% penalty will be calculated on the mentioned tax payment brought to light. On the other hand, if the informative declaration is submitted but out of time, a minimum fine of 1.500€ will be imposed, which can be increased in 100€ per each piece of information not given.

It is important to bear in mind that there is no time limit for the Spanish Tax office to open a Tax Investigation and request the tax and penalty payments in relation to assets situated outside Spain. These tax obligations are not statute barred.

This measure could also affect Spanish companies with assets outside Spain, which will have to comply with the above mentioned requirements.

This strategic fight against tax fraud has the aim of putting an end to the tax regularization processes which have been used so often in the past.

A requirement also exists for these tax payers to make regular declarations to the Bank of Spain, in relation to such investments. In addition they must be declared in their annual wealth tax returns (for individuals), and any income or gain derived there from, equally disclosed for income tax purposes.

The opening and or closing of the above types of bank accounts must also be reported to the Bank of Spain within a month.

Details of the movements in these accounts must equally be reported annually.

All the above mentioned disclosures have to be made via Internet.

Submitted by Ana Ronco.

Ana can be contacted for further information at aronco@asec.es.