jellicorse

Hi all,

I am new to this forum and have come with a query.

Having recently discovered the need to complete a Modelo 720, I have been looking into tax issues in Spain more. I already know that I am likely to have to pay back-tax (and associated penalties) on income arising from UK investments (I have never done a 'declaracion de la renta', believing it was not neccesary, my employment income being under 22000e).

However, one thing is causing me concern: some money came out of trust to me in 2008 (I was resident in Spain that year, having arrived towards the end of 2007). From what I have read, the law on trusts here is not clear. If the authorities decide not to recognise the legitimacy of the trust then presumably the whole lot could be taxed as a gain...

What I am wondering is whether the 4 year Statute of Limitations would apply here?

I know this forum is not a replacement for professional advice; I have a meeting arranged with an Asesor Fiscal to help me make the relevant declarations to Agencia Tributaria at the end of the month, but I was wondering whether anyone has any experience of this or could shed some light on what the likely outcome will be...

Rosemary

As Concierge for the Spanish section of BE I would like to say hello and welcome.

BE is a very large expat website, so if you have problems finding your way around we have concierges who will try to direct you. The moderators for the Spanish forums are Mitzyboy and Fred James, moderators are there to ensure that the site runs smoothly within the rules of BE. Problems and complaints should always be addressed to a moderador who will look into the matter and deal with it efficiently and fairly. Our members who post in the Spain Forums are friendly and helpful with a wealth of knowledge of the issues of living in Spain. At the top of the page you will find a quirkily named thread called Free Beer which is full of important and useful information. Hope you enjoy your time participating in the forums.

Please let me know if you need any further help.

Rosemary

Neptuno

I read that the. Statute of limitations does not apply in the case of modelo 720. When you say your income is under 22000, it's only if it comes one source,tax already deducted, and you are not eligible for the double taxation treaty between Spain and UK that it's not necessary to do a return. Otherwise ,
, your tax threshold is much lower than 22,000.

jellicorse

Thanks for your reply, Neptuno.

I wouldn't have thought the statute of limitations applies to the modelo 720, as this is purely declarative.

I imagine the payment of back-taxes is a separate issue and I'm not sure whether the statute of limitations would be applicable to what the Spanish taxman might see as 'capital gains' made more than 4 years ago...

Neptuno

Apparently. If the. Tax man investigates large sums of money on the 720 for eg. 2012,and finds they originate from undeclared money from years ago, he will treat them as if acquired in 2012

Fred James

Well it does and it doesn't!!

If you fail to declare an asset and they find it, it will be treated as income. The income will be deemed to have arisen in the last tax year that was not statute limited (ie 4 years ago) and taxes and fines etc will be applied accordingly.

So, the statute of limitations has not been changed, they have just moved forward any deemed income to avoid the limitations.

Crafty move!

jellicorse

Thanks Neptuno and Fred.

I can see that failure to declare any relevant asset on the Modelo 720 will lead to that asset being taxed and fines imposed. This certainly will not be the case with me, as I am declaring all relevant assets.

But it is rather concerning regarding Neptuno's point that previously undeclared money (originating more than 4 years ago) will be taxed as if it arose in 2012. I had hoped that the statute of limitations would make such tax uncollectible.

If this is the case, it may come down to investigating the law on trusts: as what is not taxable in the UK may be taxable here in Spain...

Fred James

No, previously undeclared income from normal sources is covered by the statute unless it can be proved to be deliberate fraud.

It is where undeclared assets are found that the situation changes. They are DEEMED to be income on the basis that if your wealth was later discovered to be higher than declared, then that is income. It is this deemed income that is effectively outside the statute.

I would agree with Neptuno that this income should be placed in the year of the last declaration but the guidance I have read suggested that it would be taken back to 4 years ago which doesn't seem logical apart from the fact that the interest charges could be higher to the benefit of the taxman.

jellicorse

OK, I understand Fred. Thanks.

Well, that is something of a relief. I am still going to have to pay a substantial amount in late payment penalties and tax. It will certainly teach me to keep on top of things in future, though.

It should be OK, as I will file the Modelo 720 and arrange the payment of back-taxes this February, when the accountant has time. There is still a two-week window in which I could be 'discovered' and face very heavy sanctions, though!