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Spanish tax authority denies clampdown on super-rich expats

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27th Jun 2017
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Ronaldo, Messi and Jose Mourinho are some of the latest names embroiled in Spanish tax investigations – but speaking to AccountingWEB the Spanish tax agency has denied staging a clampdown on super-rich expats. Valme Claro reports.

Recent cases

The name of former Real Madrid manager Jose Mourinho has been added to the expanding roster of players and managers caught up in tax investigations.

The list of those accused of tax fraud and other financial crimes by the Spanish courts also contains Lionel Messi, Samuel Eto’o, Neymar and Javier Mascherano of Barcelona, and Real Madrid talisman Cristiano Ronaldo.

Former Real Madrid player Angel di Maria recently agreed to pay a 2m euro fine to settle a tax case, while Ronaldo, Messi and Mourinho have all been accused of evading tax on the sale of image rights through the use of off-shore companies.

Lionel Messi was handed a suspended jail term for 21 months after being convicted of defrauding the Spanish state of €4.1m in unpaid taxes on image rights. These image rights were controlled by offshore companies in Belize and Uruguay.

Ronaldo has been accused of evading tax worth €14.7m between 2011 and 2014. According to his prosecutors, his image rights were also incorrectly described as capital gains, which fall under a lower tax rate.

Mourinho, meanwhile, has been accused of not declaring €3.3m Euros of revenue from his image rights while Real Madrid coach from 2011 to 2012. According to a prosecutor, the Portuguese manager used corporate structures in order to conceal revenues generated from his image rights. Mourinho had signed a contract granting his image rights to British Virgin Islands-based company Kooper Services S.A., which he owns through Kaitaia Trust, based in New Zealand.

No recent changes

Although there might seem like that it the case, there have been no recent legislative changes that can be attributed to any increase in these fraud investigations. Speaking to AccountingWEB, an Agencia Tributaria (Spanish tax agency) spokesperson stated that although there might seem to be more prosecutions arising, this is a false impression caused by the recent resolutions of cases that started being investigated some years ago, like the Eto’o case, with the Supreme Court conclusion coming years after.

Moreover, the agency attributes this impression to the media coverage and interest that cases like the Messi and Ronaldo cause around this kind of investigation. According to the agency, as the number of image rights contracts has risen during the last years, the relevance of investigating tax compliance has also increased.

Beckham law

Since the change to the “impatriate tax regime” went through in 2015, tax inspectors have had to pay special attention to the use of offshore shell companies to navigate around tax laws.

The impatriate tax regime was a tax exemption scheme introduced in 2005 with the aim of attracting foreign talent to Spain across all sectors during times of economic prosperity. It became informally known as "Beckham law", as the former England captain was one of the first beneficiaries during his time at Real Madrid. The scheme provided a tax rate ceiling of 24% - about half of the amount of taxes that would have been paid otherwise in these cases.

The Beckham law went through two major changes. In 2010, it was limited to retributions of less than 600,000 euros; however, the change was made so that those with contracts signed before 2010 could still benefit from the regime. In 2015 the regime changed again, with sportspeople no longer able to benefit from it.

What accountants can learn

During 2017, the Spanish tax office introduced changes to their IT tools and processes tp make it easier to investigate tax fraud. The Spanish tax office now has access to data from a wide range of sources to help them detect possible tax fraud. Spain is also part of the ‘automatic exchange of information’ regime, in which over 100 countries share personal data and information on taxpayers’ assets and income. 

These measures look for incorrect declarations of income and assets in different locations and false claims of residency. This adds to the importance of taking into account the key deadlines for declarations and tax payments, especially for those expats living in Spain that have assets or income abroad.

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