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If your mortgage has a minimum interest rate, or mortgage floor, it can cost you money.

What is a mortgage with a minimum interest rate?

HelpMyCash.com, a mortgage portal, explains that a mortgage floor is a mortgage in which there is a lower limit on the amount of interest you pay on your mortgage each month, which means that if the Euribor falls below a certain level you do not benefit from the fall, even though, in these times of crisis, there are a lot of families whose monthly mortgage payments have been greatly reduced thanks to reductions in the Euribor.

Mortgage contracts which have a minimum interest rate also have a variable interest rate (Euribor + differential) and this means that banks can use the two rates in the following way:-
- If the Euribor + differential is below the minimum interest rate, the bank charges the minimum interest rate
- If the Euribor + differential is higher than the minimum interest rate, the bank charges the Euribor + differential.

This means that banks will always charge the higher amount, whatever the rates.

When does a mortgage floor constitute an unfair clause?

Although there are multiple irregularities regarding mortgage floors (confusing publicity, banks failing to provide sufficient information, being deemed unfair under Article 49 of the Consumer Act etc), from a legal point of view, mortgages with a minimum interest rate can only be considered to be unfair when they fulfill at least one of the two following conditions:-

1. The contract with a minimum interest rate does not have a cap. That is to say, the bank protects itself against reductions in the Euribor, but does not offer the mortgager any protection if the Euribor goes up.

2. There is no legally binding mortgage offer (document drawn up by the bank which contains the exact mortgage conditions agreed upon by the parties), the mortgage offer does not mention a floor, or it is not signed by the customer. For this reason, it is always best to start by negotiating with your bank. There are various ways to try and remove, or at least reduce, a mortgage floor.

Recommendations on how to remove a mortgage floor from your mortgage:-

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1. Negotiate with your bank before the periodic mortgage review.
As a result of the complaints made by several consumer associations and bank customers over recent months, banks are coming to realise that the era of “anything goes” is coming to an end. For this reason they are increasingly willing to remove these controversial clauses from the contracts, or at least reduce them, if customers ask them to do so before the periodic mortgage review. If you have a good financial reputation and an excellent payment history, the bank should do everything in its power to keep you as a customer.

2. Consider a mortgage subrogation (change of bank).
If the bank is unwilling to modify or negotiate the mortgage floor, you can consider the possibility of changing banks. If the new bank offers you better terms by removing the minimum interest rate, and puts this offer into writing in a legally binding mortgage offer, you can use this offer as a negotiating tool with your bank. It will only have two options: match the offer to keep you as a customer, or let you sign the better option.

3. Demand your rights through legal means.
If the negotiations with the bank are not successful, you can still claim your right to a mortgage with no unfair clauses by making a complaint. There are 3 main ways of doing this: (1) making a formal complaint by submitting an extrajudicial complaint to Banco de España (although Banco de España’s decisions are not legally binding); (2) taking private legal action against the bank, and; (3) becoming a member of an association such as ADICAE, ASUAPEDEFIN or similar organisations and becoming part of a joint complaint. As of the time of writing, these actions have prompted several banks against which complaints had been lodged into calling the affected parties, and offering them a reduced interest rate in exchange for withdrawing the complaint.

Recommendations from ADICAE when taking out a mortgage:-

The Banks and Insurance Consumers Association of Spain (ADICAE) recommends that all homebuyers should calculate how much they will pay for the mortgage on the basis of the whole mortgage term, and not just the first five years, as it believes that the latter approach is misleading. To help people avoid the worst mortgage traps, the Association offers several recommendations for anyone thinking of taking out a mortgage.

1: Customers should avoid any binding conditions which are unfair. It is important to take into account the fact that many financial institutions offer loans with a differential over the Euribor of less than 0.5%, but that this offer is conditional to contracting products, pension plans, or investment funds, all of which makes the mortgage much more expensive

2: The requirement for loan guarantees should not be accepted at any time, as it is the borrower, with the property, that is responsible for the loan, and not the guarantor.

