Viewing posts categorised under: Tax tips

Should I make a tax return? If so, why?

By Peter Brooke
This article is published on: 16th June 2018

16.06.18

By Peter Brooke & Patrick Maflin of Marine Accounts

Understanding tax liability is still a big issue for yacht crew; in fact, the confusion mainly comes from the lack of clarity about being “Resident” or “Non-Resident” somewhere. Many crew members are still putting their heads in the sand and ignoring this issue; in our humble opinion this needs a cross-industry culture change, as the repercussions for continuing to ignore tax are becoming more onerous and punitive.

So why should I bother declaring my income?
• You will avoid massive penalties, fees and interest on the taxes that you ‘might’ owe should you be investigated later.
• Your info is out there: The Automatic Exchange of Information means that all your financial information is already being shared between governments.
• Common Reporting Standards: All financial institutions such as banks, insurance companies, and investment firms are required, by law, to attain, keep and share residency information for all account holders.
• I want a mortgage: Most lenders now require proof of earnings in the form of tax returns.
• I live on a yacht and so am not resident anywhere! Does your home authority agree with your assessment of your situation? Get it in writing!

On this last point, it is a huge misconception that just because you believe that you aren’t resident somewhere, the tax authorities will not be interested in you. The onus is firmly on the individual to prove non-residency, not on the authorities to prove residency. If you can’t present a convincing case, it is highly likely that the tax authority with which you have that link will deem you to be a resident. If you haven’t declared your income to them voluntarily, they will look less favourably at your situation and can apply significant fines and interest.

So where should I declare?
If in doubt look at it in this order:
1. Time spent – if you spend time ashore where are you spending it? Keep a diary/spreadsheet of EVERY day.
2. Assets – where is most of your wealth kept?
3. Family – do you have major links to a certain country (especially important if you have children)?
4. Nationality – if you are not resident in a country due to time spent, assets or family links it is likely you should be declaring your income to your ‘home’ authority – i.e. where you are from originally.

Don’t wait to be called upon by any ‘linked jurisdictions’, be proactive, understand the tax residency rules of all of these ‘linked jurisdictions’ and voluntarily declare to the most strongly linked one. It will help you sleep at night and could save thousands in fees and interest, as well as avoid black marks on your record.

This article is for information only and should not be considered as advice. Marine Accounts assist crew with tax residency in many jurisdictions.

Peter Brooke is a financial adviser to the yachting community with the Spectrum IFA Group. Spectrum has created HORIZONS, a unique financial solution just for yachts and their crew at
www.my-Horizons.com or contact@my-horizons.com or peter.brooke@spectrum-ifa.com

Modelo 720 Reporting Time!

By Chris Burke
This article is published on: 23rd March 2017

23.03.17

Just a reminder that time is running out for submitting your Modelo 720 declaration.

All those tax residents in Spain, (those living in Spain for more than 183 days a year or where Spain is the main base for your business), should be aware that as a result of legislation passed on 29th October 2012 residents in Spain who have any assets outside of Spain with a value of €50.000 or more, are required to submit this declaration form to the Spanish authorities. (that’s €50.000 or alternative currency equivalent).

This declaration can be made online, through the Tax Office`s web page www.agenciatributaria.es where the Modelo 720 (Tax in Spain) can be located and completed. It must be filed between January 1, and March 31, of the first year of residence, to avoid being investigated or fined by the Spanish authorities. I would personally recommend speaking with your accountant / Gestoria to avoid mistakes.

The assets outside of Spain that are subject to this declaration form fall into 3 asset categories:
1. Property
2. Bank accounts (cash)
3. Investments

To warrant a declaration the total value of assets should exceed € 50.000 in each or any one of the categories; e.g. if you have 3 bank accounts and totalling up all the balances it exceeds the €50.000 limit you are subject to making the Modelo 720 declaration. However, if you have a bank account at €30.000 and say, investments valued at €30.000 then there would be no reporting requirement as they are in separate categories and each individual total value does not exceed the €50.000.

