016 TAX EVATION & TAXPLANNING

General:
In another article on this web site I have tried to explain already who is considered by the Portuguese tax authorities to be tax liable in Portugal. Not being a registered resident does not exclude you for not being a possible tax payer in Portugal. Being a Resident however automatically qualifies you as being a tax resident in Portugal also.
However in general it can be said that the tax authorities take a rather passive attitude against an active in many other countries. This means that it is your obligation to file a tax return every year and that you do not have to expect to receive a blue enveloppe (green here) if you do not declare anything.
People not familiar with this approach sometimes mistakenly assume that therefore everything is OK.
It is standard practice that in whatever country you are tax liable this is on your worldwide income, that means if you have income from property in Portugal you should normally spoken have to declare a. that you have purchased a property here and b. that you may receive income from it.
In the reverse situation if you life and/or work in Portugal you are besides liable on your Portuguese income from work or investments also liable to declare your income from abroad like interest from deposit accounts regardless if they are in or outside an offshore jurisdiction.
Till recently however there was not much control on your worldwide income as bank secrecy was very strong in many countries including Portugal and it was hard to get all countries on one line. In particular Belgium, Luxembourg and Austria were not willing to exchange information to the Inland Revenue of foreign citizens having bank accounts in their jurisdiction. These counties felt that they would only consider cooperation if other countries like Switzerland and off-shore tax heavens like Gibraltar, Guernsey, Jersey and the Isle of Man would be prepared to do the same.

Situation end of 2002
At the end of last year K Chancelloer Gordon Brown issued a guarantee to fellow EU finance Minsters that the last mentioned would fully participate in a new system of automatic exchange of banking information between countries, as well as outside Europe Cayman Islands, Montseerat, the British Virgin Islands, Anguilla and T&C Islands.
Switserland however was willing to introduce a 35% withholding tax on saving accounts of non-residents and pass it on to the relevant tax authority-but under no circumstances will it exchange information about its bancustomers. At the end of last year (2002) the European Commission saiud it would continue negotiating with the Swiss. This automatic exchange of information however will only be implemented by the start of 2011 at the latest. For Luxembourg, Austria and Belgium a 7 year transition period as from 1st. of January will come into effect whereby these countries will levy a withholding tax of at least 20%.

Now March 2003:
It now seems that on the 21th. of January of this year 2003 EU governments reached a historic agreement that will change the way people handle their finances. They hace resolved that “with a view to implementing the principle that all citizens resident in a member state of the European Union should pay tax due on all their savings income, exchange of information on as wide a basis as possible shall be the ultimate objective of the EU, in line with international developments”
It seems that discussions now have been concludede and that we are now faced with the hard facts of the new laws:
• EU Memebre States will now automaticall exchange information to prevent, and enable investigation into tax evasion
• Other EU Member States and Switserland will impose a withholding tax of up to 35% on all non-resident accounts.
• Banking secrecy, as we have know it, is finished
• If you are not disclosing your full income and wealth to the tax authorities you are now at significant risk of discovery.

What is to come:
What has been described in the previous paragraphs indicates how the future will be. This of course does not mean that what you have been done in the past will be waved.
Recently the German tax authorities have started a profound investigation of German citizens with properties in Spain.
First the German authorities have asked their Spanish counterpart for a list of properties owned by Germans. They got this, in accordance with international agreements (OECD 6 EU). As all the names of property owners and their nationalities are registered in a central computer in Madrid this was not difficult to get, also they appear on a list for valuations of properties and there are many more sources (bak accounts) were your name will appear.
If a property had a value of less than  100.000 a letter was sent to people who had not included their house on their German tax declarations, asking how they had financed the purchase and if they have income from letting or sale.
In case the properties had a value of over  100.000, German tax inspectors have made investigations on the spot and even searched houses in company with their Spanish colleagues.
Despite the fact that the Spanish authorities were reluctant in providing the information as it feared it could endanger foreign investment. However it had to give in, since it is under legal compulsion to do so.

What has happened in Spain easily can happen in Portugal as well sooner or later. In that respect it is much likely better to get your house in order before it is to late and consult specialist  in this field.