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’s continued challenging financial situation has shifted the Government into overdrive mode whereby fiscal novelties are introduced almost on a daily basis in an attempt to shore up its beleaguered economy. It is beginning to be somewhat of a chore to keep up with the sheer amount of legislation being enacted.

For ’s end I have written an article to compile the most significant fiscal changes that have taken place over the last two months in bullet points.

Batch of changes

The approval of Spain’s Antifraud law (Ley 7/2012, of 29th October) introduced the majority of the most significant changes over the last months. Other laws have also contributed to this. I will review only the main ones with special emphasis on non-resident taxation.

- Cash payment restrictions. Art 7 has capped the amount one can pay in cash to €2,500 (or its equivalent in foreign currency) when one of the two parties is a professional businessman i.e. car dealer selling you a car. This threshold includes . For non-residents this has been increased to €15,000 (you need to demonstrate you hold a domicile ) so as not to curtail tourism. Applicable sanctions will be 25% over the allowed caps both to payer and recipient. Spain’s tax office is fostering through its website whistle-blowers. Those who first denounce the other party within the next 3 months will be sanction-free. But only if you are the first to denounce it; first come, first served. If the other party has already denounced you, you will be sanctioned regardless if you denounce it afterwards.

- Lottery winnings no longer tax-free. Previously accrued winnings were tax-free, only interests were taxed. Now all amounts over €2,500 will have a flat tax of 20% as from next year. This 20% will automatically be deducted on cashing in the winning ticket. This includes National state lotteries (such as el Gordo, la Primitiva) and from private institutions such as ONCE, Cruz Roja etc.

- Residence permits for houses. Popularly known as “investor visas”. Non-residents on spending €160,000 or more on a will automatically qualify for residency in Spain. This will allow them unrestricted access throughout the European Union bypassing restrictive visa applications. This measure was specifically tailored to attract Chinese and Russian nationals but it has generated the most interest in other countries, such as Morocco. Other European countries have similar investor visas schemes in place, albeit with much higher caps: France requires ten million euros, UK has a one million pound threshold, the Republic of Ireland requires one million euros and Portugal requires half a million euros.

- Tax amnesty. This will be the third wave in Spain’s young Democracy. The PSOE put in place 1984’s and 1992’s and also proposed the third one in 2010 (Zapatero). It has finally been the PP – Spain’s ruling party – which has implemented it under great criticism by the PSOE (!). Tax evaders had until the 30/11/12 to regularise their financial position with the tax agency (AEAT). The measure was a moderate success and has helped to bring in 1,5 billion in tax revenues which would otherwise have gone untaxed out of a self-declared goal of 2,5 billion. Also a further 20 billion in have come to light which will be taxable in future fiscal periods. This measure mirrors fellow European countries recent proposals i.e. France, UK, Italy and Germany.

- Abolishment of statutory periods for undeclared assets. Spain had a statutory administrative period of 4 years on all undeclared income after which no taxes could be pursued by the tax office. After this significant change, any undeclared assets held by residents will no longer benefit from the statutory period, meaning they will permanently be fraudulent regardless of how much time has elapsed. This is highly questionable from a legal point of view. In any case this was approved to create an ‘incentive’ for tax evaders to come forth and benefit from last month’s third tax amnesty.

- ‘New’ punitive measures introduced on all undeclared assets held abroad. It has always been an obligation for tax residents to declare all their worldwide income and assets to Spain’s AEAT on filing their annual returns. The reason on why this measure is being labelled as something ‘new’ is because it is being specifically levelled towards the hundreds of thousands of Spaniards who have recently emptied their Spanish bank accounts and transferred all their savings abroad. As a result this has led, amongst other reasons, to the biggest credit crunch Spain has witnessed over the last 50 years following the Bank of Spain’s statistics (since 1962).

The Government has now increased penalties on all those who – being resident in Spain – fail to declare foreign-held assets with a value of more than €50,000. This applies to titleholders, beneficiaries, or even just authorised signatories. You will be fined a minimum of €10,000 on being discovered as well as €5,000 for every undisclosed financial detail recovered E.g. residents holding undeclared offshore accounts with €50,000 or more, or even accounts in other European member countries such as the UK.

- ’s . These changes have been brought about to punish furthermore tax evaders. Spain had a statutory period of 5 years on committing a fiscal crime (defined as defrauding amounts equal to €120,000 or more). This has now been doubled to 10 years. Additionally one could be jailed one to five years for a fiscal crime. This has now been raised over to two to six years serving a prison sentence. This has been introduced in cases in which the amounts defrauded are in excess of €600,000 and/or the offender has set up specific tax avoidance structures such as offshore trusts, using ‘sham’ company directors (known as ‘Sark Larks’). Traditionally these types of white-collar crimes were difficult to detect because of the lack of resources and manpower. However the culture is now shifting to simply handsomely ‘pay-off’ disgruntled bank employees to gain access to these files as well as having Spain sign agreements with tax havens to tap into the interests of undeclared amounts held abroad. Tax offenders who denounce associates will now see the charges against them significantly reduced on collaborating with tax officers. The tax office is also fostering the public to anonymously denounce each other.

- Taxes may no longer be deferred in cases of insolvency. Companies and businessman which had filed for bankruptcy could previously benefit of a tax deferment of their obligations. This will no longer be the case.

- Preventive embargoes. The tax office may now pre-empt embargoes to secure its interests if it believes there is an insolvency risk.

- Modules declaration. For those self-employed (‘autónomos’) who declare under the fiscal figure of ‘módulos’ and invoice more than 50 pc of their income to other businessmen will no longer be able to benefit from this special favourable fiscal regime. They need a turnover in excess of €50,000.

- Reduced VAT on off-plan scratched. Currently set at 4% this will be increased to 10% as from 2013.

- Publish a list of tax debtors. The Government is mulling the idea of publishing a name and shame list with the largest tax debtors (still hasn’t defined the threshold); much as other countries have already done such as Greece which published a list of the 4,000 tax payers who owed more than €150,000 in taxes. From a legal standpoint this is highly questionable, unless current laws are amended to allow it.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal .

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