The new rules took effect yesterday, with Spanish residents with offshore holdings being expected to provide their first accounting of their non-Spanish assets between that date and 31 March 2013.
They were only published at the end of October, giving advisers and their expat clients little time to prepare, some advisers have said – particularly, they note, given the harsh penalties potentially facing those who fail to comply.
Under the new rules, failure to declare any amount worth more than €50,000 in any single asset class, or to report on any offshore entities which name the individual in question as a beneficiary, would result in a combination of a tax and fine that could not only empty out the offshore account completely, but could leave the individual owing the Spanish tax authority – La Hacienda – even more.
For example, an expat living in Spain who was discovered to have €300,000 in an undeclared offshore account would see this nest egg taxed at the top rate of 52%. But the fine for having failed to declare this would be 150% of the 52%, meaning that he would not only lose all of his savings, but he would owe the tax authority an additional €90,000, according to Vince De Stefano, managing director of Totus, which specialises in looking after expats in Spain.
In addition to the name and address of the financial institution holding their accounts, Spanish taxpayers with offshore accounts will be asked for all their relevant account numbers; the dates that their accounts were opened, closed or changed in any way; their account balances as of 31 Dec; and the average account balance in all the relevant accounts in the final quarter of the year.
Individuals are considered resident in Spain for tax purposes if they spend more than 183 days in Spain in one calendar year (or live on a boat within 12 nautical miles of Spanish land during that time); if Spain is “the centre of [their] economic activities”; and/or if their spouse and/or their dependant minor children live there, regardless of how many days the individual in question actually spends in the country.
The new rules come into force just a month after a tax amnesty ended. As reported, under that scheme, Spanish taxpayers with undeclared taxable assets were given the opportunity to declare them in return for having to pay no more than a flat 10% levy.