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“Pssst…I am writing this article in secret and out of sight and sound of any telescreens… If found the Thought Police will be here in seconds and I will end my days in Room 101”… Relax readers! 1984 came and went, the only major scars it wrenched on humanity were Duran Duran and large shoulder pads! Fortunately George Orwell’s frightening dystopia is yet to come and I am free to write whatever articles I please but most of us will still be surprised to know how many organizations are actually holding and utilising our personal information this very minute.

In this paranoid post 9/11 Dark Age, privacy is now at a premium. Whilst the controversy on biometric ID cards rages on in Britain, we are unwittingly giving away personal information to all and sundry. On any given day we may use our credit cards a number of times or enjoy surfing on the net. Added to this is the information our employers, banks, insurance companies, landlords, estate agents, government departments and others keep and use.

We need protection from the misuse of our personal data. Such protection arrived some time last year and if the Government’s advertising campaign was indeed a success you may have already heard about it. The Data Protection Act 2004 came into effect on June 1st 2006, its main aim; to give individuals like you the right to know what (and for what purpose) information is being kept about you and thus, make sure it is accurate. To achieve its aim the legislation is designed to place obligations on those who control your information.

 

The Data Protection Act revolves around 6 “Key” rights:

1)      The right to have information about yourself collected, stored and used in accordance with the Data Protection Principles. The Data Protection Principles force businesses, organizations and public bodies to obtain and process your information, fairly and lawfully, as well as to keep and use it for specific purposes.

2)      A right to access information about yourself. This includes the right (free of charge) to be told about what type of personal data is being kept, as well as the right to be given an actual copy of the information kept.

3)      The right to have incorrect information about yourself corrected or destroyed.

4)      The right to object to the use of information for the purposes of direct marketing ie. using you information to try and sell you things you do not want, probably one of the most relieving aspects of the new Act!

5)      The right not to have decisions made about you solely on the basis of automatic processing of information.

6)      A right to complain to the Data Protection Commissioner and to take legal action against the improper use of information. If you think your rights have been infringed you can complain to the Commissioner. He has powers to investigate and resolve disputes, as well as award compensation if appropriate. If the result of his investigation leaves you in the cold you can still sue in the courts.

 

Exercising your privacy rights may simply take the form of writing a letter to whatever organization is holding your information or could involve a complaint to the Commissioner or even legal action in the courts. Marrache & Co. is ready and willing to help you defend your rights wherever they have been infringed and make sure that next time Big Brother rears his ugly, large, moustachioed face you can really kick him where it hurts! 

THE 2007 Gibraltar INCOME TAX SYSTEM 

In recent days the Gibraltar Government published the new system of Income Tax along with the new Budget Measures for 2007 in the Gibraltar Chronicle.  This new dual tax system can be further classed as (1) an Allowance Based Tax System (which is the Normal system) and (2) a new Gross Income Based System.  Every taxpayer has the option of choosing between the normal system and this new Gross Income.  Further details of this new “Dual Taxation System” can be obtained from the Gibraltar Government website at: www.gibraltar.gov.gi – Summary & Chief Minister’s Budget Speech 2007.

In addition, the Income Tax Department has in recent days set up a webpage on the Gibraltar Government’s website where taxpayers can calculate which of the two tax systems will be better suited for them and which will result in payment of lower tax. The tax calculator website can be accessed at: www.gibraltar.gov.gi – Then click on the option: ‘Budget 2007 – On-line Tax Calculator’. All that is required is for the tax payer to provide their total allowances as reflected in their current Tax Code and their estimated Gross Earnings for the year.

The On-Line Tax Calculator will be of great use to taxpayers which enables them to compare their tax liabilities under both tax options. Furthermore on the web page there is information as to the level of allowances each taxpayer is entitled to depending on the Tax Code.  The Calculator automatically works out the tax liability under the Gross Income Based system and the Allowance Based System.

The category 3 status has been abolished and replaced with the new HEPPS status, specialist skilled workers who earn more than £100,000 per annum are eligible for this status which means the taxation is limited to the first £100,000, all existing Cat 3 holders who earn more than £100000 per annum may migrate to HEPPS status. This new status holds the same property requirements as Category 3.