A declaration must be submitted individually, regardless of the percentage of ownership (in joint accounts). For example, if you have a joint bank account with a value exceeding €50.000, although your particular (say €25,000) share is below the threshold, each owner would still be required to submit an individual declaration based on the total value of the account.

Although this declaration of assets abroad is solely informative and no tax is charged, failure to file, late filing or false information could result in serious consequences.

For this reason, we recommend that everybody arranges to declare their assets, to avoid the imposition of fines from a minimum of €10,000 to a maximum of 150% of the value of those undeclared assets located outside Spain. Once you have made your first declaration it is not necessary to present any further declarations in subsequent years, unless any of your assets in any category increases by more than €20.000 above the initial value declared.

The ABCs of Spanish taxation when investing in real estate in Spain

By Jonathan Goodman
This article is published on: 8th March 2017

08.03.17

For a long time, Spain has been considered a country of interest for real estate investors. It is a Western European country with many types of attractive properties available: residential, retail, offices, logistics, industrial, and more. And all this in a place that enjoys a stable legal system, over forty million consumers, and a great climate.

The Spanish tax system, however, is one of the most complex in the world. This being the case, it is essential to know the taxation associated to each of your investments in order to avoid surprises. We have written this guide as a quick introduction for first time investors. Nevertheless, you must consider it just an introduction since every property has its own peculiarities. We would be happy to help you make your investments a success.

This article was written by AvaLaw and first appeared on www.avalaw.es

What will happen in 2017?

By John Hayward
This article is published on: 23rd January 2017

23.01.17

There cannot be many people who were able to answer this question accurately in 2016. There were many “shocks” most notably the Brexit vote and the election of Donald Trump as President of the USA. There were several celebrities who died in 2016 but, more importantly, we may have lost loved ones which had financial implications, aside from the grief.

There are many events already planned for 2017 but I suggest that in December our conversations will focus on aspects that are not already known by the vast majority of people.

How do we cope with the unknown?
Our role, at The Spectrum IFA Group, is to help people cope with all things financial. With interest rates at such a low level, banks have little to offer, especially to the cautious investor. In fact, Spanish banks have an additional problem since the European Court of Justice ruling in December. They could face billions of euros in refunds due to inequitable “floor clauses” they had in their mortgage agreements.

Here are some of the ways we help:-

Improved exchange rates – banks may not charge for currency exchange but often offer poor rates. We can help you protect your income today as well your capital in the future.

Higher income/returns on investments – Whether a cautious or speculative investor, we have access to some of the top investment companies. With their expertise, they are able to make financial decisions prior to an event. Most people will react to an event when it is too late.

Tax friendly and compliant investments – We specialise in providing access to products that are tax efficient in the country of tax residence and which are portable within the European Union. This means an investment, whether this is a personal arrangement or a QROPS/ROPS (Overseas pension scheme), is tax efficient wherever the policyholder lives.

Registered and regulated in Spain – With the upcoming Brexit, it is possible that companies, who are not registered in Spain, or in other EU countries, will not be able to function. The Spectrum IFA Group has a Spanish company that holds a licence in Spain. Once the UK leaves the EU, companies based in the UK and Gibraltar may no longer be able to operate and service their clients in Spain.

Back to the question. We deal with the unknown by being prepared. This generally means applying caution and care. It means having access to experts who can react much quicker to events, if not predict them. We live where you live and so, if something needs dealing with urgently, we are available

Are you thinking of selling your UK property or have you sold one recently?

By Sue Regan
This article is published on: 13th January 2017

13.01.17

I decided on the topic for this month’s article after having had a couple of very similar conversations recently with expats relating to the sale of property in the UK. In each case they were badly let down by their UK Solicitors who failed to inform them of a change in UK legislation that was introduced in April 2015. As a result, they received unexpected and not insignificant late payment penalties from HMRC for failure to complete a form following the sale of their UK property which could have been avoided if they had been made aware of this change in the law.

Recap of the new legislation

Prior to 6th April 2015 overseas investors and British expats were not required to pay Capital Gains Tax (CGT) on the sale of residential property in the UK, providing that they had been non-resident for 5 years. New legislation was introduced on 6th April 2015 that removed this tax benefit.

