Many countries are tightening up on both tax evasion and tax avoidance. Guest author Patricia Garcia Mediero explains why readers who own unreported assets in Spain (including real estate) should examine this one-off chance to take advantage of an amnesty before it closes on 30 November 2012.

This issue affects property owners in Spain who are not Spanish resident, as well as all Spanish residents, and applies whether the property is held directly or through an onshore or offshore vehicle.

Up to 30 November 2012, taxpayers may choose to file remedial returns under the Spanish Special Voluntary Disclosure Procedure. The main framework is as follows:

  • qualifying individuals include tax residents in Spain owning undeclared assets anywhere in the world at 31 December 2010 and non-tax residents owning unreported Spanish assets, including real estate;
  • taxes covered are Income Tax, Corporation Tax and Non- Resident Tax. Any other taxes, including indirect taxes, municipal taxes and Inheritance Tax would be subject to remedial filings under ordinary late filing procedures, if not covered by the Statute of Limitations (four years extended to five in cases of tax fraud);
  • the resulting tax liability would generally amount to a one-off 10% on the acquisition value of all undeclared assets. There are certain alternative aggressive interpretations, but these lack specific legal backing;
  • where the undeclared asset is cash, this must be deposited in a bank account in Spain, another EU Member State, Iceland or Norway any time before filing;
  • taxpayers holding undeclared investments under offshore arrangements may determine their liability on the basis of underlying assets, provided that structures are liquidated by 31 December 2013;
  • filing must be done electronically through Special Forms 750 and D-750 together with full payment by 30 November 2012;
  • special returns will be confidential and not affect the Statute of Limitations of the taxes concerned;
  • going forward, taxpayers will need to include all income and gains on reported assets for Spanish income and wealth tax purposes. Remedial filings may be required for the year ended 2011 under ordinary late filing procedures;
  • taxpayers opting for the Procedure will be exonerated from (a) all provisions treating undeclared assets as deemed regular income for the year, (b) any penalties, surcharges and interest on overdue tax and (c) the referral to criminal courts under tax fraud and/or money laundering charges;
  • taxpayers should note that new anti tax fraud measures will be passed during 2012, introducing information returns on all assets and rights held abroad. Failure to report will lead to the inapplicability of the Statute of Limitations and their treatment as deemed regular income at their full value.

Consequently, Spanish resident or non-resident taxpayers who own unreported assets (including real estate) directly or through onshore or offshore vehicles should examine this very advantageous one-off opportunity closely well before the 30 November 2012 deadline.

This article is written by Patricia Garcia Mediero, a Partner at Avantia Asesoramiento Fiscal y Legal