September 2019 Edition

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
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