Don't get caught out by new Spanish tax laws

Spain on the rocky road to nowhere ?
(Image: lagomera1.blogspot.com)

The following clipping from an article in The Telegraph was written some time ago for British expats, but it equally applies to all EU citizens living in Spain or intending to do so:

British expats living in Spain will have to be on their toes to keep up with the new Spanish tax rules

By Liz Phillips

''There are a number of changes afoot which could trip you up faster than a flamenco dance. These include:

· A new double tax treaty

· New disclosure rules

· New tax allowance bands

Before becoming too entangled in the new rules, you need to clear whether you are a resident for tax purposes. This applies to expats and homeowners. You are a Spanish resident if you spend more than 183 days (roughly six months) in Spain in one calendar year , and they don’t have to be consecutive days.

But you will also be presumed to be a Spanish resident if your “centre of vital interests” is in Spain. For instance, if your husband or wife lives in Spain and you’re not legally separated.

“The centre of vital interests was introduced to prevent fraud where individuals maintained their whole life in Spain, but made sure they remained under the 183 day barrier,” explains Jason Porter, Business Development Director at tax and wealth management firm Blevins Franks.

Double taxation

The UK and Spain have had a Double Taxation Convention for some time, but the new treaty only came into force in June with further rules covering income tax and other taxes kicking in on January 1 and April 6, 2015.

“The new treaty is especially relevant to individuals and companies who are tax residents in Spain, but who draw income from the UK, as well as those who split their time between the two, perhaps paying tax in both,” says Richard Way, Editor of the Overseas Guides Company.

“For example, the new treaty could affect the amount of tax certain expat pensioners’ pay.”

Government service pensions paid to retired members of the fire service, police, civil servants, armed forces and local authorities are exempt from Spanish tax. Under the new treaty the amount of the pension is still exempt but must be included when calculating how much tax is due in Spain. This could have the effect of pushing any other income - perhaps from investments and rent - into a higher tax bracket meaning you’d have to pay more tax in Spain....

The new Spanish ‘disclosure’ rules mean that Spanish residents and expats living in Spain will have to declare all relevant overseas assets worth more than €50,000 combined. This includes bank accounts, property and life assurance policies...

“Tax authorities are now openly sharing information about citizens’ taxable assets in order to claim unpaid tax,” says Rachael Griffin, head of technical marketing at Skandia.

''For Spanish residents who have been declaring their assets already, this should simply be an extra administrative burden. However, for those who have not been declaring assets up until this point there is a potential for a significant tax charge and fine. Individuals in this situation should seek professional advice as soon as possible”

And in a move that’s led to mutterings of a new Spanish Inquisition, the Spanish authorities have started automatically taking tax debts from people’s bank accounts.

...''

There is more information in a 'This Is Money' article - click below:

Huge fines await British expats who fail to declare overseas properties and savings as Spanish deadline looms