Tax avoidance and Tax evasion 2019 Update

Written in June 2019, sometimes interesting to look back!

These subjects have been made relevant from Spanish and UK Budgets in the past decade where  part of the Governments’ increased revenue will come from tackling Tax Avoidance and Tax Evasion. One of the problems I have with the subject is that in speeches politicians often confuse tax avoidance with tax evasion. This matters because Tax Evasion is already illegal. Closing down Tax Avoidance is in the hands of Parliamentarians to change. One way to do this would be to accept Anti Tax Avoidance Directive EU 2016/1164 which has five legally-binding anti-abuse measures and all Member States should apply against common forms of aggressive tax planning. 

Leaving the EU has definitely favoured the UK's billionaires and fellow travellers!

The five anti-abuse measures are;

Controlled foreign company (CFC) rule:  to deter profit shifting to a low/no tax country.
Switchover rule: to prevent double non-taxation of certain income
Exit taxation: to prevent companies from avoiding tax when re-locating assets.
Interest limitation: to discourage artificial debt arrangements designed to minimise taxes.
General anti-abuse rule: to counteract aggressive tax planning when other rules don’t apply.

IMPORTANT;

• Avoidance and evasion are not the same
• Downright favouring the wealthy is a political decision
• Tax avoidance in many cases is legal BUT over aggressive tax 'planning' CAN affect both the EU internal market and tax liabilities e.g. Profit 'shifting' 
• Tax evasion is illegal but needs effective and efficient COLLECTION systems

       

Tax Evasion – Definition

Unlawful attempt to minimise tax liability through fraudulent techniques to circumvent or frustrate tax laws, such as deliberate under-statement of taxable income or wilful non-payment of due taxes.

Whereas tax evasion is an offense (punishable by both civil and criminal penalties), tax avoidance is not.

Whatever politicians or the newspapers say there are no extra legal powers needed to stop Tax Evasion – it is illegal. Though HMRC in the UK and La Hacienda in Spain have to do MORE to stop it and COLLECT the tax.

If you need advice or have a query please email me

Examples of Tax Evasion

• Being resident in Spain but not declaring income to the tax authorities the extent of which is now coming to light
• Not declaring income from property letting
• Spanish resident having an Individual Savings Account in the UK and tax free interest
• Not declaring gross paid interest on offshore accounts
• Wilful refusal to pay tax

Tax Avoidance – Definition

Lawful minimisation of tax liability through sound and currently legal financial planning. Parliament could stop this

I am quite happy to answer any queries you may have but I will refer you to an adviser for authorised and regulated advice, if you email me

Examples of Tax Avoidance

• Pension schemes are legitimate and avoid tax but contributions and benefits have to be within HMRC rules and importantly, limits.
• UK residents having an Individual Savings Account
• QROPS for UK non-residents or intending non-residents
• The legitimate use of offshore trusts to hold assets but not if covered by EU 2016/1164
• The establishment of Trusts or Foundations for charitable purpose

Most Tax Avoidance in the EU is legitimate, subject to EU 2016/1164!  

• In the UK there was an ‘industry’ which looks for ways of creating Tax Avoidance. It is up to the Government and especially HMRC to make sure that the tax rules and laws are not circumvented. It is also possible in the UK to negotiate a deal with the Government or HMRC. This, of course, favours the super wealthy!

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You can write to me with your personal experiences, ask me a question or to be put in touch with one of my recommended adviser by sending me an email

Linked with this post are two recent articles from my Blog;

Qualified, Regulated and Independent Financial Advice
http://expatsfrombritain.blogspot.com/2019/05/financial-advisers-must-be-qualified.html

Interesting, even in 2021?

Tell me your experiences, write to me by email

David Goodall

Financial Pages in Spain

Email: davidgoodall.spain@gmail.com

Getting a Highly Qualified second opinion

Many changes will take place from January 2021.

Financial Pages in Spain undertakes 'DUE DILIGENCE' to ensure that ALL financial advisers and their firms are correctly qualified, authorised and regulated  and have the necessary experience and knowledge.

