Tuesday, August 18, 2009

Keeping a closer watch

New measures introduced by the Spanish tax office on August 1 will mean all taxpayers, including foreign property owners, will fall under increased scrutiny. The loss of tax revenue caused by the economic crisis and reduction in consumer spending has resulted in a gaping hole in the government's budget. Incoming taxes have plunged by 25% and government spending has increased by 13%.

In order to get the finances back on track the tax office has brought in a number of measures.

As from August 1, they have the power to embargo or seize assets up to the value of 20,000 Euros as security against unpaid taxes. Not only has the limit more than tripled, being previously a maximum of 6,000 Euros, the former complicated legal process has been eliminated. In little more than 10 days the tax office will be able to secure personal equity by embargoing bank accounts and property to cover debts owed by individual taxpayers.

The government has also given the green light to measures introduced by the tax office to combat fraud. All banks will be obliged to present annual reports for every account holder detailing the movement of funds from personal loans exceeding 6,000 euros and cash deposits and withdrawals exceeding 3,000 euros per transaction.

As a result foreign owners of Spanish properties - known to the tax office through their tax identity NIE numbers - will face more in-depth scrutiny. Information about the property they own, their bank account movements and their water and electric consumption has to be made readily available by law to the taxman by the different property registries, financial entities and utility companies in Spain.

By these means the tax office will be able to determine an appropriate tax category for owners because they will know when the property is in use by focusing on the frequency of cash deposits and withdrawals from bank accounts.

When we got our first bill from SUMA for our local taxes we realised that there was a mistake somewhere because it was considerably higher than the bills of our neighbours. The advice we received from our fiscal advisers was not to pay it because it could take SUMA a long time to correct the mistake.

Eventually we received notice from SUMA that there was an embargo placed on our car. Because we had failed to pay the tax bill they wanted me to hand over the car and its documents in lieu of the unpaid debts. A hasty trip to Cadastra in Alicante was required to get a proper evaluation of our house for tax purposes and the embargo lifted.

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