Spanish Annual Personal Tax Enforcement Plan 2021

 In Actualidad

Dear all,

We hope you, your families and colleagues are safe and healthy. We are writing to update you on developments regarding the personal tax environment in Spain.

The Spanish General Directorate of Taxes has recently publicly released their Annual Tax Enforcement Plan for 2021, laying out the focus areas of the Spanish tax authorities for reviews, audits and inspections for this year.

Below is a brief summary of specific target areas of special relevance to International Private Wealth Clients:

  • Review and audit of individual tax residence in Spain, specifically as regards taxpayers identified as non-tax resident in the Spanish tax database but who the Spanish tax authorities have indications of:
    • Significant presence in Spain
    • The existence of a relevant or operating center of economic interest
    • The existence of close family ties in Spain
  • Full incorporation of actual data received by reason of international exchange of information mechanisms (CRS, FATCA and other). The Spanish Tax Administration will inform taxpayers of relevant international tax information on their records throughout 2021 as part of their tax fraud prevention practices.
  • Unprecedented use of IT tools and Big Data in order to profile taxpayers and determine specific individuals targeted for audit and inspection procedures, particularly on the basis of their connections to:
    • Intermediary entities and holding structures (such as trusts, foundations, partnerships etc)
    • Their position or potential position as UBO of entities with a Spanish asset base.
  • Specific review and audits of Wealth Tax and Inheritance Tax filings.
  • Review and audit of transfers of individual tax residence among different regions in Spain in order to apply beneficial regional tax reliefs and exemptions..
  • Specific review of Business Property Relief claims for Inheritance and Gift Tax purposes, particularly regarding the emoluments test..
  • Specific areas for potential criminal prosecutions under tax fraud charges are highlighted as follows:.
    • Simulated non tax residence in Spain
    • Use of opaque structures
    • Focus on professional “facilitators” of tax fraud

Reviews and audits on these identified class of taxpayers will be undertaken and coordinated by the Spanish Central Unit of Control of High Net Worth/Ultra High Net Worth Taxpayers, now fully operational.

We would strongly encourage clients and advisors to identify their potential exposure to a Spanish tax inspection in 2021 by particular reference to these focus areas and to obtain advice on how best to manage their potential exposure and their Spanish tax situation in advance, considering the likelihood of receiving a notification of a commencement of a Spanish tax inspection in the coming months..

We would of course be happy to provide further advice if you have any queries or wish to discuss further any of the above issues or any other Spanish tax or legal matter which we may assist you with.

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