APRIL 2020 UPDATE;
In these difficult times it's good to know that you can see an adviser with modern technology. After initial contact by email, phone and text, but only if necessary, it is possible to make video calls

Financial Pages in Spain is happy to provide this service, referring you to a qualified, regulated and independent financial adviser

I have been finding for sometime that many people come to me for a ‘second opinion’ For many differing reasons but they are unhappy with the advice they have been given and send me examples.

Rather than guesswork people also ask me to recommend Accountants, Lawyers, Surveyors and other professionals.

Some of the things people have said to me:

• ‘ It  looked like a mass produced report with just my name and personal details changed’

• ‘ They wanted an up front fee even to talk to me, funny they never mention that in their       adverts’

• ‘ I wasn’t convinced the advice was correct’

But they trust ‘Financial Pages in Spain’ and I am receiving comments which show a great deal of respect. I’ll try to help. Email me In return I refer readers of Financial Pages in Spain to advisers who pass a strict DUE DILIGENCE test. 

Can you help me to help you?

• Please send me both good and bad examples of reports you have received, from financial advisers, I’ll respect your privacy
• Tell me the names of Advisers who've given you bad advice
• If the fees, charges and commissions are hidden in a report and not openly disclosed, please send examples

This sort of information will help everyone and help eradicate some of the greedy practices.

I may not have intended it when I started out but it seems that Financial Pages in Spain is becoming the respected second opinion.

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Whatever your query, please contact  Email me
 is on this link

David Goodall

Financial Pages in Spain

Email me

Further Reading from Financial Pages in Spain

Scam Watch

Readers’ Favourites

Spanish ISD and UK IHT - Comparison

As the old saying goes ‘Like chalk and cheese’

• Impuesto sobre Sucesiones y Donaciones (ISD)

• Inheritance Tax (IHT)

• There is no Double Taxation Treaty or Agreement between Spain and the UK on these inter-linked but very different taxes

This will only be a short article because it is vitally important that you get Professional Advice

What are the principal differences?

	Spanish ISD	UK IHT
Married Couples: When is tax payable?	On First Death	On Second Death
Are Rules applied Nationally?	There are Regional differences but these only apply to Spanish residents. Non-residents only get National rules	Yes, all rules are based on a set of UK laws
Who pays the tax?	The beneficiaries pay any tax due	The Estate of the Deceased pays any tax payable
Does the tax rate change according to who is the beneficiary?	Yes	No
Who pays on what assets?	Spanish resident beneficiaries pay on worldwide assets, whilst non-residents pay only on Spanish sited assets	UK domiciled deceased Estates pay on worldwide assets. Residency is NOT an issue
Will Tax Planning reduce or eliminate the tax payable?	Yes	Yes

Please note that only one answer is common to both ISD and IHT. Tax Planning is vital

Additional reading is also recommended;

ISD in more detail

Spanish Inheritance Tax

Five Spanish Taxes affecting Non-Residents

Non-Resident Taxes

Please email me with any query you may have or to be referred to a Specialist Professional for advice

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

Successful and Sound Financial Planning in Spain

February 2012 : This was written in September 2010 but the principles are still the same now.

• Carefully consider your objectives
• Regulations in Spain are less strict, beware unregulated advisers
• Insist on clear and unambiguous charges & commissions 
• Understand your own ‘attitude to risk’
• Get all advice in writing

Let me also bring your attention to some items, which in my opinion often lead to inaccurate, misleading and false information. My three least favourite comments are;

1. ‘It was in an advert in a newspaper’

The content of an advertisement is not necessarily accurate

2. ‘I heard somewhere that……..’

Hearsay, conversations in bars and rumours are notorious in giving misleading advice

3. ‘They are a well known company, they must be good’

Just never make that assumption, do your homework and find out for yourself or ask me for a recommendation

Financial Planning is not an exact science and you would be amazed how many people with very different circumstances and different objectives are sold an ‘off-the-peg’ solution. Many financial advisers are in effect product salesmen. Beware 

If you want to be recommended to an adviser who will talk to you about your objectives please email me.