The rate of CGT for non-residents on disposals of residential property is the same as UK residents and depends on the amount of taxable UK income the individual has i.e. 18% for basic rate band and 28% above it, and it is only the gain made since the 6th April 2015 that is subject to CGT for non-UK residents.

Reporting the gain

When you sell your property, you need to fill out a Non-Resident Capital Gains Tax (NRCGT) return online and inform HMRC within 30 days of completing the sale, regardless of whether you’ve made a profit or not. This applies whether or not you currently file UK tax returns. You can find the form and more information on the HMRC website at hmrc.gov.uk

Paying the tax

If you have a requirement to complete a UK tax return then payment of any CGT liability can be made within normal self-assessment deadlines. However those who do not ordinarily file a UK tax return will be required to pay the liability within 30 days of completion. Once you have submitted the form notifying HMRC that the disposal has taken place, a reference number will be issued in order to make payment.

As a French resident you also have to declare any gain to the French tax authority. The Double Taxation Treaty between the UK and France means that you will not be taxed twice on the same gain, as you will be given a tax credit for any UK CGT paid (limited to the amount of French CGT). The French CGT rate is 19% and any taxable gain is reduced by taper-relief over 22 years of ownership. You will also be liable to French Social Charges on the gain, at the rate of 15.5%, and the gain for this purpose is tapered over 30 years (rather than 22 years).

At Spectrum we do not consider ourselves to be Tax Experts and we strongly recommend that you seek professional advice from your Accountant or a Notaire in this regard.

There is little that can be done to mitigate the French tax liability on the sale of property that is not your principal residence. So it is important to shelter the sale proceeds and other financial assets wherever possible to avoid future unnecessary taxes. One easy way to do this is by investing in a life assurance policy, which in France is known as a Contrat d’Assurance Vie, and is the favoured vehicle used by millions of French investors. Whilst funds remain within the policy they grow free of Income Tax and Capital Gains Tax. In addition, this type of investment is highly efficient for Inheritance planning as it is considered to be outside of your standard estate for inheritance purposes, and you are free to name whoever and as many beneficiaries as you wish. There are very generous allowances for beneficiaries of contracts for amounts invested before the age of 70. Spectrum will typically use international Assurance Vie policies that fully comply with French rules and are treated in the same way as French policies by the fiscal authorities.

International Assurance Vie policies are proving highly popular in light of Loi Sapin II, which has now been enacted into law. More details about the possible detrimental effects of the ‘Sapin Law’ on French Assurance Vie contracts, in certain situations, can be found on our website at https://spectrum-ifa.com/fonds-en-euros-assurances-vie-policies/. Thus, when also faced with the prospect of very low investments returns on Fonds en Euros – in which the majority of monies in French Assurance Vie contracts are invested – it is very prudent to consider the alternative of an international Assurance Vie contract, particularly as you would still benefit from all the same personal tax and inheritance advantages that apply to French contracts.

Working in Gibraltar but living in Spain

By Pauline Bowden
This article is published on: 3rd June 2016

03.06.16

Thousands of people cross the border from Spain to Gibraltar every day to go to work. Many of these people feel that they are in a kind of “Limboland” because they are not fully part of either state’s systems. Even though they pay tax and social security to the Gibraltar government, they are not entitled to free education for their children, nor automatic free health care. If they do not pay tax and social security in Spain, they are not always entitled to the facilities in that country either.

Contrary to popular belief, the two countries do co-operate in many areas. Social security and health care are areas of great co-operation between the two. They also have a reciprocal arrangement for income tax.

Each individual working and paying social security in Gibraltar can elect for those payments to be transferred to their local social security office in Spain. It is a fairly easy procedure, in that you go to the social security office in Gibraltar and ask to fill in the form to transfer your social security payment to the seguridad social of your area of residence. The Spanish office then send confirmation of receipt of payments and issue you with a Spanish social security card.
You are then entitled to Spanish state health care, unemployment benefit, sick pay etc, and once enough contributions have been made, the Spanish state pension.

