Cross-checking information

When we warn people that the Spanish Tax Authority is getting smarter, they don’t always believe us. But it is true. We are increasingly receiving new clients into our office who bring new challenges with them. Usually, because they have avoided and evaded their taxes until the Tax Authority in Spain has caught up with them. We are then left with sorting it out. 

These are not empty threats. Sometimes the only way to convince people that your latest warning isn’t just another money-making frightener is to give them a case study. A real example of what you’ve warned them about, and how it has affected someone – for real. 

 

The case of Mr. A 

Mr. A is lucky enough to have two holiday homes, one in Tenerife and one in Torrevieja. When he bought his home in Tenerife, all the paper work was completed and arrangements were made for him to pay his non-resident income tax. The trouble was, when he bought his second property he wasn’t as meticulous. There were loose ends and he omitted to tell his fiscal representative in Tenerife of his new purchase. So no tax was paid. 

Meanwhile, the Tax Authority in Tenerife had access to the Land Registry records and being a bit short of money, decided to do some research. Their cross-check highlighted Mr. A as a non-resident with two homes and only one set of paid-up taxes. He then received an official letter demanding tax from the year 2008 that languished for a little while in the post box until Mr. A was on holiday to collect it. Now he has to pay not only the unpaid tax but, a late payment fine, late payment interest and a sanction payment.

Electricity link 

In this case it was the Spanish Tax Authority linking up with the Land Registry who spotted the anomaly. However, we know that the Tax office is also cross-referencing the consumption of electricity with references in the catastral. They are making links between who owns what, whether they are resident or non-resident and what their electricity consumption is. If you say you are non-resident and you have a high annual electricity consumption rate then either you are renting out your property (and should be paying tax on this) or you are a resident and haven’t changed your status.

 

Across the water 

It’s not just in Spain that information between different sources is being shared. We had a case recently where following the presentation of the annual Spanish  tax declaration there was a hold up in the process for one resident couple. When we came to investigate it further it was to be told by the Spanish Tax Authority that they were aware that not everything had been declared. They had been informed by the bank in the UK of interest on savings there that wasn’t finding its way onto the declaration sheet here, in Spain. Understandably, this was causing a slight hold up in the processing of the application. A very embarrassing situation for all. 

The Spanish Tax Authority are becoming more and more inventive in finding ways of catching people out. They have to, they need the money. In case you were taking it personally or nationally, it’s Spanish people as well who are being tracked down, just as avidly. 

So, if you haven’t believed what we’ve said before, then you are taking a very big risk. A risk that has always been there but has never been as great. Instead of worrying about it, it’s time to deal with it.