SpanishPropertyBuyer.com

One of the hottest topics being discussed at the present is the issuing of the EHIC and in general, health entitlement abroad.

Remember that when travelling to other EU countries you will need the EHI Card and will receive free or reduced cost medical attention in most EU countries (check the ehic.org site, for those countries in the scheme) or any unforeseen accident or emergency will end up a costly experience. As a backup it is advisable to take out travel insurance too.

If working in the EU or abroad under contract, then you should be covered by the health scheme of the country you are working in but always check.

If you live in a EU or foreign country and are self employed then you should be covered by the Social Security contributions you are making, check with your Tax advisor or accountant.

If a pensioner living in an EU country and registered as a resident of the country in which you live and having registered your E120 (Certificate of entitlement for pension claimants) then you should be entitled to reciprocal health arrangements, check that your country of residence is part of the scheme.

If you are living in an EU or overseas country, not of pensionable age and/or an unregistered worker then you will normally, not be entitled to health care. It will be necessary to arrange private health care.

For information on these subjects look at the following sites:-

https://www.ehic.org.uk/Internet/home.do

 http://www.nhs.uk/nhsengland/Healthcareabroad/pages/Healthcareabroad.aspx

Homebuyers still prey to uncertainty: Should I buy now, wait… or what should I do?
It now appears that home prices have not fallen as much as everyone thought, or at least according to the most important statistics. And that is not all, as the Government also believes that the sector will stabilise in the “near” future. How soon this will happen is not clear, although it will probably not be before the VAT increase, which will increase home prices by an average of 2,000 euros, and may take place before 2011, when the deduction for habitual residence purchases is to be abolished, a measure which will bring about a hidden increase of 8% in average home prices, according to calculations by economists.

Therefore, and bearing in mind that buying a home is the biggest investment that most people make in their lives, is it worth buying now, while you can still take advantage of the deduction and without being penalised by higher VAT? Or is it better to wait until 2011, when the era of low-priced homes may have finished? Should I sell? Should I lease with an option to buy? There are too many questions, and the answer to all of them is discouraging: “It depends”. The experts consulted by EXPANSIÓN did not have any general solutions, although they did have an answer for each question

Is it a good time to buy a home?

If the price of a property has dropped considerably, don’t take too long over your decision, because house prices have probably hit the bottom.

Bear the following in mind: “Prices can fall between 20% to 25% on average in the housing cycle”, and: “It is a good time to shop around carefully, because there is a wide range of homes for sale, and you will find some properties at a good price.” However, a word of caution if you want to buy a property on the coast – it would be better to wait as “prices are going to fall further”.

Is it worth buying a home before the tax hike in July?
This year is a good time to buy your first home: “If depreciation rates  were between 4% to 5%, the VAT increase and the elimination of the mortgage tax deduction would cancel out the lower prices. But in fact I do not believe that house prices have fallen 4%”. They must have fallen “by least 10% to 15% (depending on the area) in 2009, and in 2010 they will probably drop by around -10% to 20%, which means that this year will be a good time to buy a home, and a terrible year for selling”.

Does it make more financial sense to wait?
“The longer you wait the further house prices will fall, although it will be harder to find great home buying opportunities. If you buy now it means that you will not be affected by the VAT rise from 7% to 8% in July. In addition, you will be entitled to a deduction of up 15% on the first 9,015 euros spent on mortgage repayments each year in your personal income tax return, even though you earn over 24,000 euros a year. However, this must be balanced against the fact that next year promises to be a very good one for homebuyers.
What is going to happen in 2011?
The tax rise and the government’s promise to abolish the mortgage tax deduction “are going to encourage homebuyers to buy this year, even though the market has not yet bottomed out”.

What about if I want to buy a property in order to lease it for rental income?
This is another good option. Buying a rental property is a good investment at the moment, as due to the crisis there is a very wide range of opportunities to choose from. Now is a good time for medium and long term investments, even though “prices are bound to fall even further next year” according to real estate analysts. “Anyone who buys now will see a good return on their investment in ten years´ time” advises Izquierdo.

