dontworrybehappy

Hi everyone!
I have been looking for a place to post so hope somebody out there can advise!I have lived in Spain over 10 years with my British partner, both our names are on the deeds, we have a joint bank account (we are not married). He has never had an income here and all payments into our bank have been in my name. I have worked in legal jobs paying tax plus others that went into my bank which were not taxed, aside from this we rented our flat on online tourist sites like Airbnb as we assumed we could do that legally as it is our home and we live in it (we have no other property or assets worldwide). We were very wrong.

Here in Barcelona there is a huge witch hunt for illegal tourist lets and due to an aggressive campaign this tax year 25,000 letters to those discovered on the internet have received a letter from Hacienda asking for declarations from 2011 to 214, plus of course 2015. Obviously I was very stupid and badly informed about our tax situation, although the last year I have worked in the system paying taxes and not renting our flat, but I cannot change the past or what shows in my bank account!!!

From some of the posts I've seen here, I know I will be told it is my own fault, and I agree, but that doesn't change my situation and I want to try to find the best way forward. We own our flat with no mortgage but have no savings due to being out of work 10 months with no income from anywhere so we used it all up. I then took a job paying 950 euro a month over a year ago and we cannot live on that either.

I have just seen a lawyer who is going to do my declarations and when the amounts of money coming in, he wasn't too bothered, but he did say I shouldn't mention the illegal salary as Hacienda are concentrating on the income from rentals in the letter, but I am not so sure. He is going to work out the figures including interest (not fines though) based on paying back all tax including untaxed salary and the option he recommends, just giving the income from rentals. He is asking Hacienda for a month to get the paperwork done so it is sent off by deadline of end June. As I have never done a declaration, I am not sure what happens next. He says I will have to pay around 7k euros if just the rentals, and have to pay this immediately when submitting the form, or I can ask to pay in 10 installments. Obviously I will need to borrow this.

When he suggested I just send income for rentals I asked him how we could do this as surely I have to submit receipts and bank statements with the form and he said that is not required, it is done electronically. He suggested I open a new bank account and put that on the form for the account to pay them the back taxes. This is all well and good if they don't decide to audit me, I am sick with worry!

Of course, my biggest nightmare are the sanctions that may follow after an inspection if they proceed, although my lawyer says that as I came forward immediately and will send them the forms in time, they are less likely to think I have anything to hide, but that cannot be guaranteed. I asked him how long after they get the forms will they investigate me (I suspect they will) and he said 2 to 3 months at least so it could be much longer. The fine could be 300% of what was owed, with the added worry of the town hall fining us for renting our flat, I have heard of fines of 90,000 euros to 600,000k which would be a life sentence and clearly we would lose our home and our bank would be frozen, so essentially we would be trapped here forever with no way out, we have seriously considered suicide and I've had to take the week off work due to state of panic. I am trying to do what I can to redress this but from what I hear, Hacienda make no exceptions. We have been ignorant and stupid but we are not criminals. I know a girl at work who told me she and her husband got into trouble with Hacienda and she lost everything, I asked what she meant by that and she then told me her husband killed herself!

Alongside this, we have been trying to sell our flat for around 5 years, as we knew a long time ago we made a big mistake coming here and it is so difficult to survive. Since January the market has picked up so we thought we'd tried again and have had some viewings last few weeks, this was before I got the letter from Hacienda a few days ago. We will sell up if we can but I am not sure what will happen with our debts, I am hoping I can pay the back tax when we sell (assuming we do so within next 3 months) and then deal with any fine afterwards.

I am wondering if I can go ahead with a sale whilst my declarations are being checked, I have no idea on what happens after the submission, but imagine it takes them several months to cross check if necessary. Although we are residents and I have paid tax over the years, I have read we will have to pay 3% of the total selling price as withholding tax, but if I submit my forms end of June, I think I can go to Hacienda and get a tax resident certificate even if my partner cannot, anyone know if this is the case? We would plan to pay the CGT also as I want to pay what I owe before we leave.

