International Tax Law Barrister, Lawyer & Attorney : Leon Fernando del Canto : Private Clients, Tax Planning, Spanish Tax : Spain, UK, Europe

Today in the BBC it was revealed that the HMRC, the UK's tax authority has confirmed that it has paid an informant for data regarding British citizens who have accounts in tax haven Liechtenstein.

HM Revenue and Customs (HMRC) confirmed the move after a Sunday Times report, but would not say how much it had paid the informant. Read the article here

The suspected whistle blower, accused of stealing data from the bank, LGT,  was sacked and convicted of fraud.Mike Warburton, a partner at Grant Thornton at www.grantthornton.com  said: It is shocking that the Revenue has started buying information from dubious sources to help its investigations.

I have discussed this issue in this morning post OECD, Liechtenstein and Germany. Is there a place for a synthetic approach? and will welcome people's views.

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The tax disclosures in Germany affecting the LGT Bank, owned by the Liechtenstein principality, generated many reactions worldwide. I would like to highlight the  OECD and the LGT bank responses to this issue.

There is a clear tension between both individual jurisdictional interests and the perceived global economic interest represented by the OECD. To honour one of my favourite German schools of thought I would suggest to take a  dialectic approach.

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Tax Freedom Day shows just how long the UK taxpayers spend working for the UK Treasury, rather than themselves.

The concept was developed by the Adam Smith Institute in the UK at http://www.adamsmith.org and shows that the UK residents work 5 months out of 12 for the Government.The Institute says that overall, the government takes more than 40% of national income in the UK. This amount is significantly lower that the EU average. In the USA, however, the government excises are lower, and this may be understandable historically by the strong opposition to governmental pressure.

The reality is that  most  UK residents have to work a full five months of the year solely to pay that tax bill. In 2006, that meant working from 1 January to 1 June – just to pay taxes! And the March 2007 budget did nothing to change that. Tax Freedom Day 2007 once again falls on 1 June. What will happen in 2008? I can not foresee taxation going any lower, and you?

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This morning I was reviewing the current status of Inheritance Tax in Spain, in light of the recent news regarding the abolition of the Wealth Tax after the general elections.The Wealth Tax is administered by the regional entities, Comunidades Autonomas, but legislated nationally by the national government.

This is also the case with the Inheritance Tax. What we have seen however is that the move on this tax has started by the regions by improving the position or even technically abolishing the tax itself. In this case, they did not wait for the central government to act.

Ten regions have already abolished this tax in the context of family inheritance. The regions are Madrid, La Rioja, Murcia, Castilla y León, Comunidad Valenciana, Baleares y Cantabria, in a first move and Canarias, Aragón y Castilla La Mancha in a second move. Andalucia is considering this move too, and again, that will depend on the regional elections this year.

We welcome the move toward abolition of the Inheritance Tax and the Wealth Tax in a system overload with income, indirect duties and VAT.

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On January 22nd 2008 the General Directorate of the Spanish Tax Office (Direccion General de la AEAT) published a Resolution with the areas of focus for the tax inspectors in 2008.

The Tax Office publishes every year this Resolution, stating the areas of tax investigation focus for the tax year. This is a statutory obligation of the Tax Office according to Spanish Tax Law (Ley General Tributaria 58/2003, section 116).

During the last years we have seen an increased focus on non resident individuals with properties and operations in Spain.

The main areas of focus we have identified in this document are: 

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UK residents, domiciled and non domiciled, owning property in Spain using an offshore or trust structure will need to look very carefully to the new domicile and residence changes in UK expected for  April 2008.

As in previous years, we are expecting changes to the proposed legislation before final enactment and there may be some other issues arising, which we will try to address in our blog.

What is clear now is that anyone on that category will need to pose how those changes may affect his or her position and try to plan prior to 6 April 2008 an efficient course of action.

Some of the changes will affect the selling of property in Spain by the offshore company or trust structure if owned by UK residents and this is something to consider seriously with your UK tax adviser.

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HM Revenue & Customs published PBRN 18 and as whe have seen in previous years when the domicile or residence rules are threatened by the HMRC,  a significant ammount of noise is generated in the accounting profession.

Some of my UK non resident clients living in Spain raised their concerns with this legislation. A very good discussion can be found in Lisa Spearman's Tax plus blog 

The main discussion is who is likely to be affected?

The answer is, UK residents paying tax on the remittance basis and non-resident individuals who spend a significant amount of time in the UK.

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Madrid has captured the advantages of globalisation by becoming a metropolitan region of 6 million people, which attracts foreign workers and firms. 

There is also a good tax environment for international executives to relocate to Spain as we have discussed in these pages. See the article published in Tax Journal UK on this topic España Mañana.

The capital region has experienced impressive dynamic economic growth in recent years, making the best of the positive business cycle in Spain. It absorbs more than half of Spain’s total foreign direct investment (FDI) and has extended its economic relations with Latin American countries.
Growth has occurred largely in the service sector (financial, banking, business services) as well as in logistics (Madrid Barajas Airport is the largest employer in the region).

Please read the full article OECD territorial article on Madrid

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