3: Toxic products such as minimum interest rate clauses or swap contracts are high risk, and should be avoided. ADICAE thinks that a fair minimum interest rate clause would be one which had a 2% floor, and a 6% cap. If your mortgage has a floor, read these recommendations.

4: ADICAE advises against going to debt consolidators. The OCU also advised against using them because they earn substantial commissions from acting as intermediaries between clients and banks, and because the solutions they provide are the same ones that you would get by negotiating directly with the bank.

 Credit: Fuster & Associates. www.spainsolicitors.com

Wider UK trade deficit and falling factory gate prices dampen appetite for the pound. Stability returns to the euro as the Greek panic subsides.

Sterling spent a second week paying the bill for its post-budget honeymoon. It has now returned all the way to its position before the chancellor stood up to deliver his speech on 22 June. There was nothing dramatic about the decline and no sense of the panic that would have been typical six months or more ago. To some extent the fall was a completion of the technical head-and-shoulders formation that peaked a fortnight ago.

The UK economic data were mixed. Monday’s services sector purchasing managers’ index (PMI) fell by one point to a less-than expected 54.4. It suggested that companies were still growing their activity but at a progressively slower pace.  Wednesday’s production figures were good in parts. Although manufacturing production grew by only 0.3% in May instead of the +0.5% analysts had predicted, it was a far better result than April’s -0.8% decline. The broader industrial production figure, which includes such things as mining and energy, reversed the previous month’s decline with a +0.7% rise. The Halifax house price index went down for a second month, this time by -0.6%, leaving house prices 6.3% higher than a year earlier. 

The most disappointing data, at least as far as sterling was concerned, came on Friday with June’s producer price index (PPI) and the balance of trade for May. The input and output components of the PPI, representing manufacturers’ costs and factory gate prices, were lower in June by -0.2% and -0.3% respectively. The numbers supported the Bank of England’s projection that inflation will fall back towards its 2% target without the need for higher interest rates. The UK trade figures were also unhelpful. The deficit in goods widened to more than £8 billion while goods and services together registered a £4.5 billion shortfall. Both deficits were bigger than expected and cast renewed doubt on the alleged benefits of a weak pound.

Other events during the week saw an announcement from the new Office for Budgetary Responsibility (OBR) that its boss, Alan Budd, did not intend to renew his initial three month contract and that the two other members of the triumvirate would also be leaving before the end of the year. Critics of the new setup wondered why he was leaving.  Could it be because of lack of independence? Perhaps not, for the International Monetary Fund (IMF) came out later in the week with economic growth projections remarkably similar to those put together by the OBR. The IMF agrees with the OBR that Britain’s gross domestic product will grow by 1.2%.  Its forecast of 2.1% growth in 2011 is lower than the OBR’s 2.3% prediction.

After months of punishment as a result of the problems in Greece the euro has made a good fist of regaining some semblance of stability. There has been a correction to what commentators retrospectively describe as an ‘oversold’ condition, in much the same way that sterling recovered from its near-parity lows a year and a half ago.

The euro zone’s services PMI came in better than its British or US equivalents at 55.5, minutely higher than the previous month. Retail sales also performed better than forecast in June, rising by +0.3% instead of falling by that amount as analysts had predicted. Finalised figures for economic expansion in the first quarter of the year showed a +0.2% growth in gross domestic product (GDP), probably a tad short of the +0.3% growth that is expected to have demonstrated. Germany performed better than Britain on the industrial production front, with growth of +2.6% in May, while it demonstrated slower inflation at +0.8% in the year to June. If the Bank of England is under no pressure to raise interest rates in the War on Inflation, the European Central Bank (ECB) seems to be under no greater pressure.

