The move has come about as a result of enhanced Spanish monitoring capability, with new technologies and tighter Common Reporting Standards making it more difficult for individuals to under-declare income and assets, particularly that which is located in or originates from overseas.
Gibraltar has long been a popular place of residency for those with wealth management priorities, mainly because of its status as a favourable tax jurisdiction. However, this does not mean that anything goes; HNWIs and their financial advisers must ensure that the status of their tax, assets and income fully complies with the laws of all relevant jurisdictions and, crucially, that they are reported in a clear and transparent way.
During May, ABC ran a story which detailed the success of the Spanish authorities in tracing tax evaders. It said that it had unfortunately become “quite common for foreign nationals to live in luxury residences in the Costa del Sol but to claim residency in “el Peñón” (the Rock).”
One troubling issue has been the way some HNWIs hide their true financial affairs behind “complex corporate structures” in order to avoid various taxes, including property tax, income tax and Spanish wealth tax.
However, it is important that the residents of Gibraltar take wealth management advice to ensure that they understand the difference between legitimate tax minimisation and tax evasion, which is illegal – Gibraltar’s unique status means that HNWIs can, with the right advice, significantly reduce their tax liability while also remaining within the law.
In recent years, communication between the two jurisdictions has improved considerably. For example, in 2013 93% of people who lived in Spain but worked in Gibraltar failed to disclose their income to the Spanish tax office. Enhanced reporting standards mean that, since 2017, 75% now disclose their income.
It is of course important that all income is declared; however, for many expats it is possible to legally organise their finances in a way that allows them to make the most of favourable tax and financial structures. Professional advice is essential in this regard.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
In a world where our financial stability impacts almost every aspect of our daily lives, it is more important than ever to preserve what we have worked so hard to achieve. Unless you’re lucky enough to win the lottery, most of us have worked hard and for a very long time to achieve financial security and the lifestyle we want for ourselves and our families in retirement.
The later part of the 20th century saw its fair share of financial bubbles. There was the property bubble, stock market bubbles, and then the dot com bubble of 2000, just to name a few. In each instance, people paid exorbitant amounts for things that shouldn’t have been worth anything like the going price. But this is nothing new – look back at the Dutch in the 17th century when already pricey tulip bulbs experienced a twentyfold price explosion in just a single month.