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New Disclosure Obligation on Assets and Rights Abroad

Spain
14 Mar 2013
The new disclosure obligation on assets and rights abroad was introduced in Spain by Law 7/2012 on 29 October 2012. The disclosure amends tax and budgetary legislation, and adapts financial legislation to step up proceedings to prevent and fight fraud.

This is achieved through the inclusion of Additional Provision 19 in the Spanish General Taxation Law. The scope of the obligation includes:

  • the assets and rights to which it applies
  • the cases that are excluded from the disclosure
  • compliance with the obligation in relation to certain assets and rights
  • the filing period for the disclosure (between 1 January and 31 March of each year, although exceptionally, for this year, the period runs until April 31).

Taxand Spain analyses the main implications of the new obligation to disclose assets and rights located abroad for multinationals.

The new disclosure obligation forms part of a raft of anti-fraud measures adopted by the new Government with the aim of promoting the process of voluntary regularisation of undisclosed income and assets carried out in Spain. It is important to highlight firstly the conclusions of the analysis of the legislation regulating that disclosure obligation, given that it reveals that the group of taxpayers affected will be much broader than expected.

In short, the obligation to provide information extends generally to accounts in financial institutions abroad, real estate located abroad and rights on that real estate, as well as securities, rights, insurance and term or lifelong income, deposited, managed or obtained abroad.

In addition, a particularly stringent penalty regime is established for the failure to comply (or for late compliance) with that obligation, composed of both fixed fines. The important effect that non-compliance will have on the treatment of the capital gains that have not been justified or disclosed (in PIT and CIT), is the so-called "non-statute-barring" of the tax authorities' right to assess the tax debts of derived from undisclosed income invested in concealed assets or rights. The law also establishes a specific penalty of 150% of the gross tax relating to that non-justified gain.

As stated, the period for filing the first informative return relating to 2012 ends on 31 April 2013 Until then, three different obligations must be met:

  • obligation to disclose accounts in financial institutions located abroad
  • obligation to disclose securities, rights, insurance and term or lifelong income deposited, managed or obtained abroad
  • obligation to disclose real estate and rights in rem on real estate situated abroad

Subject to the disclosure obligation are individuals and legal entities resident in Spain, permanent establishments in Spain of non-resident individuals or entities, and entities without legal personality regulated in article 35.4 of the Spanish General Taxation Law. This is only the case if the above listed entities are the legal or beneficial owners of the assets or rights to which the obligation refers on 31 December of each year.

Nonetheless, it should be borne in mind that in the case of accounts in financial institutions situated abroad, the obligation to disclose also applies to those who appear in the accounts as representatives, authorised persons or beneficiaries of the accounts. In addition, the obligation also applies to those who have the power of disposal over the accounts, or those who could be deemed the "beneficial owner" as defined by the legislation on money laundering and the financing of terrorism (Law 10/2010, of April 28, 2010). If there is an obligation to disclose, it will also apply to anyone who might have had such status at any time during the year to which the disclosure refers.

A series of exceptions to this disclosure obligation were established, which include most notably the accounts held by legal entities resident in Spain. This includes permanent establishments in Spain of non-residents and resident individuals that conduct an economic activity. The accounts must be registered in their accounting records individually and identified by their number, credit institution and branch in which they are kept, and the country or territory where they are situated. The accounts must be open in foreign offices of credit institutions domiciled in Spain, and must be disclosed by these institutions.

Also excluded from this disclosure obligation are accounts whose balances at 31 December, or average balance of the last quarter, do not exceed, jointly, EUR 50,000.


 

Your Taxand contact for further queries is:
Angel Garcia Ruiz
T. +34 91 514 52 00
E. angel.garcia.ruiz@garrigues.com

Taxand's Take


The potential implications of the new disclosure obligation on certain clients, whether multinationals operating in Spain, or Spanish companies established abroad (with special attention to employees on assignment), arevery important. Especially considering the penalty regime defined by the Spanish lawmaker.

Thus, without prejudice to the uncertainties which this legislation and its penalty regime might raise from the standpoint of the constitution and, especially, of the EU freedoms (of establishment or of movement of capital) and principles composing EU law, it is essential to take special care in complying with this disclosure obligation in a timely manner.

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