Should I sell?
The experts recommend that “sometimes it is better to make a loss than wait for the situation to get better”. If you set a realistic sale price, the property will sell. However, you should remember that t the property’s current worth will almost never be as high as during the property boom. THREE TIPS
1. “The whole of 2010 is a terrible year for selling, and a good one for buying. The best time to buy is probably before the summer”, as that is when VAT goes up.
2. “Now is the time to look for low-priced homes. The longer you wait, the more prices will fall, but it will be harder to find great home buying opportunities”.
3. Look for properties selling at very reduced prices, because it is unlikely that they will fall any further. “It would appear that the homes for sale at reduced prices are the homes that are selling”.

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The Spanish Inland Revenue ‘penalises’ anyone who buys a bargain-priced home.

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The tax authorities have minimum prices for residential properties.

When you buy a second hand home you have to pay a property transfer tax (PTT), established by the Autonomous Communities, which comprises 7% of the sale price which appears in the title deed. Although this is normally straightforward, there has been a recent increase in the number of cases where purchasers have received a tax demand from the tax authorities for an amount which is higher than the PTT they have already paid.

This is particularly true when a homebuyer has bought a home at a low price – a bargain price. The reason for this is because the Autonomous Communities have several minimum-price tables, which are used to calculate the minimum PTT that the purchaser has to pay when they buy a house. The purpose of these tables is to prevent the fraudulent practice of registering a purchase price in the title deed that is lower than the real sale price. As a result, the tax authorities have a reference minimum price for each residential property, and consequently a minimum tax amount. This is not a problem if the purchaser pays more than the minimum tax, but if the tax authorities think that the purchase price has been too low it uses the tables to claim outstanding tax.

An unpleasant surprise for the purchaser

Therefore, anyone who buys a second hand home, and is not familiar with all the procedures, may find themselves in the situation where, after having paid the taxman 7% of the property’s purchase price, they receive a tax claim from the tax authorities informing them that they have to pay additional PTT. The amount in question will be 7% of the difference between the purchase price that appears in the title deed, and the price that the tax authorities consider to be the minimum price of the property, plus the interest due for late payment.

For example, if you buy a home for 200,000 euros, you hav e to pay 14,000 euros as PTT. If the minimum price of your property, according to the tables of the tax authorities, is 300,000 euros, the minimum PTT is 21,000 euros, which means that the taxman will send you a tax claim for the difference: 7,000 euros plus interest.

For this reason, if you are thinking about buying a property whose price, perhaps due to the crisis, has dropped significantly, you should find out its minimum price in the minimum-price tables in order to know how much tax you will have to pay, and to avoid any unpleasant surprises or tax claims at a later date. The minimum prices are usually below the sale price, but in some areas where home prices have plummeted as a result of the crisis, it is increasingly common for this not to be the case.

It is therefore extremely important that before executing the title deed for the property, you contact the tax department of the Autonomous Community where the property is located to find out what the min imum price of the property is, according to the tax authorities´ tables. This will enable you to find out how much tax you will have to pay, and allow you to plan your finances accordingly. In particular it will save you from being subject to unpleasant surprises in the future in the form of a tax claim from the tax authorities.

Is it possible to appeal to the tax authorities to avoid paying “extra” tax?

If the purchase price that appears in your title deed is less that the minimum price given by the tax authorities, and you pay less PTT than is due, the tax authorities will send you a tax claim informing you that you have to pay the difference. After you receive the notification, you will have a limited period in which to appeal, and present your arguments to justify why the property’s purchase price is less than the price that is given in the minimum-price tables. Typical grounds for appeal are that the purchased property is in poor condition, or that it has a sitting tenant (which lowers its value). You can also provide a valuation report from an independent expert that shows that the market value of the property is less than the value assigned to it by the authorities. However, it is extremely unlikely that your appeal will be accepted, and that you will not have to pay “extra” tax, as this only happens when there are extremely strong grounds. Therefore you should not count on the appeal being accepted, as the tax authorities “accept” that you have purchased a bargain-priced home, but they will tax the sale using the property’s minimum price in the event that the sale price is lower.

