50 countries sign deal to share your Information

Automatic exchange of information on a global scale will become a reality in 2017, as 51 countries signed an agreement to share financial information. Another 35 jurisdictions will join the following year.

All Organisation for Economic Cooperation and Development (OECD) and G20 countries, as well as most major international financial centres, signed a “multilateral competent authority agreement” that will activate the automatic sharing of financial data for tax purposes. The signing ceremony took place at the Global Forum on Transparency and Exchange of Information for Tax Purposes in Berlin on 29th October.

It shows the determination from governments across the globe to prevent tax evasion and capture lost tax revenue. Tax authorities of participating countries will be able to gather much more information on the assets their taxpayers hold abroad.

The OECD explains that automatic exchange of information “can provide timely information on non-compliance where tax has been evaded either on an investment return or the underlying capital sum, even where the tax administrations have had no previous indications of non-compliance”.

58 jurisdictions, known as the “early adopters”, have pledged to make the first exchange in 2017. This includes Spain, the UK, Spain, Germany, most of the EU, Isle of Man, Jersey, Guernsey, Gibraltar, Bermuda, Cayman Islands, British Virgin Islands, Iceland, Liechtenstein, San Marino, Seychelles, Argentina and South Africa.

A further 35 jurisdictions have said they will start in 2018. This includes Hong Kong, Monaco, Singapore, United Arab Emirates and, significantly, Switzerland.

Although not one of the early adopters, the Swiss government has adopted mandates to soon begin negotiations with the EU and other countries on automatically sharing data on bank accounts from 2018.

Reduction in the CGT on sale proceeds

In order to encourage real estate property investments, the Spanish Government has approved a Royal Decree to be effective as from 11th May.

Here is an overview of the new provisions. For details as to how it might affect you please contact your financial advisor.

The main measure is a reduction of 50% in the Capital Gains Tax on sale proceeds for properties bought between 12^th May and 31^st December 2012. This is regardless the future sale date.

The tax remission benefits both natural persons (residents and non-residents) and legal entities, under the following conditions:

-        The property must have been purchased between 12^th May and 31^st December 2012

-        It must be an urban property (residential or commercial)

-        The buyer and seller should not have any connection, either corporate or family

-        The property should not be considered a commercial development or venture.

The tax reduction will be applied in the annual Income Tax declaration or in the company tax of the fiscal year in which the capital gain was generated.

Provided that the applicant meets all necessary requirements, the capital gain to a non-Spanish tax resident on sale of a Spanish property is taxed as follows:

Sale in 2012-2013             Before:  21 %

                                          Now:      10,5%

Sale in 2014 or after:         Before:  19%

                                           Now:      9,5%

The tax on capital gain to a Spanish tax resident is as follows:

Sale in 2012-2013             Before: until 27% (depending on Gain)

                                           Now:     until 13,5%

Sale from 2014 on             Before: until 21%

                                           Now:    until 10,5%

In the case of companies, the Capital Gain is taxed at approximately 15%.

We would like to remind you that the tax for newly constructed properties remains at 4 % until 31^st December 2012.

VAT rise in Spain as from 1st September

There has been recent tax news introduced by the Royal Decree Law 20/2012. This regulation has increased the general VAT tax rate from 18% to 21% and the reduced tax rate from 8% to 10%.  The new tax rates will be applicable from September 1st 2012.

Additionally, Personal Income Tax withholding over the income paid to professionals are increased from 15% to 21% (the new withholding tax rate will be applicable from September 1st, 2012 until December 31st, 2013).

Update on Property Taxes

In order to encourage real estate property investments, the Spanish Government has approved a Royal Decree to be effective as from 11th May.

Here is an overview of the new provisions. For details as to how it might affect you please contact your financial advisor or us Bufete Morell.

The main measure is a reduction of 50% in the Capital Gains Tax on sale proceeds for properties bought between 12^th May and 31^st December 2012.  This is regardless the future sale date.

The tax remission benefits both natural persons (residents and non-residents) and legal entities, under the following conditions:

-         The property must have been purchased between 12^th May and 31^st    December 2012

-         It must be an urban property (residential or commercial)

-         The buyer and seller should not have any connection, either corporate or family

-        The property should not be considered a commercial development or venture.

The tax reduction will be applied in the annual Income Tax declaration or in the company tax of the fiscal year in which the capital gain was generated.

Provided that the applicant meets all necessary requirements, the capital gain to a non-Spanish tax resident on sale of a Spanish property is taxed as follows:

Sale in 2012-2013               Before:  21 %

                                              Now:      10,5 %

Sale in 2014 or after:           Before:  19%

                                              Now:      9,5 %

The tax on capital gain to a Spanish tax resident is as follows:

Sale in 2012-2013               Before: until 27% (depending on Gain)

                                              Now:     until 13,5 %

Sale from 2014 on               Before: until 21%

                                              Now:    until 10,5 %

In the case of companies, the Capital Gain is taxed at approximately 15%.

We would like to remind you that the tax for newly constructed properties remains at 4% until 31^st December 2012.