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Cross-border tax planning for today’s global transparency By David Bowern, Partner, Blevins Franks Tax transparency has recently been revolutionised by the global automatic exchange of information under the ‘Common Reporting Standard’ (CRS). This initiative enables tax offices across the world to keep track of taxpayers’ offshore assets and accounts. Meanwhile, many countries, including the UK, have introduced additional measures to check taxpayers are making correct declarations. HM Revenue & Customs (HMRC) collected £560 million from offshore tax investigations in the 2018/19 tax year –72% more than 2016/17, before CRS data collection began. With such heightened worldwide scrutiny, it is more important than ever to make sure you are paying the right taxes, in the right place, at the right time. What is the Common Reporting Standard? In 2016, the CRS “early adopters” began collecting information on financial accounts held by non-residents. The first exchange – where the 2016 data was passed on to the taxpayers’ country of residence – took place in 2017 between 49 jurisdictions, including the UK and Spain. Today, over 100 countries are co-operating, with more joining each year. Financial information being shared includes investment income earned over the year (interest, dividends, income from certain insurance contracts, annuities etc.), account balances and proceeds from the sale of financial assets. Local scrutiny Tax offices receiving CRS information can easily verify whether taxpayers have accurately reported their worldwide income on their income tax and wealth tax returns. In Spain, the authorities have already started following up discrepancies after comparing data to residents’ declarations. In the last exchange, the Hacienda received information on approximately 1.5 million offshore accounts with a total balance of €457 billion, while only €150 billion was declared through Modelo 720. In the UK, HMRC has made it clear that those who voluntarily declare and correct their offshore tax arrangements will be in a much better position than anyone who waits until investigators find them. Its ‘Connect’ analysis programme cross-checks data it receives from abroad with its own, providing tax officials with information to challenge around 500,000 cases each year. The importance of getting it right If you are tax resident in one country and have assets or earn income in another, take extreme care to make sure you are correctly declaring income and paying tax where you should be. While cross-border taxation is highly complex, getting it wrong – for any reason – can have severe penalties serious consequences. Remember, ignorance is no defence. There are tax planning arrangements available in Spain that can help you legitimately reduce your tax liabilities, particularly on investments, so take advice for the best results. An adviser with cross-border expertise can help you enjoy favourable tax treatment while offering peace of mind that you are meeting your obligations, here and in the UK. The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice. Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com 31