If the adviser does not provide clearly and openly what the charges are, it begs the question ‘What has he or she got to hide?’ It has been Financial Services Authority (FSA) policy in the UK for open disclosure of charges and commissions since 1993. Yet even FSA authorised advisers in Spain often do not disclose all charges and commissions. I see no reason why a table of charges should not be clearly set out in writing.

Good advisers are always happy to be open and will answer your requests in writing. If you would like to be recommended to an adviser please email me.

In my opinion, your attitude to investment risk is a key question that an adviser should ask. As this is not a concept you may not have heard before, the best advisers will give you examples. As most will use a Confidential Questionnaire or Fact Find, they can explain the concept based on your needs and desires.

Never be afraid to ask questions and expect answers. Of course if you ask an adviser a technical or obscure question he or she may need to seek clarification themselves. But always insist on your questions being answered.

If you have already been given advice, I am happy to give you a SECOND OPINION without any obligation or fee. Just email me with a copy of the advice

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If you have your own question, I’d be delighted to answer it. Those of you who live in Spain or intend to live in Spain should be very careful when choosing an adviser. Please take note of the points in this article.

You can write to me with your personal experiences or to be put in touch with my recommended adviser by sending me an email

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

Spanish Inheritance Tax (ISD) - professional opinions

January 2012 (Update)
Spanish Inheritance Tax (ISD) is very very different from UK IHT. Yet in many ways, ISD is a 'voluntary' tax which is only paid by those WITHOUT an effective plan.


See what appropriate professionals have to say;

I thought that it might be useful to bring other views on the best solution. Spanish Inheritance Tax (ISD) is and will become and even bigger problem. I think we all need professional advice. 

If you have your own story to tell, please email me

Here are some views from various professional advisers, who have dealt with the problems associated with the ownership of property in Spain and the heartbreaking situations of dealing with inheritance tax.

Chartered Accountant (FCA)

Paul Austen who runs his own practice

Thousands of British people owning Spanish property are unknowingly exposed to this Spanish Tax on their death on the value of their property and the tax falls on the person who inherits the property not on your own estate. Therefore by not protecting yourself against this tax you are handing down a potentially huge liability to your spouse or offspring. Because the property along with any Spanish bank accounts can get tied up in Spanish red tape for sometimes as long as two years, getting money from the property sale is often not an option so your relatives would have to find the money themselves

                                                                                    

Andrew Eastwood (British Lawyer, Legal4Spain)

We are increasingly confronted with complicated estate planning cases involving Spanish property. Our clients often require solutions for legally and legitimately mitigating their tax exposure and/ or putting in place special arrangements, to cater for complicated family or beneficial circumstances. In appropriate cases, UK Limited Company Structures have successfully formed a component part of the solution we have provided in achieving our clients' objectives

Martin Ward FCA – owns Spanish property

Within an hour of starting, it was abundantly clear to me that the UK company route was the only sensible way to go. To be blunt, apart from avoiding the nightmare of ISD, if you think UK tax is complex and bureaucratic, I can assure you, if you don’t know already, that Spanish tax is much worse, so better to get away from it altogether.

It quickly became apparent that a DIY approach to transferring a Spanish property to a UK company was not on the cards... for me or anyone else.

Maria L De Castro (Spanish Lawyer)

Restructuring your property now is a legal, intelligent and very simple process to save a small fortune in future taxes for your heirs.

This property strategy takes care of everything for you. The arrangement uses qualified Lawyers, company formation agents, accountants and business consultants to restructure your property ownership.

You will NEVER lose control of the property, and can rent or sell it as you wish

 As background you may wish to read;

ISD is voluntary and the Widows Story
http://expatsfrombritain.blogspot.com/2012/01/expats-and-property-owners-in-spain-no.html

Spanish Inheritance tax

http://expatsfrombritain.blogspot.com/2011/07/spanish-inheritance-tax-isd.html

Professional Connections

http://expatsfrombritain.blogspot.com/2011/04/professional-connections.html

  

You can get more information by a simple process of working out your own liability or potential liability. Please don’t ‘sweep it under the carpet’!

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

Expats and property owners in Spain - No plan for Spanish Inheritance Tax (ISD)?

