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!

Spanish gift tax - a nasty surprise

No one likes taxes but some hurt more than others. One of the most unpleasant has got to be gift tax which strikes me as particularly unfair. If you have built up assets over the years it is normally because you have paid for them out of income that has been taxed once already. Why then should you have to pay again when you give those assets to your nearest and dearest?

I suppose the answer is because (1) the government finds the money handy to spend on vital projects likes billion pound computer systems that never go live (2) if you could give things away without a tax it would undermine inheritance tax takings and (3) the state doesn't want wealth to flow unhindered through the generations as that might entrench class structures.

Mmm. But it's not for humble accountants to moan about the Whys of a tax but merely to advise on the Whats, Whens and most pertinently How Muches of them. Here in Spain the tax seems particularly harsh and all encompassing. We have just put a guide on the website call, er, Spanish Gift Tax. It's got all the facts and the all important rates which are quite murderous in some circumstances. Give a €1m house to a mate and it may cost them around €530.000 in tax (they pay not you). The taxes apply to Spanish assets even if you or the recipient of your generosity is not a Spanish resident. There are a few Spanish gift tax avoidance strategies, like setting up a company to own assets like houses, but these need careful thought and structuring to make effective. If this is an issue which is or might at some stage effect you then take a look at the guide as a starting point but also take advice.