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More wealthy people are expected to leave the UK to reside abroad and escape the new 50% tax rate for higher earners. Now the UK tax authority has warned that it will dig deeper to determine non-resident status and look closely at people’s lifestyles – and not only how many days a year they spend in the UK, to assess their tax liability.

Wealthy or not, many people who live outside the UK may think that they are UK non-resident and therefore not liable to pay UK taxes, but under the scrutinising eyes of the taxman they could be found to have UK tax status because of the connections they retain with the UK. It would be wise to be wary of the taxman – for what you believe to be the tax rules regarding residency may be rather different from HM Revenue & Customs’ view.

Many people go by the 91 day rule when calculating their tax residence, which is to spend less than 91 days in the UK on average, calculated over a period of up to four UK tax years. But this is a guideline rather than a law and could be ignored if other factors give weight to UK residency. Retaining a strong association with the UK such as maintaining a UK property, especially for family members; visiting the UK on a regular basis for work and keeping strong social ties such as club membership could go against you when HMRC determines your tax status.

It is advisable not to keep a house in the UK after moving overseas but to sell it and avoid buying a smaller property such as a flat for occasional visits. If it is not possible to sell your property because of a weak residential market, it should be let to a third party – not to a friend or a relative. If you do retain a home in the UK then HMRC could argue that your property overseas is more of a holiday home than a permanent residence.

HMRC has not yet revealed full details although it indicated in April that new guidelines covering the strength of your association with Britain could mean that you will be deemed a UK taxpayer even if you abide by the 91 day rule.

Private client partner at City law firm, Wedlake Bell, Emma Loveday, told The Sunday Times: “Merely counting days is just not enough to maintain non-residency status. HMRC will be considering many other factors and it will be trying to assess what the intention of the individual is when applying for non-residency and whether their lifestyle indicates that they have left the UK and become non-resident.”

“There is currently no statutory definition that sets out clearly and concisely what activities make an individual a non-resident,” Loveday said. However, other factors that could go against UK residency is sending a child to a British boarding school, remaining on an electoral roll, remaining registered with a UK doctor or dentist, keeping a car in the UK and having post sent to your UK address.

HMRC may well send you a letter requesting answers to questions giving evidence that you have left the UK for a settled purpose and that you have clearly separated yourself from UK residence.

Questions include:

• Your full current postal address in your new country of residence.

• Date of departure from the UK.

• Precise dates of when you visited the UK from that date and the reason for each visit.

• Where you stayed on each visit.

• Documentary evidence to support these dates in the form of bank/credit card statements covering the period which indicates where you were at the time of the transactions.

• Copies of utility bills, itemised phone bills, building and contents insurance, property/Council tax bills for your property in the UK and overseas.

• Particulars of arrangements to transfer your furniture and personal belongings to your overseas residence.

• Details of all property transactions during the period.

• A schedule of all bank, building society and credit card accounts during the period.

• Documentation that you are a registered taxpayer in your new country.

Anyone who moves abroad to live needs to be careful to ensure that they have indeed left the UK permanently to avoid being deemed as a UK tax resident. It is not enough to rely on the time based rules, i.e. spending less that 183 days in the UK during a UK tax year or not more than 91 days in the UK averaged over four tax years, but to cut all ties with their homeland as well.

The 91 day rule is not actually law in the UK, as some people who believed they had spent less than 91 days in the UK each year have found to their cost. UK case law is littered with stories of people who claimed they had left the UK and spent less than 91 days there, but were found by UK Courts to have remained UK tax resident.

From 6th April 2009, HMRC’s new publication HMRC6 entitled “Residence, Domicile and the Remittance Basis” replaces the publication IR20 on the tax liabilities of residents and non-residents. HMRC stresses that HMRC6 is for guidance only and does not have legal effect.

