Tax intermediaries, the OECD views
A new book has been released by the OECD based on the working group discussing the role of the tax intermediaries, such as lawyers, tax advisers, bankers, etc... The book can be read in PDF format at Study into the Role of Tax Intermediaries.
The book examines the role tax intermediaries play in the operation of tax systems and specifically discusses their role in what they call “unacceptable tax minimization arrangements”. As in any other OECD international initiative it will be interesting to see how the concepts of tax avoidance or minimization vs tax evasion are harmonized in such diverse jurisdictions, and agreements are reached.
In addition, the study identifies strategies for strengthening the relationship between tax intermediaries and revenue bodies, which is always welcome by all of us.
Pension Plan vs Investment Funds in Spain
Pension plan contributions are tax efficient for the contributor if he receive employment or similar taxable income, however very few people consider the tax efficiency for the heirs or inheritors.
It is important to emphasize that pension funds are taxable on death when received by inheritance, according to the rules of Inheritance and Income Tax, one or the other tax will be applicable depending on the heirs position for Spanish Income Tax purposes.
Therefore, if the fund is exempted from Inheritance Tax, the heirs will be taxed according to the income tax rules up to 43% if residents and at 24% if non resident, providing the fund is located in Spain. The taxable base will be for the full amount of the fund.
From a estate planning point of view it may be worth considering an investment fund rather than a pension plan. The investment fund will be taxed, on disposal or liquidation, according to the Capital Gains Tax rules at 18% both for residents and non residents.
A no brainer tax saver, as only the gain will be taxable in this case.
As usual it is important to balance estate planning with efficient income tax planning in order to calculate the most advantageous situation.
