It is often said that when America sneezes the world catches a cold, well recent US legislation has Europe reaching for the Kleenex. After committing to the American tax evasion legislation FATCA (Foreign Account Tax Compliance Act) the EU began revising its current savings directive and has introduced one of the most comprehensive systems of automatic information exchange in the world.
Since 2005 the EU Savings Tax Directive has ensured that member states collect data on the savings of non-resident individuals, and automatically provide this data to the tax authorities where those individuals reside.
From January 2015 this will be extended to include income from employment, directors’ fees, life insurance, pensions and property. Furthermore, agreements in 2014 have paved the way for income from dividends, capital gains and all other forms of financial income and account balances to be added to the list of categories subject to the automatic information exchange within the EU by January 2017.
Since 2012 the Spanish tax authority has required residents to complete and submit the Modelo 720. This requires each tax resident to report foreign assets in various categories including cash deposits, investments and real estate where the total value in each category is over €50,000.
As law abiding citizens this should not be a worry. However, it is important to ensure that your current tax reporting is up to date, your form 720 matches the information that the Spanish tax authority will now receive under the latest automatic exchange of information, you are fully aware of your legal country of residence for taxation purposes and that your savings, investments and pensions are as tax efficient as possible and compliant with your country of residence.
The idea of offshore tax exiles is a thing of the past as all income and capital will be reported to the tax authority of the country that you live in. Far too often I meet clients who believe that they are under the radar and therefore have buried their heads in the sand despite all of the information about the increased activity of the Spanish tax authorities.
If you are based in Spain but unsure of your tax residency, or would like to confirm that your pension, savings and investments are as tax efficient as possible then get in touch for a no obligation review of your current financial situation.
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