The New Obligation of Gibraltar Financial Institutions to Provide Automatic Exchange of Tax Information to The Spanish Tax Office
As part of the recent agreements of exchange of tax information subscribed by Gibraltar for cooperation in tax matters, the Gibraltar financial institutions will be reporting to the Spanish tax office the relevant tax information of all their account holders, including income on earnings, tax withheld and tax residency status. The first reporting will take place before the end of 2017 related to the tax year 2016. The world is getting smaller...
The purpose of those agreements subscribed by Gibraltar was to promote international cooperation in tax matters through exchange of information. This was developed by the OECD but also implemented through the relevant EU Directives.
You may have heard or read that Gibraltar financial institutions have sent letters to their customers asking to confirm their tax residency status and to request their “TIN”, which is in fact their Tax Identification Number. For the purpose of Spanish residents, this is the identity card (DNI) for Spanish nationals and the NIE for non Spanish nationals. Basically the Gibraltar financial institutions, through the Gibraltar tax authorities, will be providing to the Spanish tax office the relevant tax information for all the account holders who are tax residents in Spain. This annual reporting obligation starts before the end of 2017 and related to the calendar year 2016, so the Spanish tax office will have access to this tax information very soon.
If you are tax resident in Spain, you have bank accounts or any other financial investments in Gibraltar which you have diligently declared in Spain by filing the related personal annual tax declarations (namely Modelo 720 – declaration of ownership of non Spanish assets -, Income Tax and Wealth Tax)
However, if you are tax resident in Spain and have not declared the ownership or the income from those financial assets held in Gibraltar, you are exposed to a significant and certain risk. The Spanish tax office will be able to check if you have declared that income and, if not, to assess you for the payment of the related tax plus fines. The Spanish tax statutory limitation to review tax matters (prescription) is generally 4 years and, subject to certain conditions, the tax fines can be up to 150%. The message is crystal clear, and you would need to seek specialised tax advice on how to best bring your Spanish tax matters up to date.
The world is getting smaller and it seems that it is the last chance given by the tax office to all taxpayers to bring their tax matters fully up to date.
Spence Clarke & Co specialises in the provision of Spanish tax, legal and accounting services, mainly to foreigners with interests in Spain. Our cross-border knowledge helps clients adapt to the Spanish system with the minimum of doubt and disruption, and we will be pleased to provide you with expert, practical and straightforward advice on the compliance of your Spanish tax, accounting and legal matters.
Spence Clarke & Co, Marbella 17 July 2017