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 “.

 

[Sols]

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

If it gets to this point, just saying there is a double tax treaty isn't some magic spell you can mutter to make the problem go away. You should expect to have to demonstrate which clauses of the tax treaty apply to you. And they might still fight back.

Who wins?

The Hacienda. It doesn't even have to worry about winning. Assuming they have done a good enough job to satisfy their legal obligations to identify that you — I mean Axel — as a tax resident in Spain, the burden of proof might now be reversed and it's up to Axel to appeal their decision and/or take the hacienda to court.

 

[luap]

In any other country? It can go one of many different ways. In Spain? They will simply demand payment anyway or freeze your accounts. The only (very low) chance of not paying would be spending more on lawyers than the tax+penalty. Axel would be better avoiding Spain.

 

[Sols]

Axel would be better avoiding Spain.

Unfortunately, Spain seems to be like a magnet for tax fools. So many threads about people trying to live in Spain and not pay Spanish tax.

 

[CyprusLawyer101]

Is that Axel Rose?

 

[TheCryptoAnt]

So many threads about people trying to live in Spain and not pay Spanish tax.

I mean the Spanish Hacienda is not necessarily the smartest one in the room, there're a bunch of ways to circumvent them.
Specially if you are not 'you'

 

[Sols]

I mean the Spanish Hacienda is not necessarily the smartest one in the room, there're a bunch of ways to circumvent them.

So you're saying the hacienda is a good match with these people?

The hacienda's stupidity is part of why they are so dangerous. They often don't spend much time on evaluating cases, preferring a shoot first, ask questions later approach to enforcement.

 

[TheCryptoAnt]

So you're saying the hacienda is a good match with these people?

The hacienda's stupidity is part of why they are so dangerous. They often don't spend much time on evaluating cases, preferring a shoot first, ask questions later approach to enforcement.

In my experiences this is the case with most tax agencies tho. Good thing about them is that if you go to court and win you can ask for compensation not only for the legal costs but also for 'distress' and 'lost time'

Spain is a circus sometimes

 

[sriracha]

I mean the Spanish Hacienda is not necessarily the smartest one in the room, there're a bunch of ways to circumvent them.
Specially if you are not 'you'

Could you elaborate?

 

[TheCryptoAnt]

Could you elaborate?

Dont tell them you live there. This only works if you are a Schengen citizen or have a residency permit in another EU country.

Or tell them you live there but bank using darks.

 

[JohnnyDoe]

Who wins?

Your friend is playing Russian roulette. However, in this version of the game the gun (the Hacienda) is loaded with 5 bullets.
Is it a smart thing to do to play the game (going to Spain)?

 

[sriracha]

Dont tell them you live there. This only works if you are a Schengen citizen or have a residency permit in another EU country.

Or tell them you live there but bank using darks.

I thought as much. I would even say that darks are not necessary and one could switch EMI every two months or so (this would work for one year or so).

 

[Sols]

Your friend is playing Russian roulette. However, in this version of the game the gun (the Hacienda) is loaded with 5 bullets.
Is it a smart thing to do to play the game (going to Spain)?

I think the record will show that people who move to Spain and try to evade Spanish tax are the kind of people who'd go first in a five-bullet game of Russian roulette.

 

[European]

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 “.

What CRS information would Hacienda get from Revolut to trigger this? Does Revolut share card transactions, where they took place?

 

[Sols]

Does Revolut share card transactions, where they took place?

Not automatically but they would upon request.

 

[European]

Not automatically but they would upon request.

I don't think that situation is likely. Why would the Spanish tax authority start investigating somebody that had no previous official link to the country and just moved in fiscally? Unless perhaps, perhaps, if Axel has a lot of money and Hacienda thinks they have a lot to earn from this. But if he was making some €50K a year and already paying taxes in Germany I do not see much of a return for them.

 

[Sols]

I don't think that situation is likely. Why would the Spanish tax authority start investigating somebody that had no previous official link to the country and just moved in fiscally?

Agreed, it's not very likely.

Unless perhaps, perhaps, if Axel has a lot of money and Hacienda thinks they have a lot to earn from this. But if he was making some €50K a year and already paying taxes in Germany I do not see much of a return for them.

I have seen Spain go after people with similar income. I have also seen them completely miss people with high income.

There's not much rhyme and reason to the Spanish tax authority.

 

[RealDude]

I don't think that situation is likely. Why would the Spanish tax authority start investigating somebody that had no previous official link to the country and just moved in fiscally? Unless perhaps, perhaps, if Axel has a lot of money and Hacienda thinks they have a lot to earn from this. But if he was making some €50K a year and already paying taxes in Germany I do not see much of a return for them.

 

[European]

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

 

[European]

Now I understand why a Spanish friend of Axel saw his Revolut card and said, oh your're using that to keep your money out of sight of Hacienda...

So it looks like a you can hold all of your money with EMIs in other countries than Spain, so if the isht hits the fan, you can just give them the finger I suppose, unless you've bought real estate there or a similar mistake.

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