Spanish tax office delivers 300,000 nasty letters

The Spanish tax office began sending out letters headed “comunicacion” to foreign property owners a couple of months ago.  They have been causing a lot of concern to people who don’t understand what they say (they are in Spanish) or do understand but are worried by the implications.

To explain briefly to anyone who hasn’t come across this issue yet, these letters are notifications from Spain’s equivalent of the Revenue (Agencia Tributaria).  In essence they are saying  that they know the recipient owns a property but have not received tax returns from them.  They are not tax demands as such and do not require a response but they do suggest further action will be taken if the property owner receiving the letter really does have tax returns due.

It has been quoted that 300,000 letters have been sent  out.

I won’t go into detail about the matter as there is already some information about them out in the blogosphere and  I have posted a detailed Question and Answer guide on our main website:

What to do if you have received a letter from the Spanish Tax Office

I would like to clear up a couple of specific points which I haven’t read about elsewhere –

The letter claims that help will be available at your local branch of the Agencia Tributaria (Google your nearest).  I don’t know how true that will be in practice but it does open up the possibility of being able to resolve the situation without recourse to a professional i.e. paying a lawyer or accountant to catch up your taxes for you. 

If you want to take a DIY approach to the problem, firstly read up on the tax (our website has several articles on non resident tax – see the Advice page and use the drop down box).  The visit the tax office with all your documentation and see what they have to say.

Also you might wonder why the letter is asking for tax returns from 2007-2010.  There is a technical reason for this – the equivalent of a statute of limitations which prevents the tax office collecting unpaid taxes four years after they were due.  For example 2006 resident taxes were due by 30 June 2007 i.e. more than 4 years ago so not collectable. 

They didn’t ask for 2011 returns because they are not yet due.  2011 resident returns are due next June and non resident returns next December.

Spanish tax advice that could cost you dear

As I am sure the whole of Spain knows by now the annual tax return season has just ended. The Spanish tax office (Agencia Tributaria or more colloquially La Hacienda) have issued some interesting stats about the tax campaign which I have summarised below. But before coming onto that, I must point out an error on a website popular with ex-pats (Euroresidentes.com) which could have serious repercussions if anyone believed it. They say, in answer to the question “I am a foreign resident, I live in Spain and receive a monthly pension from England. Do I have to declare tax in Spain?”:

No. If you collect your pension in England must comply with tax laws of that country with respect to their income. Only people who have a job or a pension in this country have to declare that income in Spain.

This is absolutely incorrect as we describe on our website: Do I have to do a Spanish tax return?

Anyone who is tax resident in Spain – generally those living here more than half of a calendar year – has to do a tax return and declare all their income including income earned outside of Spain. The only exception is if this income falls below certain levels (see Spanish income tax rates 2011 for these) or if the overseas income is exempt from Spanish tax. There are few such exemptions, the most common being income from a “crown” pension (basically a UK government pension which is, because of the UK-Spain tax treaty, taxed only in Britain).

So I hope no one has read this kind of advice and decided they don’t need to do a tax return because they have no Spanish job or pension. If for example they are living off foreign savings (e.g. offshore bank account interest) it is highly likely that not declaring will come back to haunt them. It is also worth noting that all foreigners who become Spanish tax resident should declare in the first year of becoming resident regardless of the sources or level of their income.

As for the Hacienda’s stats (see Agencia Tributaria website), these revealed:

The average wage declared on tax returns was 22.596€. Given that the law paid do not have to do returns the average wage of all Spanish people must be a lot lower.

2/3 of taxpayers had wages less than 21.000€ a year. Only 3,8% declared gross salaries in excess of €60.000

There were around 1.5 million business declarations and 600.000 autonomos declaring

About 12.7 million declarations were made seeking a tax rebate and so far 6.2 billion € has been returned to taxpayers

Big brother is watching your Spanish bank account

The Spanish authorities must be getting desperate for money - the papers have been full of scary stories about the tax office (Agencia Tributaria) saying how they are going to raise billions of Euros by cracking down on tax fraud. News of last year's haul even made the New York Times as everyone worries about the prospect of Spain struggling to finance its budget deficit (Spanish fraud crackdown nets 10 billion). This year's priority is to cooperate with the Social Security department to catch people operating in the, erm, "informal" economy without registering for tax. The intention is to use new powers to demand information from utility companies, credit card providers and banks.

The full story is on our website Authorities tackle tax avoidance in Spain but a couple of aspects to all this are worth highlighting. The first is a new rule in force from 2011 but applying to transactions that go back to 2010, that all banks report all transactions over 3.000 with the following details:

- name and NIE (or company name and CIF) of payer/recipient

- amount

- whether deposit, withdrawal or transfer

- date account

Worth bearing in mind if you are paying for a property partly in cash or making a gift transfer which should be declared for gift tax (see explanation Spanish Gift Tax).

Also the Agencia Tributaria are keen on catching more people who don't declare rental income. Already they boast of trapping 200.000 shifty landlords by simply requiring that anyone claiming a tax deduction for rent paid has to state the catastral reference (Land Registry number) of the house or apartment on their tax return. This is used to check the owner's tax return to see if they have declared the income. The once sleepy Spanish tax authorities are waking up!