Indeed, the ECB sided with the Bank of England in leaving its policy interest rate unchanged at Thursday’s meeting. President Jean-Claude Trichet expressed guarded optimism at the pace of economic growth but found no difficulty in containing his enthusiasm. Of more interest to investors was that he did not say about the ’stress tests’ that Euroland banks have recently undergone. The purpose of the tests is to examine how those banks would survive another serious economic or financial shock.  Investors are uneasy that the ’stresses’ to which the banks’ balance sheets are subjected might not in fact be real life worst-case situations. The results of the tests will come out in a couple of weeks’ time and are eagerly awaited.

That sterling spent the whole week on the slide does not bode well for it in the immediate future. With UK statistics for Gross domestic product, inflation, consumer confidence, employment and earnings all due this week there is scope for further setbacks if the numbers are not supportive.

Buyers of the euro should hedge half their requirement until sterling’s future course becomes clearer.

Credit:- Moneycorp  13 July 2010

Does It Apply On Overseas Properties?

The Spanish gains tax regulations can provide relief on the sale of the main home for Spanish tax residents whose property qualifies as their habitual main residence.  If you are 65 years or older the gain is tax free even if you do not buy another property.  If you are under 65, the exemption only applies if you reinvest the proceeds of sale into a new main residence within a four year period, starting from two years before the sale.  There is some confusion about whether this relief applies if your new main home is located outside Spain, so this article looks into this issue.

 How does the relief work?

For the property you are selling to qualify as your main home, you need to have lived in it for a continuous period of at least three years from the date the property was bought or construction was completed.  If you have to sell earlier because of a change of job, marriage, separation or death of a partner, the tax relief can still apply.

 The relief is based on the proportion of the total sales proceeds reinvested in the new home.  If it costs more than the sale price of the old home, the full gain is exempt.  If only half of the sale proceeds are reinvested, then only half of the gain is exempt and the other half is taxable in the year of sale.

 If the property being sold has a mortgage on it, it is the net sale proceeds (after deducting the mortgage) which need to be fully reinvested to escape capital gains tax.

The taxpayer must declare the gain on his Spanish tax return together with his intention to reinvest the proceeds into a new main home, or the relief will not apply.

 Location of the properties

While the tax relief is only available to Spanish tax residents (as the property cannot be your main home if you are not Spanish tax resident), the properties themselves do not need to be located in Spain – either the residence you are selling or the new one you are buying.

So, if you move to Spain and sell your main home in your former country of residence (eg the UK) after you become Spanish resident, you may be able to avoid Spanish capital gains tax under these provisions.  You have to purchase your Spanish home within the two years preceding the date of sale of the UK property or within two years following the sale.  The purchase price of the Spanish property should be at least the net sale proceeds of your UK property for full relief to apply. 

If the Spanish property costs less than the amount you received from the sale of your UK property, you will be charged tax in Spain on a proportion of the gain equivalent to the sale proceeds not reinvested.

Similarly, if you sell your main home in Spain and move to another country, reinvestment relief can still apply to the former Spanish home even though the new home is not located in Spain, provided that you and your family make this property your new main home.  The purchase of the new home must take place within the relevant time limits and the full sale proceeds must be reinvested for full relief to apply.  If the family members move overseas to the new home, but the taxpayer remains in Spain, the relief will not apply as the property has not become the taxpayer’s new main home.

An example of relief applying in such a case is given in a formal response to a query submitted to the Spanish tax administration.

Furthermore, it would be a clear breach of EU law if Spain did not allow the relief for reinvestment in a new home situated within another EU country.  This situation arose in Portugal, and so the European Commission took action, as below: 

“In July 2004 the European Commission invited Portugal to change its rules which prohibit the capital gains tax relief where the new main home is situated outside Portugal.  The European Commission considers these rules to be discriminatory and contrary to the EC Treaty rules on the free movement of people, etc.

“Portugal did not amend its legislation within the 2 months time limit given by the Commission, so in January 2005 the Commission decided to refer Portugal to the European Court of Justice.

“On 26 October 2006, the European Court of Justice ruled that the restriction of the relief to the purchase of a primary residence located in only Portugal was an infringement of the fundamental freedoms guaranteed by the EU Treaty.

