All Tax Residents in Spain must declare foreign assets in 2013

From 2013, private individuals or entities resident for tax purposes in Spain will be obliged to declare all their foreign assets valued over 50,000 Euros. This is a new measure, devised mainly for two reasons:

- to ensure the success of the recent amnesty

- to pursue all those who have transferred non taxable funds abroad resulting from sale transactions during the property boom

However, this will now have a knock on effect on foreigners that have become Tax resident in Spain and who have pensions, properties, trusts, insurance policies or assets in their countries of origin or anywhere else in the world.

More specifically the new tax duty requires reporting three groups of assets only when the assets within each group exceed the value of 50,000 Euros. In general terms, the three groups are as follows:

a) Bank accounts held with financial institutions abroad;

b) Shares, securities, insurance policies, temporary income received from insurance policies and income resulting from loans, rights or other assets from foreign entities;

c) Immovable property and rights over it.

As an example, in relation to the bank accounts, it will be necessary to inform about the name and address of the financial institution, complete identification of the accounts, open/closing date, the average balance of the last three months and the final balance. As far as shares are concerned, name and address of the entity and the value at the end of the year.

The normal declaration period will fall inside the first quarter of the year but only for declarations corresponding to 2012, the presentation period will be between the months of March and April. Once the tax payer has presented the first declaration, he/she will only be liable to present future declarations if the value of the assets within each group has increased by 20,0000 Euros.

Finally, it is necessary to remark that one of the punitive measures introduced to ensure that people comply is that there will be no statute limitation time. In Spain we have a four years limitation, which beyond this time the Tax authorities cannot inspect. For those who do not comply with the above, this limitation will not apply and will allow them to backdate their investigation indefinitely for these assets.

It is therefore highly recommended to obtain proper tax advice in order to analyse each case individually and have a clear idea of the current position in relation to 2012 and to understand its implications for this year and years to come.

Source: Irwin Mitchell abogados and the Euroweekly News

Horia Mainescu