January 2012: No apologies for telling you as it is! The irony about ISD is that since careful planning can avoid most of the tax, it is actually a ‘Voluntary Tax’

I recommend that you take advantage of a FREE proposal which will tell you the extent of any liability you might have. It commits you to nothing but does put you in the picture.

• Spanish Inheritance Tax (ISD) is NOT the same as UK IHT

• A widow’s sad story

• Why didn’t your lawyer tell you?

This tax is totally different from UK IHT, in fact so different that it is not covered by any Double Tax Treaty between UK and Spain. This article covers anybody who has assets in Spain whether they are resident or non-resident in Spain.

I suspect that it affects everyone who reads this Blog and each of you know many, many people who are also trapped by its implications. Perhaps you could pass it on to friends and neighbours?

But there are solutions

A letter from a Widow

Mrs Holt wrote to me, about a sudden demand for €8,800 plus other costs to transfer ownership into her name following the tragic early and unexpected death of her husband. For a modest second home in Alicante Province, transferring their holiday home will cost more than €10,000. In addition to the ISD there are the Notary costs, land register charge and her own solicitor’s costs.

‘The property I assumed would be signed over to myself, however, after asking our solicitor in Spain to confirm the costs they have included an 8,800 euro inheritance tax.’ She told me. ‘At his time of death we were both working and living full time in the UK and hold residence of the UK.’ She added.

Mr & Mrs Holt bought their dream home in 2002 but the solicitor who handled their purchase never mentioned Spanish ISD. I’m not sure why but they never seem to.

As if coping with a tragic death is not enough, there is a highly significant tax as well!

Yet there are UK solutions which are using the advantage of EU treaties, yet complying with Spanish Law. Rather than tell you more here, I suggest that you look at your own situation and get a free quotation based individually on your own circumstances.

Please click on the section 'Check YOUR Spanish Inheritance Tax liability' in the right hand column.

As always, you can also contact me by sending an email

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

PS If you’d rather pay this ‘voluntary tax’ – do nothing!

                            

Spanish Inheritance Tax (ISD)

Impuesto sombre sucesiones y donaciones

The New Conservative Government in Spain has a major project to substantially increase the tax it collects in 2012. Yet ISD is effectively a ‘voluntary tax’ that you only pay if you don’t plan for it.

• Details and scope of ISD
• What various professionals say
• Non-residents ARE liable

Are there any solutions? Please read on

No ISD is payable if the property is owned by a UK company, since even if a shareholder dies, the company can continue in existence and the shares passed on to a beneficiary under UK rules.

In recent months, my blog has carried several posts dealing with the very complex subject of Spanish Inheritance Tax (ISD). This is very definitely a subject on which you need professional advice. To access a professional please email me.

• Detailed reading for a thorough understanding of ISD is probably best from my post on July 18^th 2011. This is the link;

http://expatsfrombritain.blogspot.com/2011/07/spanish-inheritance-tax-isd.html

• Here are some views from various professional advisers, who have dealt with the problems associated with the ownership of property in Spain and the heartbreaking situations of dealing with inheritance tax.

http://expatsfrombritain.blogspot.com/2011/06/spanish-inheritance-tax-isd_17.html

• Expats and property owners in Spain - No plan for Spanish Inheritance Tax? This post includes a Widow’s sad story and the inevitable question ‘why didn’t anyone tell us’?

http://expatsfrombritain.blogspot.com/2011/01/expats-and-property-owners-in-spain-no.html

The question ‘why didn’t anyone tell us?’ is probably the one I get asked most often. One of the key objectives of my blog is to provide INFORMATION. I do not and will not take advertisements from financial companies. I give links only to offers and services which I have used myself or I have tested.

This leads me to understand that people working in property, financial advisers, mortgage broking, pensions, lawyers and other financial services must be open in all dealings with clients.

• Openly disclose all commission and charges
• Tell clients how it is – good and bad
• Please, please, please tell them about Spanish Inheritance Tax (ISD)

I am happy to receive feedback, answer questions or refer to appropriate professionals if you email me

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com