“As a result of the European Court decision, taxpayers should be able to benefit from the main residence relief in Portugal, provided the proceeds are reinvested in another primary residence within the European Union.”

 By David Franks, Chief Executive, Blevins Franks

www.blevinsfranks.com

The Spanish property market has fallen victim to the current recession and taken with it many of the big building names in Spain who have gone into administration. Thousands of agencies have closed but hopefully illegal sellers who took advantage of the boom years will have disappeared also, they are no loss to an industry which is still reeling from bad publicity caused by illegal builds, land grab and corruption. That said, many of these matters are being dealt with and Spain has been addressing these problems for some time, with new legislation covering the building industry and the EU is taking an active part by investigating the plight of buyers caught in financial and legal nightmares over homes they bought in good faith.  

During the boom years, thousands of homes were built and sold as people rushed to own a second holiday home but gave little thought to what and where they were buying, how much they were spending and how it would all be paid for in the future and many were blinded by the glossy pictures and over emphasised spiel of the big agencies that herded them into large urbanisations. Now we see hundreds of ex-pats returning home as the crisis has crushed their dreams, interest rates eroded their savings, losing jobs they thought they had for life and crippled by large mortgages and without the means to pay them, many have had their homes repossessed.

However, for many their life in Spain continues, they are happy and take an active part in the community and town activities in which they live and would never dream of returning to the UK or country of birth.

There are of course properties which have been slashed in price to sell them but what you must ask yourself is, why? It could be that the owner is so desperate that they will take anything to return home but it may be because they bought in the wrong location to begin with? If that is the case, you may buy the property very cheaply and be happy with that but what if you want to sell it again yourself? Will you be able to or will you be in the same plight as the current seller?

Many people still want to buy property in Spain and now is the time to buy before the VAT increases in July and there are many bargains to be found and in the right place to buy.

No, they will not be detached villas with sea views for 50,000 euros, they are piped dreams but there are properties now being sold at thousands of euros below market value, in nice areas near the sea and are good long term investments for when the market recovers. The Spanish are searching along the coast for such bargains as they are well aware that the market will recover and prices will increase, so are jumping on the bandwagon now.

 Some advice:-

• Don’t be deceived by glossy brochures and the hype of property fairs.
• Research areas as much as you can on the internet or your local library.
• Do come to Spain and look for yourselves without the pressure of inspection trips.
• Never exceed your budget.
• Always use a solicitor.
• Choose an accredited agent, who will assist you throughout and after the purchase. We recommend WiseBuySpain.com

Editor 13 April 2010

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

www.blevinsfranks.com

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

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.

Credit:- www.blevinsfranks.com

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.

Credit:- www.blevinsfranks.com 

Banks obliged to report all transactions over 3,000 euros to the taxman.

The Government has decided to tighten fiscal control over the real estate sector, a sector that is under suspicion, and which the tax authorities are scrutinising closely as they believe it is more conducive to tax evasion than other sectors.

From now on banks will be obliged to “clearly” specify all the “methods of payment, whether cash, transfer, debit, cheque or any other form of payment”, used in real estate sales. They will also have to provide the personal details of the seller and the purchaser in each sale.

The aim of the tax authorities is to monitor “more effectively” provisions, payments and collections made in cash through financial or credit institutions when they exceed 3,000 euros. Banks, saving banks, and any other institution which provides collection management services to business people and professionals will now have to report annually any transactions that exceed this amount.

Previously, the tax authorities could access this information if needed by making specific requests to a bank, but under the new Royal Decree the information will “automatically” be sent to the tax authorities´ computers on an annual basis.

Credit: http://www.spainsolicitors.com/

Editors note.

In our opinion, this is an interesting and overdue development which can only be seen as a positive thing for property buyers and the property industry alike, giving transparency to what have been ambiguous areas and may help to remove unregistered property sellers from the industry, who neither pay taxes nor provide a safe environment for prospective property purchasers who have fallen foul of their unregulated activities.

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