Volatile currency exchange rates are complicating tax returns for expats in Spain who have to declare the value of their overseas assets by the end of March.
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The Spanish tax authority has a strict set of rules for expats filing the returns.
The conditions are different if the expat is a first-time filer or a regular filer – and on the type of assets they own.
Expats who have foiled a Form 720 in previous tax years only have to update the tax authority on any change over a certain threshold in the value of the assets or of any disposal.
The rule is:
- Expats have to tell the tax authority about any bank accounts, investments or immoveable property
- If the assets are outside Spain
- The total value of assets in each separate category adds up to more than 50,000 euros
So, a British expat with £100,000 of shares held outside Spain has to tell the tax authority about all shares owned as they are worth more than 50,000 euros.
Complicated rules
However, if the also have 30,000 euros of cash outside Spain, this does not have to be declared because the asset value in that category is less than 50,000 euros.
With fast changing euro/pound currency rates, expats with asset balances around the 50,000 euro mark need to pay close attention to whether they need to make a declaration.
The rate is fixed at the official government euro/£ rate on December 31, which was 1.28 euros to a pound.
Since the Spanish government has introduced a wealth tax on expats, many have seen their tax bills rise either because they are declaring their assets for the first time or, because for different reasons, they wrongly declared their worth in previous years.
CGT in the UK
Not only are expats now taxed on capital gains, but the income the assets may generate as well.
For the first time, expats also face a double tax whammy from April 6, 2015, when they will have to pay capital gains tax on the profits of any disposal of a home in Britain.
Luckily, home prices for CGT will be rebased from April 6, 2015 so that CGT will only apply to any chargeable gain arising from that date.
Any capital gains tax paid in in Spain can be offset against that due in the UK, and vice versa, under a double taxation agreement between the two countries.
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