An obligation for 2012, with serious consequences if not carried out.
Any person, residing in Spain, who is a titleholder of assets and rights located abroad (bank accounts, values, real estate, insurance, etc.) must give very detailed information about the same to the Spanish Treasury, presenting an informative declaration during the first quarter of the following year. In 2012, the residents must fulfill this new obligation for the first time in the first quarter of 2013.
In case of non-fulfilment, the sanctions and consequences could be very serious.
GREATER CONTROL OF THE INCOME TAX, PROPERTY TAX, INHERITANCE AND DONATION TAX
Obviously, this declaration will help the Spanish Treasury to find out whether these residents declare or not in Spain, the derived income from their assets abroad (interests, dividends, rents, etc.) in their Income Tax declaration, which they must submit a few months later (May or June). It will also help to check whether they include these properties in the Wealth Tax declaration (reestablished in Spain for 2011 and 2012, and will be extended to 2013) or in the Inheritance and Donation Tax declaration, if these properties are being transferred by inheritance or donation to other residents abroad.
REQUIRABLE OBLIGATION TO RESIDENTS IN SPAIN FOR THE FIRST TIME IN 2012
The new obligation to inform about assets and rights situated abroad has been introduced in Spain with Law 7/2012, which came into force the last 31st of October 2012 and establishes very important and tough measures in the prevention and struggle against fraud.
The above-mentioned obligation has been developed through the Royal Decree Law 1558/2012, published in the Official State Bulletin from the previous 24th of November, which establishes that only “The natural persons or legal entities, residents in Spain” (and the permanent businesses in Spain of non-resident persons or legal entities) and will be requirable for 2012.
That is, the residents in Spain in 2012 have to inform, for the first time, and in detail about the assets and rights they have abroad, between the 1st of January and 31st of March 2013.
THERE WILL BE SERIOUS SANCTIONS AND CONSEQUENCES, IF THIS OBLIGATION IS NOT FULFILLED
Before analyzing the detailed information, which has to be provided to the Treasury and supposing that it will not be obligatory to inform, it is important to comment the serious consequences of not fulfilling this obligation:
-Not presenting the declaration or presenting it incomplete, inexact or with false details, is a very serious infraction, which will be sanctioned with a fine 5.000 €, for each detail or a group of details, with a minimum of 10.000 €.
-Moreover, if some assets or rights, located abroad, are not declared, and are later discovered by the Spanish Treasury, the same may consider them as a non-justified property profit and attribute it to the last non-prescribed year (2012 or later). If it is a natural person, he may have to pay for the Income Tax 52% of the value of these assets (up to 56% in Catalonia) plus the delay interests and also a fine of 150% on the above-mentioned payment. That is, if the Spanish Treasury discovers non-declared assets abroad, with a high value, it may require amounts higher than this value, and the person might even be committing fraud. The most serious thing is that it will not be possible to avoid the accusation as a non-justified property profit, pleading the prescription and proving the ownership of these properties since many years. It is a very tough regulation that might be contrary to the Constitution, as by denying the possible prescription it attempts against legal certainty.
In order to avoid the Treasury considering as a non-justified profit the properties or rights abroad that have not been declared, the only way is to prove that its ownership corresponds to declared rents or to rents obtained in the years, when one was not a resident in Spain.
CONTENTS OF THE DECLARATION
Law 7/2012 and in more detail the Royal Decree Law 1558/2012 establish that the natural persons and legal entities, residing in Spain must provide information to the Spanish Treasury, through Declaration Statements, which will be approved through a ministerial order, on three different groups of assets and rights, located abroad:
i.- Open accounts in financial institutions, of which they are holders or where they appear as representatives, authorized or beneficiary or with a power of disposal. Here it is referred to regular accounts, saving accounts, fixed term deposits, etc. that must be identified completely, indicating the opening and closing date, the balance on the 31st of December and the average balance of the last three-month period.
ii.-Values, rights, insurances and income, of which there is ownership by the 31st of December. It refers to any titles, assets, valuables or representative rights of capital, own funds or assets from any institutions, or to the cession of own capital to third parties, or participation in Undertakings for collective investment in transferable securities (UCITS) (or hedge funds), as well as disability and life insurance and annuity or temporal income.
A very detailed information of such assets or rights has to be given, and especially the balance or value as of the 31st of December.
iii.- Real estate and rights on real estate.
They have to identify themselves in detail: type, situation (country, city, street and number) and date and acquisition value.
ONE MUST INFORM ABOUT THE ASSETS THAT WERE POSSESED ABROAD AT ANY TIME OF THE YEAR, EVEN THOUGH THEY ARE NOT IN POSSESSION BY THE 31 OF DECEMBER.
Royal Decree Law 1558/2012 establishes that the people, who were titleholders of assets or rights abroad (accounts, valuables, real estate, etc.) at any time of the year, even though they are not titleholders as of the 31st of December anymore, are also obliged to present an informative declaration.
In this case, these people must present a declaration and indicate the balance of the account or the value of some shares on the date they stopped being shareholders. If the ownership of the property has been lost before the 31st of December, one has to inform about the date and value of transfer.
EXCEPTIONS TO THE OBLIGATION OF DECLARING
There are three different groups of assets or rights abroad. When the assets or integrated rights in one of these groups DO NOT exceed jointly the amount of 50.000 €, then they do not have to be declared.
Otherwise, each and every one of the assets or rights of this group must be declared.
On the other hand, it must be noted that when the informative declaration has been presented one year, for the assets and rights of one group (because they exceed 50.000€), it will only be obligatory to present the declaration in the following years, if there has been an increase superior than 20.000€, in relation to the declared value in the last declaration.
There are other exceptions to the obligation of declaring, such as the registered assets or rights and well specified in the accounting, of legal entities, and even natural persons, who own their businesses and carry out their accounting according to the Commercial code.
Overall, it is very important that the natural persons and legal entities, residing in Spain (also the permanent establishments in Spain of non-residents) have present the new obligation to inform about assets and rights, located abroad and present correctly and on time the corresponding informative declarations (the ones corresponding to the year 2012 – in the first quarter of 2013)
On the contrary, the consequences can be very serious and burdensome.
One must have in mind that the exchange of information and the assistance in matters of collection in the European Union, is working more and better each time. And that the Spanish Treasury will have more and more capacity to investigate the possession of assets in other countries.
With this aim, it is intensifying the collaboration agreements in order to exchange tax information with territories such as Andorra, Bahamas, Singapore, Hong Kong, Panama, etc. Moreover, Switzerland will also provide information about the title of bank accounts as of 2013.