FINANCIAL CONTROLS

Free movement of money

There are no regulations governing the movement of money to and from Spain, but the Spanish government do like to know what is happening. As a consequence they have developed a reporting system by which most transactions involving foreign exchange (divisas) is recorded. This declaration does not mean authorities deny the transfer, only that it is reported. Banks record this information with their customers not realising it is taking place. ‘What is reason for the transfer?’ asks the international clerk at a UK bank when setting up a monthly direct transfer. ‘What is the bill of exchange for?’ asks the manager at a Spanish bank when a large sum is withdrawn to pay for a property. The payer, the receiver, the amount and reason for transfer are automatically identified.

The informality of these questions disguises a system administered by bank officials as an electronic transfer greater than 600€ should theoretically be reported. This applies to residents and non-residents alike. It refers to inward transactions and outward transactions. So in order to make a payment across national boundaries of more than 600€, the name and address of the recipient and the reason for the payment should be declared to the bank. Does this happen in practice? No! But it can happen in a selective way to individuals who may be suspected of money laundering.

Is it possible to carry a suitcase of money, cheques or gold bars into Spain? After all, there are virtually no cross-border or airport customs for EU citizens. Any amount under the value of 6,000€ is completely unregulated. Any amount greater than 6,000€ should be declared to customs authorities when entering Spain. Taking out of Spain more than 6,000€ but less than 30,000€ should be recorded on a form available at the bank when the cash is obtained and presented to the customs at the point of departure. Taking out a sum greater than 30,000€ must be accompanied by a form and permission from the Direccion General de Transacciones Exteriores, which is normally granted. As stated previously, the government does not wish to restrict the movement of cash, merely to know what is happening.

Falsification of any of the information on a form is a legal offence. Authorisation to export money does not fit with the EU Directive on the free circulation of money. The European High Court has ruled that Spain may require notification but cannot limit the amount taken out. Spain therefore maintains a check on the amounts of foreign exchange passing across its borders and keeps an eye on an individual’s tax obligations. But the bottom line is, any amount of funds can be transferred in any choice of currency – just fill in a form.

Money laundering

The UK’s Money Laundering Regulations came into effect in 2004. This new legislation, coupled with amendments to the Proceeds of Crime Act 2002, creates a new code of statutory responsibility for all financial and legal professionals based in the UK to report any suspicion of tax evasion to the Inland Revenue, wherever in the world the offence may have occurred. Where a UK regulated financial or legal adviser has clients who live abroad, the adviser will report the suspicion to the authorities who, in turn, will relay this information to the tax authority of the country of residence of the individual. Money laundering is widely defined and includes tax evasion. Where criminal conduct occurs outside the UK it is still within the scope of the Act and constitutes an offence as if it had occurred in the UK.

Financial advisors, solicitors, accountants and estate agencies are obliged to report to the authorities any suspicions they have that a client may have deliberately failed to declare all their income on their tax return. They are prohibited from informing the client about the report. Failure to report transgressions, or even just suspicions if there are reasonable grounds, will result in professional organisations being penalised by fines or imprisonment. The obligation to report will override the duty of confidentiality owed to a client.

However this is a UK law and does not embrace similar companies or laws in Spain.

Certificate of Non-Residence

A transaction to buy a Spanish property can be completed outside Spain, for example money transferred from a buyer’s account in Edinburgh to a seller’s account in Dublin. But to do this a Certificate of Non-Residence is required. It is issued in Spain by the Ministry of the Interior and again helps the Spanish tax man keep track of where the money comes from and goes to. This will take time; but without it a notary will not approve a property purchase.