Sorry for the long message, difficult to shorten it due to the complexity. Appreciate any constructive comments or examples of personal experiences of a similar nature. Please don't attack me, I cannot change the past but I want to make things right!!

Rosemary

Hi and a warm welcome to the Spanish forum on BE. Myself and Fred James are the moderators for the Spanish forums whilst BEVS moderates Europe. Moderators are there to ensure that the site runs smoothly within the rules of BE. This is so that members gain the information that they are looking for and find their experiences on the forums to be friendly and worthwhile.

Problems and complaints should always be addressed to a moderator who will look into the matter and deal with it efficiently and fairly. Our members who post in the Spain Forums are usually friendly and helpful with a wealth of knowledge about the issues of living in Spain. I hope that you enjoy your time participating in the forums.

Please let me know if you need any further help.

Rosemary

tebo53

phew............

Horlics

You should be able to sell your place while the tax investigations are ongoing.

Get it sold as quickly as you can.

Get back to the UK.

Put the money you have into property there, if that is what you intend to do.

If you have cash in the bank, or when you do (when the place is sold), get it out of the country asap.

Continue co-operating with the tax people in Spain to reach a position where there is an agreed amount you owe. Pay what you can, negotiate terms for the rest.

They can't have what you haven't got, so an arrangement will be reached. The fact you will no longer be living here should make them a little more agreeable given that they might otherwise have difficulties getting to you (although there is a lot of co-operation between countries these days).

If you have anybody at all in this world who cares about you you must put the extreme actions out of your mind. I can't type the word because I have been closely affected by it in my family. Don't be silly, nothing is that bad, you're not thinking rationally because of your panic.

Fred James

I agree with Horlics. Get out while you can. Sell for a lower price that you might want, but at least you have the cash. The 3% retention does not apply so long as you can prove you are tax resident. The retention is against any CGT that the sale might generate, but if you reinvest the proceeds in another habitual home, even outside Spain, there is no CGT to pay.

The tax investigations may well end up with you getting a large bill, but if you have no assets in Spain it will be more difficult for the taxman to grab it from you. Again, as Horlics said, you will be in a safer position to negotiate a deal.

olivefarmer

Good fiscal advice there.

The key thing I would say is maintain your health. Sensible eating and drinking. Easily said but so important. Couple of suggestions that might work are to make lists of things to do and cross off the done things.(in any case keep records of who said what and when and contact details - makes it easier later to pick up a trail) The second is to set aside specific time say 9 a.m. to 1p.m. (if you are a morning person) where you concentrate on moving forward with declaration/selling property tasks- treat it like a job. Then if it is outside that time do something else e.g. gardening, walking or visiting somewhere nearby that you have never got around to etc that you enjoy and switch off knowing you have done what you can that day. Just suggestions that might help.

Hope things turn out well for you.

dontworrybehappy

Thank you so much to all of you who replied, so impressed you managed to read my HUGE post, well done!!
To Horlics and Fred:
What you say puts my (very active) mind a little at rest, but suffice to say that the last week of my life has been the very worst, even worse than when my partner's mother died 6 months ago, we have had a very long run of bad luck and awful experiences.

In terms of your recommendations to cooperate with Hacienda, I have been thinking more along those lines. A Spanish friend who works in property management said, sell up asap and go! That terrified us as puts us in the category of fraudulent fugitives, his suggestion was not to give Hacienda the back dated declarations or back dated tax (although just on the tourist lets, not my illegal salary). But if and more likely when they investigate further down the line and I am back in UK, doing this would surely make us look like we knowingly fled without any attempt to rectify our situation, is this the right thing to do? The option of selling up and just paying the 3% CGT retention and nothing else, would surely look like we did a runner and would have more severe implications in the UK? Is that true?