Many people worry that if they do this, then they would not be entitled to any health care in Gibraltar should they have an accident or fall ill while at work or visiting Gibraltar. Gibraltar is part of the European Union’s health care system and once you have your Spanish social security card, you can go to your local officina de seguridad social and ask for a “Tarjeta Sanitaria Europea” which is produced on the spot once a check is made to ensure that your social security payments are up to date in Spain. This card is valid in all EU countries and Switzerland (including Gibraltar).

To be fully legal, if you live in Spain for more than 183 days in any one year, you should also make a tax return in Spain. Unless you are a high rate tax payer in Gibraltar then you should have no more tax to pay. All it will cost you is the Gestor’s fee for submitting your annual tax return.

Top Tax Tips for Expats in Italy

By Gareth Horsfall
This article is published on: 4th March 2013

Here are my top tax tips for living or moving to Italy.

1. Beware of the DIY approach.
Always discuss your tax situation with an experienced and knowledgeable commercialista. Taxes in Italy are not that much different to other countries around Europe and you might be surprised at just how littel you have to pay. The DIY’ers rarely find the tax breaks and end up paying more than they need to.

2. A Tax Residence of choice does not work.
Just because you are spending 3 months of the year in the UK does not mean you automatically qualify for UK residency when in fact you are actually spending more of your time in Italy. The double tax treaty will not cover you in this case.

3. Don’t think you can hide.
If you an Italian tax resident (i.e you spend more than 183 day here a year), then the Guardia di Finanza can find you. There is always a paper trial, utility bills, mobile phone records, airline tickets, credit card and bank statements, as well as visual evidence from neighbours, gardeners, cleaners etc. It is much better to be ‘in regola’ and know that the knock on the door is highly unlikely.

4. Beware the UK 90 day rule.
Quite a few people I meet try to claim UK residency because they go back to the UK for at least 90 days a year out of the last 3 years. This is not a law and is ignored by the courts. The Italian tax authorities would swiftly brush this aside as an excuse if they were trying to determine tax residency in Italy or not.

5. Don’t rely on a double taxation treaty to protect you.
A double taxation treaty is merely a statement saying that you cannot be a tax resident of 2 countries at the same time. So, you have to be resident in at least one country in any one year. The Italian’s will quite quickly assume that you are Italian tax resident if there are any signs of regular/permanent establishment in the country.

6. Be very wary of trying to be non resident anywhere.
If you are claiming to be a non tax resident anywhere then you could misunderstand the rules of the countries that you are living in. It is possible but most countries will deem you to be tax resident even if you spend less than 6 months of the year in the country. They just find it hard to accept that you can be non resident anywhere.

7. Don’t forget to register your presence.
Some people move to Italy and then decide not to report that they are living there and try and live under the radar. It is illegal to NOT complete tax returns and and a criminal offence in Italy. Even if you are paying tax on pensions in other countries, have assets overseas or income from other sources, the tax code in Italy states that as a tax resident you are liable to taxation on your worldwide income and assets. However you might get some Double tax treaty relief’s from Italy for paying taxes in another country already.

8. Tax favoured investments in one country do not necessarily apply in Italy.
The classic example is the UK Individual Savings Account. (ISA). It is not recognised as a tax free account in Italy and is therefore taxed on income and capital gains. You might need to re-examine all your old investments and replace then with tax efficient investment for Italy (namely the Life assurance Investment Bond).

9. Watch out for tax free lump sums from pensions
The UK pension system allows a 25% lump sum pension payment on retirement. In Italy that lump sum is taxable and therefore it might be advisable to take it before you leave for the country. You might also consider moving the pension fund to a QROPS ( Qualified Recognised Overseas pension Scheme). This means you can put the pension outside the UK tax system, avoid having to buy an annuity and potentially avoid the 55% charge on the fund at death.

10. Don’t be worried about tax planning in Italy.
Life in Italy is great. Taxes are not that different to those in other European countries. If you plan early enough and do things properly you will not pay that much more than if you were a UK resident. I often tell clients that for a few hundred euros more, it really is not worth taking the risk.