The category 2 and HNWI’s status remains the same, but with effect from 1st July the tax payable does increase on both levels, i.e. £14,000 goes up to £18,000 and £50,000 to £60,000. 

The budget also saw corporate tax rates reduce details of which are available on the Gibraltar government web site.


Taxing wealth in Spain

Spain has a tax based solely on the wealth of individuals known as “impuesto sobre el patrimonio” (spanish wealth tax) This tax is levied on the ownership of assets, such as immoveable property, cars, cash, shares, jewellery etc less any allowable charges and debts (i.e. on the net wealth of an individual). It was originally brought in a number of years ago as a mechanism to force taxpayers to declare what assets they owned and has remained until this day.

The tax year in Spain is the calendar year and when deciding which assets are liable to wealth tax the residency of an individual must be ascertained.

Under spanish domestic law, an individual is deemed to be “tax” resident in Spain if they spend 183 days or more in Spain (temporary absences are ignored unless they can prove habitual residence in another country). 

If an individual spends under 183 days in Spain, the tax authorities can deem the individual a spanish tax resident if their centre of vital interests are in Spain. The term centre of vital interests includes both personal and economic interests. An example of personal interests making an individual resident in Spain is if the individual’s spouse and/or (minor) children habitually live in Spain.

Spain has entered into a number of Double Tax Treaties and as Double Tax Treaties override domestic legislation it is possible that the above rules are overridden in cases of two countries claiming residency of the same individual.

 

The effect of residency for wealth tax is as follows:

Residents

spanish tax residents are liable to wealth tax on their worldwide assets. They also benefit from the following allowances:

•   General allowance €108,182.18.

•   Habitual residence €150,253.03. This allowance is      available against the individual’s main residence in      Spain and is in addition to the general allowance.

•   If the individual has a business then (subject to a      number of conditions) there is an allowance available      against the value of their business.

•   There is an automatic capping of wealth tax which is tied      in to the amount of income received in the same year.

Non spanish Residents

Non spanish Residents are liable to wealth tax solely on assets located in Spain.

Non spanish Residents do not benefit from allowances so they commence paying tax from over €0.00.

Valuing assets

There are various rules for valuing different types of assets. One of the most common assets on which wealth tax is paid is immoveable property. The valuation of immoveable property for wealth tax purposes is based on the higher of:

 

·  the catastral value (rateable value),

·  the acquisition cost (as declared on the title deed)

·  an official valuation undertaken by the tax authorities.

 

In practice, the acquisition cost on the title deed (la escritura) is used as it is usually higher than the catastral value and valuations by the tax authorities are not commonplace.

 

The value of assets and charges are usually based on the last day of the spanish tax year (31st December).

 

Tax rates

 

The tax rates work on a sliding scale and vary from 0.02% - 2.5% depending on wealth. The tax rates are summarised below:

 

Taxable wealth up to	Tax payable	Rest of taxable wealth	Tax rate
€0.00	€ 0.00	€167,129.45	0.2%
€167,129.45	€ 334.26	€167,123.43	0.3%
€334,252.88	€ 835.63	€334,246.87	0.5%
€668,499.75	€ 2,506.86	€668,499.76	0.9%
€1,336,999.51	€ 8,523.36	€1,336,999,50	1.3%
€2,673,999.01	€ 25,904.35	€2,673,999.02	1.7%
€5,347,998.03	€ 71,362.33	€5,347,998.03	2.1%
€10,695,996.06	€183,670.29	Exceeding	2.5%

 

To conclude, spanish residents are able to benefit from allowances to reduce their exposure to spanish wealth tax, but are liable to worldwide net assets. If their wealth is considerable then other forms of tax planning would need to be undertaken to try and minimise the affects of this tax.

 

Non residents are liable to net spanish situs assets. For example, they can reduce their exposure to wealth tax on their spanish holiday home by simply buying their holiday home with a mortgage registered in Spain. The net difference between the value of the property and the mortgage is what would be liable to wealth tax rather than the whole value of the property.