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Global crackdown on Tax Dodgers

March 14, 2019

The global crack down on tax offenders continues at pace with more countries signing up or committing themselves to the OECD’s mutual convention on the exchange of tax information. Singapore is one of the latest countries to sign up and work together with international partners in other financial centres such as Switzerland, Luxembourg, Hong Kong and offshore jurisdictions like the British Overseas Territories in a concerted attempt to make tax co-operation the standard.

With taxpayers increasingly operating worldwide, tax authorities are moving from bi lateral to multilateral cooperation and from exchange of information on request to other forms of cooperation such as automatic exchange of information.

You may well be wondering what the implications of this are for you and your investments. One of the main themes, which will be further highlighted when the EU Savings Directive is amended, probably later this year, is that trusts and offshore companies will fall under any reporting requirements so that whether you are an owner or beneficiary of such an arrangement there will be reporting requirements. Of course many people will set up this type of arrangement for inheritance tax mitigation or other reasons however if your objective is solely for secrecy then this is not likely to work moving forward. The British Government has been particularly forceful in securing an agreement with the likes of Cayman Islands and BVI in order that information can be passed to HMRC and then subsequently this information will be forwarded to the Spanish authorities.

Even closer to home jurisdictions such as the Channel islands and the Isle of Man have agreed to report to the UK authorities so for example living in Spain and holding bank deposits in your own name or in a trust or company will need to be disclosed to the tax authorities.

For residents of Spain there is already a requirement to report offshore assets but many expats have chosen, at their peril, to make the relevant declaration probably thinking that the authorities would not discover these or if they did would not bother to chase the tax payer. Unfortunately there is bad news on both counts, the first round of Modelo 720 was an unmitigated disaster and so Hacienda has recruited more inspectors and has specifically set out to target British Expats (probably because of the Channel Islands and offshore territories connection). The second piece of bad news is that Britiain and Spain, as part of the G5 group, signed a specific agreement to automatically exchange information with each other. What this means is that it will be nigh on impossible to keep secret the existence of any investment held in either one of the crown dependencies or an offshore territory.

The message is simple. There are uncomplicated and inexpensive ways of legitimately arranging your financial affairs in a totally transparent way which will avoid the nasty shock of an investigation from the tax inspector either in Spain, in the UK or worse still in both. If you want to find out more why not speak to one of our advisers at a tax and wealth clinic being held in your local area. Call 956796911 or email