Under note 1.5.22 it states:

“The number of days you are present in the country is only one of the factors to take into account when deciding your residence position…

“You should always look at the pattern of your lifestyle when deciding whether you are resident in the UK. Things you should consider would include what connections you have to the UK such as family, property, business and social connections. Just because you leave the UK to live or work abroad does not necessarily prove that you are no longer resident here if, for example, you keep connections in the UK such as property, economic interests, available accommodation, and social activities or if you have children in education here.

“For example, if you are someone who comes to the UK on a regular basis and have a settled lifestyle pattern connecting you to this country, you are likely to be resident here.”

Anyone who has concerns about their UK residency status can take professional advice from financial experts Blevins Franks and receive guidance on how to legally minimise their tax liability both in the UK and their country of residence.

Credit:- By David Franks, Chief Executive, Blevins Franks

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The demand of property has been decreased in Spain due to the recession period which is the main reason for slowing down the prices of property. It encourages the foreign investor for buying Spanish property. Spain is located in southwestern Europe. According to Spanish government, there are 4.8 million of foreign residents settled in Spain. It’s 11 % of the total population of Spain. Spain is known for its welcoming nature of the locals. It has become popular for its beautiful atmosphere, neat and clear beaches as well as water, affordable way of life, and pleasant climate. So, it is the main centre for tourism on the European continent. Having great potential for tourism, it becomes a favourite location for the hundreds of real estate investors and homebuyers to make quick profits.

Many real estate investors have been concentrating to invest their money to buy cheap Spanish property in some desirable area in Spain to construct restaurants, luxurious apartments, and tourist resorts for the last few years, so prices of these properties are rising in these areas. As it was rising up and up, some regions become intangible due to exorbitant prices, some have lost interest and finally prices come down.

Now, Spanish government encourages the real estate investors to buy cheap Spanish property to revitalize their local economy. This is the perfect moment for overseas investors to invest in cheap Spanish homes and properties located inland rather than in the surrounding areas of coast. If you are good at bargaining and have an idea of price and desirable location from where to buy property, then do not lose the chance to invest money. Costa Blanca is one of the cheapest locations in Spain to buy property. The prices of the flats start here from 40,000 pounds to maximum of 150,000 pounds.

Approximately, 450,000 new homes already finished in this year and out of them, many homes remain unsold.

Credit: Articles Base ID #1041799- Roshan Dark- 16 July 2009

Cancellation  Of  The Loan, In Whole Or In Part, Is Penalized By A High Charge
A new ‘anti-switching’ clause ties mortgagees to their banks.

• § It’s called ‘Compensation for Interest Rate Risk’, and it’s been law since 2007
  § It penalizes those who wish to change banks by up to 5%, although there’s no legal upper limit
  § The borrowers affected have no room for manoeuvre: Once they’ve signed they can’t object
  § There’s been no public outcry: ‘This is just the beginning. There’ll be more of it for sure’

Times change and with them the clauses and mortgage charges, used by banks and savings banks. Following upon the famous ‘mortgage rate floor’ clause, the latest to become fashionable has been the so-called ‘Interest Rate Risk Compensation Clause’. A new, and completely legal, ace up the sleeve which some lenders are including in loans mainly to prevent their customers from taking their mortgages to other banks or savings banks.

The penalty, included in Chapter I V of the 2007 Mortgage Act -and therefore only affecting mortgages taken out after that date-, has begun to make its appearance in some deeds drawn up in recent months. Its sudden emergence coincides with plunging interest rates and the fierce competition between lenders to get the highest number of existing mortgages onto their books.

Credit:-www.spainsolicitors.com  - 9 February 2010

Although there are financial institutions and real estate companies that are trying to convince consumers that house prices are not going to fall any more, the truth is is that the real estate market is still overvalued, and over the coming months we will see the market fall further until the number of homes on the market, currently standing at one and a half million, is significantly reduced.

