End of Year Spanish Tax Update 2013

OVERVIEW

The overall environment is that taxation in Spain will increase in 2014 and 2015.  The Ley 14/2013 of 27thSeptember 2013 has already included many  of the changes.  In addition, there is a panel of experts already meeting to decide upon the 2015 changes.

The IMF and EU are bring increasing pressure on Spain to increase taxes.  These organisation have identified the following taxes for increases:

Income Tax

IVA

Gift/Inheritance Tax.

With Inheritance Tax there are two specific things the EU is proposing. As there are differing rates of IHT from region to another, Eu says this is against human rights and quotes an example of a father with two sons, one in Madrid and the other in Catalunya. The son in Catalunya perhaps pays 32% inheritance tax.  The son in Madrid will receive his inheritance without a deduction for tax.

SPECIFICS for the Year End 

Form 720

The Hacienda believe the form 720 is proving effective.  As a consequence accountants like Baker & Mackenzie are advising their clients to go “white” BEFORE THE END OF THIS TAX YEAR.   This is because it is currently possible to make a late declaration before the end of the year and pay a small fine or face the full 720 fines (Min €10,000 + 150% of asset, unpaid tax etc.) if it goes into next year.

Also note that the 720 requires to be completed when the value in any of the three asset classes changes by more than €20,000 UP OR DOWN.  This is a clarification by the Hacienda of the original legislation which specified that a new form was required if there was a “variation” of 20,000€ since the last declaration.  There was much commentary last year when the Modelo 720 started that a new report would only be needed if the value of assets in any one class were to go up.  Many people, therefore, do not know that they have to report if the value goes down by more than €20,000 in any one class.

This year the date for filing the Modelo 720 2013 is different from last year.  Remember that the date for filing the 2013 return is 31st March 2014.  As before the balances of assets such as bank accounts are based on the balance at the 31st December 2013.

Trusts

There is a change regarding Trusts in Spain.  A huge issue for anyone with a Trust is that Spain is now recognising trusts ONLY for the exchange of information. Beneficiaries details for those beneficiaries that lives in Spain are now available to the Hacienda under exchange of information rules. .  The trusts, however, are NOT RECOGNISED  for the purpose of applying Spanish taxation.  The Hacienda, apparently, have said they will look through the trusts and tax the beneficiaries as though the assets are personal assets of the beneficiary.

Life Assurance Bonds

Life assurance bonds that are compliant with Spanish law are one of the few, continuing, “WHITE” tax planning vehicles.

Purchase of Residency

By investing 2 Million Euros in Spanish debt or companies, by buying €500,000 worth of property or setting up a company here for the good of Spain you will buy Spanish residency.  The residency gives the right to Shengen travel.  This unrestricted travel is very useful for people from outside Europe who are trying to do business in Europe.

Wealth Tax and Savings Tax

The higher rates of saving tax (21%, 25% and 27%) whilst only introduced for 2012 and 2013 has now been extended to 2014.   Similarly, Wealth Tax that was introduced for 2013 will continue in 2014.

OVERALL IMPACT

Having your affairs properly organised is increasingly important.  Please feel free to contact Barry Davys at barry.davys@spectrum-ifa.com to request a free review with one of our advisers.

 

Author: Barry Davys

This update is based on a briefing by Baker & Mackenzie (B & M), Accountants in Barcelona.  It is designed to give an overview, we are not tax experts.

You may also like to see the following

Spanish Tax Facts 2013

La Renta Tax Return

 

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