International private wealth clients in Spain - a quick post-Covid outlook
The International Family Offices Journal
Vol. 5 - Iss. 2 pp. 36–37
An article on the impact of Covid-19 comes from Spain. This is of particular interest to the many individuals who are spending more time, because of the pandemic, at their holiday homes in Spain as there can be serious tax consequences. As Patricia García Mediero (Spain) explains: Given the large number of foreign individuals with second homes in Spain and a stable presence in this country, tax residence is one of the main target areas of the Spanish tax inspection. Inspection practices and resources have been materially enhanced following the recent creation of the Central Unit for Private Wealth, now fully operational. These investigations often result in large tax assessment and lengthy court cases - sometimes under tax fraud charges - and are based on an increasingly aggressive interpretation of the Spanish and Treaty provisions regarding an individual's tax residence situation. She advises that individuals examine their tax residence status in order to determine their potential exposure on a potential Spanish tax audit: This is especially important for individuals who are not declaring themselves as tax resident anywhere, or claim to be tax resident in a low tax jurisdiction, or in a jurisdiction with special tax regimes (eg, Portugal, Italy, United Kingdom), all while having a stable presence in Spain or retaining economic or other ties to this country. The tax rates are high - the current general marginal income tax rate for regular and investment income for Spanish tax resident individuals is set at 45% and 23% respectively - post-Covid, this may go up to around 50% and 27%. There is also an annual wealth tax. She closes with a plea to family offices: We encourage family offices to start a dialogue with principals with a view to maximising the use of current highly advantageous tax regimes in Spain to transfer wealth to the next generation in a structured, tailored and tax beneficial manner, considering not only the Spanish tax implications but the overall effect in all jurisdictions concerned.