The high excess housing supply will only come under control when prices fall low enough, despite the fact that neither financial institutions nor developers appear to be willing to sell properties for less than their book value. Nobody wants to sell at a loss, but in the end there will be no other choice.

How much further do house prices have to fall? Experts vary widely in their opinions, since the statistics are not very reliable, but if we take into account the fact that the real estate bubble caused prices to increase by 30%, and that they have since dropped back only by about 10%, we can conclude that house prices should fall by another 20% over the coming months.

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The Centre for Economics and Business Research (CEBR) has forecast that parity between the Pound and the Euro could be reached in 2010. How the markets react to the UK’s public finances will be the main determining factor as to whether Sterling falls below the Euro.

Much depends on the forthcoming general election. The markets were betting on the Conservatives winning the election as they have indicated that they would take a positive stance on spending cuts and reducing the UK’s £178 billion budget deficit. The incumbent Labour Party had been vague about future spending cuts and argued that withdrawing Government support too quickly could be damaging to the recovery.

There has been a significant gap in the opinion polls with the Conservatives being favourites to win the next election but more recently the gap has narrowed and the outcome is less certain. The CEBR warns that if the Conservatives’ lead drops off well into the single figure zone the markets “will have kittens and probably start a Sterling sell off” thereby causing the Pound to plunge.

The CEBR’s chief executive, Douglas McWilliams, explained that “Whether the markets react to the UK’s fragile public finances before they react to the divergence of performance in the Eurozone will determine whether Sterling drops below parity with the Euro. If I had to bet, I would bet on the side of parity being broken.”

Meanwhile the ratings agencies “are looking for an excuse to downgrade the UK Government from its AAA rating,” McWilliams said. “There are far too many variables and far too much uncertainty for us to have a very firm view about what will happen. But opinion polls are volatile …and it would be unusual for there not to be at least one wild poll showing Labour doing well, even if the underlying views are different.” 

The CEBR forecast was published on 28^th December, the day after a letter was published in The Sunday Times from several leading economists attacking the Government for its “irresponsible” failure to set out a convincing plan to reduce the UK’s budget deficit. They said that there was a “heightened risk” of Britain’s sovereign debt rating being downgraded.

When the CEBR’s forecast was published the Pound was trading at around 1.10 against the Euro after hitting a record low of 1.02 a year previously.

Euro’s strength in balance

On the other hand, the exchange rate also depends on the strength of the Euro, which is under threat from fears about sovereign debt downgrades in the Eurozone.  Countries like Greece, Spain, Portugal and Italy are putting a strain on the monetary union. The major international ratings agencies have downgraded Greece’s government debt rating and Spain and Ireland could face a similar fate.

The European Commission has warned that soaring budget deficits and low growth “are feeding into significantly higher public debt levels.” Average Eurozone public debt could reach 84% of gross domestic product in 2010 and 88.2% in 2011, well above the EU’s Stability and Growth Pact’s limit of 60%.

Commentators are beginning to talk about the likelihood of EU countries being forced into economic reform. The Euro was launched eleven years ago and there are questions about how long its strength will last. The 16 Eurozone countries are joined by the common currency and monetary policy but each country sets its own fiscal policy. Yet one currency across such a varied range of economies with Germany considered as the cornerstone of the Euro doesn’t allow for flexibility according to each country’s fiscal needs.

“The Euro has also got a potential downside, because to be frank it has not worked,” McWilliams said. “When it was set up, it was assumed that economic performance between Germany and the rest of Europe would converge. This has not happened – quite the reverse ‐ and when Germany is forced to bail out much of the rest of Europe it is hard to see the Euro remaining as strong.”

No one knows with any certainty what will happen between Sterling and the Euro during 2010. Last year some economists were predicting that the Pound would pick up more than it did towards the end of 2009. Now it looks like it may fall further depending largely on the UK’s general election result and the markets’ reaction.

