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.
If you are worried about the Lifetime Allowance (LTA), we understand. LTA is a limit on the amount of pension benefit that can be drawn from pensions schemes without an extra charge being triggered.
Great news for the clients of expat financial services: the government has announced proposals to abolish the 15-year time limit on the right of expats to participate in UK general elections.