Saturday, 26th May 2018
FINANCE & INVESTMENT Article
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This Month's Magazine
Hidden Havens Made Bare

Hidden Havens Made Bare

A look at tax legislation affecting offshore holding companies.

Mark Twain once said “The difference between a taxidermist and a tax collector is that the taxidermist takes only your skin”! Never so true as from January 1st, new tax legislation in Spain heralded the end of an era for those who own their properties through offshore company structures.

Over the last twenty years many thousands of foreign investors have channelled their property investments in Spain directly or indirectly through offshore companies. This has enabled many individuals to avoid the payment of many Spanish taxes such as capital gains, inheritance and gift tax.  

Now, we know that not everyone owning assets in Spain through an offshore structure is a crook, but here on the old Costa del Crime, there are a handful of lets say, unscrupulous individuals who benefit greatly from their offshore structure! In line with the rest of Europe, the Spanish authorities have been trying to introduce legislation that will lessen the amount of tax evasion and money laundering and the tax office does not want to leave any stone unturned in its quest to eradicate all investments channelled through tax haven countries.


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The main thrust of the new legislation, which came into force January 1st, is aimed at forcing companies with offshore financial structures in place to demonstrate beyond reasonable doubt that their underlying activities are truly carried out in their respective offshore centre, and that these are indeed normal business activities.

The tax office will be able to initiate tax investigations of these companies based on the simple presumption that they consider the true or main activities to be carried out in Spain. It will be up to the companies concerned to demonstrate otherwise. Failure to do so will result in the companies in question, having to present accounts in Spain, reflecting all their transactions, wherever they are.

These proposals will also affect offshore holding companies set up to hold shares in Spanish companies. Offshore companies will be taxed as onshore as from 1 January 2007 and Capital Gains taxes and Spanish Inheritance tax will become payable. Costs of unwinding the structures will be expensive (10% approx) and will be subjected to capital gains tax.

If you wish to protect the existing tax benefits of your offshore structure then a consultation with Graydon & Associates is highly recommended.



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