There is also a feeling that the Euro may be about to turn downwards brought to a head by the pressure of the economic crisis and the ability of a “one currency fits all system” to work efficiently.

What can you do?

British expatriates continue to feel the burden of a low Pound against the Euro, especially where transferring regular income such as pension payments are concerned.

If you don’t already use a currency exchange specialist to transfer money you should consider doing so, since they can offer better rates than banks and without many of the accompanying charges.  You can also fix a rate for regular payments such as payment income, to ensure you receive the same amount each month.

If you have private pension funds you may be able to set them up so you can change denomination to Euros and avoid further currency uncertainty.  The same applies for your savings and investments – if you intend to live in the Eurozone for the foreseeable future you should ideally have some assets in Euros

Whether you need to change currency now or if you are concerned about preserving your wealth it is in your interest to consult an international financial adviser and wealth management company like Blevins Franks for advice on how to get the most of exchanging your disposable income and protecting your assets for the future.

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As with the start of any new year we’ll wonder what it will bring.  Unfortunately, one assumption we can make about this year is that we’ll be forking out more in tax.  Here in Spain, VAT will increase, as will the tax rate on savings and investments.

Spain has been particularly hard hit by the credit crunch and economic downturn.  Property prices have fallen.  The construction industry is in disarray.  Unemployment is the highest in the EU and climbing.  The budget deficit is expected to hit over 8% of gross domestic product, much higher than the 3% target for Euro countries.  The European Commission has given Spain until 2012 to rein its deficit back in to 3%.

Government spending has overshot budgets as a result of measures to counter the financial crisis and spiralling unemployment benefit payments.

Back in September, Prime Minister José Luis Rodríguez Zapatero indicated how he would start to balance the books, telling parliament:  “I am going to ask for a share of people’s incomes out of solidarity and to meet the demands of the most needy”.

Just a few years ago, when Spain was booming, Zapatero was able to court the electorate by cutting taxes.  But times have changed, and today he is in a position where he needs to raise taxes, whether voters or the opposition party like it or not.

At the end of September his government delivered its 2010 “austerity” Budget, which included proposals to increase taxation to the tune of €11 billion.  The Budget was then passed on 24^th December.

On a day to day basis the cost of living would increase thanks to higher VAT rates from July 2010.  The general VAT rate will jump from 16% to 18%, while the special rate applied to services and food production will be 8% instead of the current 7%.   

The tax rate applied to savings, investment income and gains has increased from 18% to 19%.  If your total savings/investment income or gains exceeds €6,000 in a year, then the rate has increased to 21% on the excess.  

The Budget also abolished the annual income tax allowance of €400 for employees.

In an environment when interest rates are so low and unlikely to increase in the near future, these tax increases will impact on many expatriates living in Spain, particularly those with large holdings in bank deposits.

You should also be aware that wealth tax has NOT been abolished.  The rate was set at zero, but the tax still exists and can be resuscitated at a moment’s notice

You should not necessarily let the tax tail wag the investment dog by making investment decisions purely to pay less tax.  Your wealth management decisions should take both the investment and the taxation aspects into consideration.  Overall, your aim should be to protect your wealth and income in real terms, and in such a way that your savings and investments are as tax efficient as possible. 

This is especially important at a time when bank interest rates are low; the Sterling to Euro exchange rate is unfavourable for British expatriates and the potential for higher inflation is on the horizon.  Reducing your tax liabilities can increase your income and/or your capital growth, which helps maintain the value of your wealth over the longer term.

Likewise, if you have a UK pension which is either deferred or in drawdown, you may be able to reduce the rate of tax that you pay on it to below 2% per annum in Spain – which again would improve your income.

Other countries besides Spain can expect to suffer tax increases over the next few years.  The UK has already announced changes which will make higher earners contribute more of their income to support the state.  The middle classes expect to be next in the firing line, especially once the general election is over and the government can stop trying to woe voters and move onto the crucial task of reducing the huge national debt at the same time as meeting its social welfare commitments. 

