The high-profile tax amnesty for individuals and companies based in Spain to declare offshore assets has received much criticism since it finished in November 2012, says Javier Morera, Tax Partner at Broseta.
La amnistía fiscal del Gobierno ha recibido grandes críticas, dice Javier Morera de Broseta. Esto ha ocasionado que el Gobierno haga el proceso más restrictivo y que a partir de ahora los contribuyentes deban declarar todos sus bienes en el extranjero o arriesgarse a pagar importantes multas.
The amnesty – which brought in around half the intended €2.5bn– saw the Government state that anyone declaring foreign assets would face a 10 percent tax for their total value.
“If individuals declared off shore assets through the ordinary voluntary disclosure procedure of filing complementary tax returns, they would only pay capital gains on the interest/gains and not the asset itself,” he says. “So declaring in the amnesty would in many cases result in having to pay €100,000 whereas the traditional route could result in a 18-21 percent tax, but only on the interest/gains.”
The Government redrafted the rules so that, under certain conditions, the 10 percent tax was on income from the past five years. Morera believes that while the amnesty may have not hit the target in terms of tax revenues collected, it was more than achieved in terms of offshore assets disclosed (more than €30,000m, versus a €25,000m target). As a result, overall Government tax revenues will improve.
Individuals who have not declared their assets will now face tougher consequences. The Government is making the process much tighter and people must declare all their foreign assets each year (for the first time, before April 30th) or risk the penalties.
“If in the future the Tax Authority discover undeclared foreign assets, they can tax them as a non-justified capital gains, ie at marginal tax rates (now over 50 percent) and charge fines of 150 percent on top,” says Morera, “effectively meaning an investor loses everything as well as facing a potential imprisonment penalty if the unpaid tax exceeds €120,000 in a given year.”