Spain tightens tax noose for expats

Spain tightens tax noose for expatsExpats in Spain can expect a tax crackdown on earnings from overseas investments.

The Hacienda – the Spanish government’s revenue service – is following the lead of the US and UK in urging taxpayers to declare any income from abroad.

The Hacienda is reviewing information about savings and investments passed by foreign banks under tax treaties and chasing expats who have not filed the details on their tax returns.

Expat forums are crowded with comments about letters from the Hacienda requesting information about offshore holdings.

The move follows the development of tighter tax enforcement across the 34-nation of Organisation of Economic Cooperation and Development (OECD), which includes many of the world’s leading economies.

As part of their tax avoidance campaign, many tax authorities are swapping financial information about expat customers picked up from bank and investment records.

In common with the UK and US, Spain has a tax amnesty that offers reduced fines and penalties for taxpayers telling the Hacienda about previously undeclared holdings.

The amnesty is expected to bring in around €2.5 billion in ‘lost’ taxes.

Running until November 30, 2012, taxpayers can own up to undeclared assets and pay 10%t tax rate to bring their affairs up-to-date.

Other financial measures introduced by the government include making overseas investors tell the tax authorities about their holdings and a ban on making cash transfers of more than €2,500.

The crackdown is aimed at expats from Britain and other nations resident in Spain who have savings, pensions, investments and property overseas as well as other resident Spanish taxpayers.

The extra taxes are key in the government’s plans to fund the gap between spending and borrowing. The government must cut spending by 3.2% of GDP to meet strict eurozone limits.