If you are currently tax resident in Spain but may return to the UK, you can take steps now to make your investable assets more tax efficient once you are back on British soil.

Whatever your circumstances, it is always important to get professional guidance from a wealth management firm like Blevins Franks on the most appropriate tax mitigation arrangements for your circumstances.

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2009 was a year of what seemed like relentless news on the crackdown on offshore Banks and tax evasion; national budgets in deficit (due in no small part to falling tax revenues) and proposals for tax increases.

February – Swiss bank UBS agrees to a $780 million payout in fines to the US to settle a claim that it helped approximately 17,000 US taxpayers escape paying US tax.

March – Several Offshore Financial Centres (OFCs) announce they will co-operate with the Organisation for Economic Co-Operation and Development’s (OECD) principles on exchange of information concerning tax matters.

Switzerland also agrees to relax its secrecy rules and divulge more information on suspected tax evaders. It is hailed as “the beginning of the end of tax havens”.

In the US, a second Stop Tax Haven Abuse Act is launched in an attempt to halt the $100 billion a year lost due to offshore tax abuse.

April – At the G20 Summit in London world leaders declare that “the era of banking secrecy is over” and vow to take action against non co-operative jurisdictions.

Credit Suisse starts closing down the offshore accounts of US clients who have not declared them to the US authorities.

The UK Budget on 22^nd April a 50% income tax rate for high earners.

May – France sets up a voluntary disclosure facility.

June – France announces a measure requiring its banks to disclose information regarding their links to tax havens.

The Isle of Man announces the end of banking secrecy for EU residents from 1^st July 2011.

July – HM Revenue & Customs (HMRC) confirms details of the New Disclosure Facility (NDO), to give offshore tax evaders an opportunity to bring their affairs in order and avoid the high penalties they would face when eventually caught. 

August – The UK Tax Chamber of the First-tier Tribunal orders 308 UK and overseas banks to give details to HMRC about customers who hold offshore accounts.

UBS agrees to hand over the names of 4,450 of its US customers to the US government.

France secures a list of 3,000 citizens holding about €3 billion in Swiss bank accounts that authorities suspect have not been declared.

The UK signs a landmark voluntary disclosure deal with Liechtenstein.

September – The UK’s NDO starts on the 1^st.

Italy launches its third amnesty in eight years.

The Spanish 2010 Budget contains almost €11 billion in proposed tax increases.  The French Finance Bill for 2010 also contains a raft of tax initiatives to generate €3 billion additional tax revenue.

The OECD reports that over 90 new Tax Information Exchange Agreements have been signed since April.

October – The French government says that French banks will close all branches in jurisdictions considered to be tax havens from March 2010.

Italy’s financial police raid 76 local branches of Swiss banks in a mounting crackdown on tax evasion.

The National Institute of Economic and Social Research in the UK suggests that a 7% rise in the rate of personal income tax is needed for the country’s debt burden to be brought to more acceptable levels.

November – The US government announces an unprecedented response to its voluntary disclosure scheme.

HMRC extends the deadline for its NDO to 4^th January.

December – The UK Pre-Budget Report doubles the potential maximum penalty for offshore tax evasion to 200% of the unpaid tax.  HMRC will have to be informed of bank accounts opened in certain jurisdictions.  The Chancellor also increases national insurance contributions for those earning over £20,000; freezes the personal allowance and income and inheritance tax thresholds and extends the higher-rate tax relief restrictions to catch those earning over £130,000.

What next?

We can expect to see further taxing times ahead as governments step up efforts to reduce their deficits, both by increasing taxation and by cracking down on tax evasion.

In spite of all this, tax planning is still alive and well.  But while you may want to reduce your tax bill, the solution is not to ‘hide’ your money from the taxman – it is only a matter of time before everyone evading tax will get caught.  Why take the risk when there are tax protected investments which legitimately avoid tax without having to hide it?  Seek professional advice from an experienced tax and wealth management firm like Blevins Franks to ensure your get your tax planning right.

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