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Meeting of 31st May 2012

Meeting of 31st May 2012

Rafael came to speak to us about the legislation recently passed by the Spanish government to allow an Amnesty from the penalties and fines which would nomally occur on income of Spanish residents arising in the period 2007 to 2010 and which they have not previously declared to the Spanish tax authorities.

The Amnesty is designed to raise €2.5 Billion to help mitigate the public deficit in Spain.

The Amnesty legislation allows the regularisation of assets acquired by the tax payer which do not correspond to the income declared by the tax payer between 2007 and 2010. No penalties and fines will be imposed if the value of these assets is now declared to the tax office under the Amnesty. However, if the tax payer is under tax investigation for this time period he cannot benefit from the Fiscal Amnesty.

The categories of tax specifically mentioned in the legislation are income tax for residents and non-residents and corporation tax in respect of companies. The Amnesty does not cover IVA, Gift tax and Inheritance tax.

The Amnesty allows residents to regularise their tax situation in relation to these unpaid taxes by:-

1. Proving ownership of the asset between 1st January 2007 and 31st December 2010, if it was acquired with undeclared income. The tax declaration showing ownership of this asset must be presented to the Spanish tax office by 31.11.2012. 

2. Cash:  It is very difficult to prove ownership of cash so ownership will be acknowledged by the tax office if it has been deposited in a bank account in Spain, or any EU or EEA country, in his name prior to making the tax declaration. The cash declared in this way will be considered to have belonged to the tax payer on 31st December 2010.

3. If assets are in the name of Trusts or Companies, the person can make the tax declaration in his own name if the assets are transferred to his name by 31st December 2013. 

Proof of ownership of an asset may be shown by any acceptable legal means. If income, or assets derived from this income, have been partially declared the Fiscal Amnesty can be used for the part of the value of the assets acquired with non declared income. Assets acquired before 2007 are excluded from regularisation because the Spanish Statute of Limitations is only 4 years.

The initial rate of 10% tax will be charged on the tax base value of an acquisition. This is the acquisition value of the asset when it was acquired, even if the value has changed since.

The regularisation of a person's tax situation will be kept confidential because the information will be disclosed exclusively through the internet on a secure system. If an individual is unable to submit his tax information by internet he must use a tax adviser to do it.

The advantage of the Amnesty is that income tax on the undeclared income, plus penalties and fines, would have been much greater than 10%. Becoming totally legal for only 10% could be a good deal. After the Amnesty the penalties will be much tougher. The Draft new plan against Tax Fraud involves:-

1. Compulsory information to the tax office of any bank accounts and assets in foreign countries where the tax-payer is the Owner, Beneficiary or Authorised Signatory.

2. A fine of €5,000 will be imposed for each piece of data that is found to be missing, with a minimum of €10,000 plus the fact that in the future for any undisclosed accounts there will be no Statute of Limitations for the tax authorities to enforce payment of taxes, surcharges and penalties.

The proposed modification of the Criminal Law is as follows:-

a) A new type of Aggravated Tax Fraud for non declared income of more than €600,000 per year OR when the non declared income is generated within a criminal organisation OR using companies, businesses or places which hide or make difficult the identification of the tax payer or the defrauded amount.

b) The punishment is increased from 1 - 5 years imprisonment to 2 - 6 years.

c) The Statute of Limitations to pursue the Tax Fraud will be increased from 5 years to 10 years since the fraud was committed.

Finally, a Polemical Decision, but an Opportunity, is to declare hidden assets and so legalise these at the, relatively, low cost of 10% of their value.

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