I was thinking that after I file the declarations end of June and pay what is due, I could legally get my Tax Resident Cert and avoid the 3% retention on my share of the property, saving around 3k. We would open up a new bank account in just my name and leave sufficient funds for the tax bill and my partners CGT. When they investigate, I am sure they will, I can at least say I kept the bank open for these payments but had no idea about having to declare the other earnings and the fines, saying I was foolish and ignorant. Perhaps they will look on me more favourably?

We could use the funds to buy a small property in my partners name and anything left to pay rent for a few months whilst we get an income again.

Do you know if we have to pay tax on the money we move over to the UK from our property, given it is our only asset? If not, can we use it for whatever we need to, such as rent and living costs till we get jobs? I have assumed it is not a problem.

We regret ever moving to Spain but due to having family here I will need to come back for visits so do hope I will not be classed as a fugitive and stopped at the border! I am worried about so many things.

We have dropped the price already and have had lots of visits the last 2 weeks and the agents say it will sell very soon. We hope to complete by end July and move back early August, funds would go at the same time, I am praying that Hacienda won't start the investigations till September or October and that should take several months. As I said, here in Barcelona there is a massive hunt for hidden tourist rental income and they will be saturated with tax forms and inspections, plus August is coming up and nobody works then!

Thank you for the practical advice Olivefarmer, what you say is sensible but right now feels impossible. I am having panic attacks now, which I have never had in my life, I feel like I am drowning. Somehow I have to go to my job tomorrow and will try my best, but I am not sleeping and feel a mess so not sure of the impact on my health.

Horlics, I do have people I love, my parents would be devastated and other family too, plus my partner. But I have been seeing the worst scenario of poverty and loss of my dreams, struggling for all my days. I know it is only money but the worry is crippling me.

Just one more question. If I managed to get back to the UK and Hacienda did come after me, and the bill was massive (I suspect it will be) would I be able to go bankrupt in the UK, I have read that here in Spain the debt is never written off so you have it for life but in the UK you are discharged after 18 months. If my partner put the new property into his name only, I am assuming that money would be safe?

Really appreciate your time and help, thank you all!!

jonboy

Dear dontworrybehappy,

I get the impression from the length, complexity and expressed panic in your posts that you may be over whelmed by your own thoughts.

The advice from Olivefarrmer and others is very good. It may also be of value to speak with your doctor as well on this matter? I wonder if you are sharing your anxieties with your partner. All the issues you speak of are manageable and survivable but I worry that you cannot see this as you are so “het up”.

Anxiety is a very powerful emotion and can colour our perception of situations enormously. You will not be the only person here to have experienced this.
Apart from looking after your own emotional health my advice would be to sell, take money to UK and buy a place to live in.

After that you and Spain can try to reach agreement as to how much you may be able to pay them over what period of time. Your own mental health and safety is more important than any of the above.

dontworrybehappy

Thank you Johnboy. The reason my posts are long and complex is due to there being various issues wrapped up in our situation, difficult to make it simple, wish I could! In a nutshell, we have wanted to move back to UK (London) for many years, the recent events have intensified things and put even more obstacles in our way. Aside from that, after 10 months of no work with no income, draining all our savings, I was forced to work in an awful call centre (I am in my 50's with very good CV and skills and it is all I could find here) been doing it for a year during which time we have tried to sell as I cannot keep doing this with no hope in sight. We are at an age where we are faced with no pension, no property, no money,had this have happened 15 years ago, I would have had a very different attitude! My partner is very worried too, we are very alike and love each other dearly after 30 years together! My health has been affected over recent years but last two weeks much worse, currently I am signed off work for a few days but cannot afford to stay off as salary is deducted.

Taking a practical approach in the moments I can overcome my fears, we will sell but what we will have left due to having to drastically drop the price, will not pay for a property to live in, anywhere in the UK. We will rent in London for a year and see what happens, when the Spanish tax office come after us we will not have the money to pay back and will go bankrupt as there will not be another way out of the debts but at least I will be back in my home city! I know that debts in Spain are for life, but will never return to live or work, but will need to visit my family here fairly often.