Question Part 2 - Axel gets busted by Hacienda

[sriracha]

So our friend Axel from Germany stays a whole, uninterrupted year at Maria’s place in Barcelona, while working as a German freelance (freiberufler) for Siemens in Germany, being paid in Germany and paying taxes in Germany. He opts out of German social security payment and ends up paying about 35% tax (I think these numbers are realistic for Germany, at least the part where you can skip the SS payments).

Having used his Revolut card, Hacienda gets CRS info about him.

So after one year, Axel quits his job at Siemens and decides to become a freelance registered with Hacienda (“autonomo”).

After a month he starts declaring income, but Hacienda then finds out about the previous year, and says “you owe us money”.

Axel then says “I don’t owe you money because Germany and Spain have a double taxation treaty”.

Who wins? In my mind Hacienda says “Yes, then pay just a fine for not declaring”.
Or Hacienda could say “you owe us the ss payment you skipped “.

 

[sriracha]

I don't quite understand what you mean with the second paragraph

I wanted to give more details indeed.

So the video says that although Hacienda does more or less random checks, if they get you, they can F up your life. It also says that there is a 4 year statute of limitations for taxes.

So I can see a situation where Axel goes to Spain, keeps a very very low profile (nothing in his name, darks etc) and after one year he decides that he wants to stay there (to quote Johnny Doe, he has "entrepreneurial low self-esteem" or something like that ), so he tells Spain "I just arrived", he becomes a Spanish freelancer ("autonomo") and pays taxes.

In the meantime, he makes sure that the bulk of his money stays out of Spain (EMIs etc) and doesn't get things in his name (apartments, boats etc) so if Hacienda busts him, he can just leave the country without losing his entire life savings etc.
After 4 years, when the statute of limitations has elapsed, then he maybe buys an apartment etc.

 

[RealDude]

It's a long video and the auto translation from German in CC is kinda clumsy.
What does the video say, high level, and how is it relevant to this conversation?
Thanks

The video is generally meant for german dreamers, as they prefer spain. if you don't know german it is not worth watching. The bottom line is that you will very easily and with high probability always run into some spanish tax trap, because you are actively obliged to declare in advance and the spanish tax office is passive. so you will always have to expect draconian penalties afterwards due to the complex tax laws.

 

[sriracha]

The video is generally meant for german dreamers, as they prefer spain. if you don't know german it is not worth watching. The bottom line is that you will very easily and with high probability always run into some spanish tax trap, because you are actively obliged to declare in advance and the spanish tax office is passive. so you will always have to expect draconian penalties afterwards due to the complex tax laws.

It is also geared toward people who send their kids to school in Spain, buy property in Spain etc - see my previous post.

 

[European]

The video is generally meant for german dreamers, as they prefer spain. if you don't know german it is not worth watching. The bottom line is that you will very easily and with high probability always run into some spanish tax trap, because you are actively obliged to declare in advance and the spanish tax office is passive. so you will always have to expect draconian penalties afterwards due to the complex tax laws.

By German dreamers you mean Germans that move to Spain but avoid becoming tax residents there, just like Axel initially?

I wanted to give more details indeed.

So the video says that although Hacienda does more or less random checks, if they get you, they can F up your life. It also says that there is a 4 year statute of limitations for taxes.

So I can see a situation where Axel goes to Spain, keeps a very very low profile (nothing in his name, darks etc) and after one year he decides that he wants to stay there (to quote Johnny Doe, he has "entrepreneurial low self-esteem" or something like that ), so he tells Spain "I just arrived", he becomes a Spanish freelancer ("autonomo") and pays taxes.

In the meantime, he makes sure that the bulk of his money stays out of Spain (EMIs etc) and doesn't get things in his name (apartments, boats etc) so if Hacienda busts him, he can just leave the country without losing his entire life savings etc.
After 4 years, when the statute of limitations has elapsed, then he maybe buys an apartment etc.

Thanks. By keeping his money out of Spain (EMIs etc) you mean Axel will hide it from Hacienda after registering in Spain? If that is the case we are talking about a completely different situation from what Axel explained initially. And about keeping your money in EMIs so that Hacienda cannot seize it ... I am not sure, but I would bet that if the EMI is in the EU Hacienda will be able to freeze it i they need to

 

[Deepbarrels]

Could Axel move his money from a EMI (in USD) to an account with Interactive brokers with an address from another country then Spain to invest it there or would interactive brokers require justification on taxes paid on that money held in the EMI?

 

[uplana]

This is one of the best threads on OCT - bookmarked and following the conversation.

 

[sriracha]

Thanks. By keeping his money out of Spain (EMIs etc) you mean Axel will hide it from Hacienda after registering in Spain? If that is the case we are talking about a completely different situation from what Axel explained initially. And about keeping your money in EMIs so that Hacienda cannot seize it ... I am not sure, but I would bet that if the EMI is in the EU Hacienda will be able to freeze it i they need to

Not hiding, just holding. Say you are an “autonomo” and take your pay on a certain date. It is one thing to keep it in a physical Spanish bank, another thing to keep it on Revolut (or similar).
Physical national banks are basically ATMs for tax offices, they can freeze (or take) your money with a click, they have a console with your accounts a “freeze” and a “withdraw“ button.

With an EMI, you might have time to make your money fly away if you sense danger.

 

[European]

Not hiding, just holding. Say you are an “autonomo” and take your pay on a certain date. It is one thing to keep it in a physical Spanish bank, another thing to keep it on Revolut (or similar).
Physical national banks are basically ATMs for tax offices, they can freeze (or take) your money with a click, they have a console with your accounts a “freeze” and a “withdraw“ button.

With an EMI, you might have time to make your money fly away if you sense danger.

I see. Good point. It might give you some more time. Not sure how it works now but I don't think it will take long before they have the same power over EMIs as over banks

 

[sriracha]

I see. Good point. It might give you some more time. Not sure how it works now but I don't think it will take long before they have the same power over EMIs as over banks

In November there are general elections in Spain and the communist will be kicked out of government. That might lower taxes, as it happened in Madrid with Ayuso.