Mark Stücklin
Spain called out for dodgy tax practices targeting foreign expats.
It’s not every day you see a full-page advert in the Financial Times or Wall Street Journal denouncing a country’s tax regime. It’s even rarer when the country in the crosshairs is a supposedly upstanding EU member like Spain. Someone, somewhere, is seriously hacked off—and willing to splash a small fortune making sure the world knows about it.
The adverts—one in the FT in December, another in the WSJ this month—were placed by an outfit called Spanish Tax Pickpockets, which describes itself as a ‘legal advocacy effort led by international law firm Amsterdam & Partners LLP’. Their gripe? The Spanish tax authorities, accused of sharp practices, especially when it comes to expats lured in by the so-called ‘Beckham Law‘.
This law offers certain foreign workers a flat 24% tax rate on Spanish income, instead of the progressive rates climbing up to 47% for residents. Sounds good, right? But Spanish Tax Pickpockets argues Spain is pulling a classic bait-and-switch: attracting wealthy foreigners with promises of favourable tax treatment, then moving the goalposts once they’re settled. “You moved to Spain based on a promise. After you settled, they changed the rules. FIGHT BACK AGAINST UNFAIR TAXATION!” blares the website headline.
Bob Amsterdam, head of Amsterdam & Partners, doesn’t mince his words: “The Tax Agency is not aware that it is operating in a free and democratic society,” he told Spanish media outlet El Español. His firm has offices in London and Washington DC, so this is no small-time grumble.
Not surprised
Spending six figures on adverts in the world’s top financial papers is a clear sign that a lot of affluent expats are frothing with rage. Does this surprise me? Not one bit.
I’ve been in this business long enough to hear a steady stream of horror stories from foreigners and tax lawyers about the high-handed tactics of the Spanish tax authorities. Tax experts say the problem is systemic: poorly defined tax regulations, aggressive inspectors chasing bonuses, weak oversight, and a view of wealthy foreigners as easy prey. It’s also a postcode lottery. Catalonia has a reputation for being high-handed, Madrid less so.
Argentinisation
I remember a round-table discussion back in 2011 when an international tax expert described the “Argentinisation” of Spain’s tax system—ambiguous rules enforced arbitrarily to squeeze money from taxpayers, not uphold the law.
And who could forget the infamous ‘Modelo 720’? This worldwide asset declaration requirement came with eye-watering fines for non-compliance or even small mistakes. It was sold as a tool to fight corruption, money laundering, tax evasion, and terrorism financing. In reality, it looked like a shakedown targeting foreign expats rather than dodgy local politicians. It took the European Court of Justice and Spain’s Supreme Court to finally defang it.
Today’s outcry is about Beckham Law victims, but the deeper issue is the culture of the tax regime. “In countries like the UK, tax rules are clear, and taxpayers can generally expect fair and reasonable treatment from the authorities—you know where you stand,” says León Fernando del Canto, founder of Del Canto Chambers and a tax-qualified English Barrister and Spanish Abogado with offices in both countries. “That’s often not the case in Spain, where the tax authorities don’t always play fair, and some officials have no qualms about exploiting the country’s ambiguous tax system.”
Fightback
Another part of the problem is the supine reaction from many foreigners. “Expats living in Spain, or those who simply own an asset like a house here, often back down without a fight,” explains del Canto. Yet, Spanish media outlet El Confidencial reported in December 2021 that the Spanish Tax Agency (AEAT) loses about 45% of taxpayer appeals before economic-administrative courts and around 30% of cases that proceed to judicial review. That means taxpayers win roughly 51% of disputes overall.
What does this tell us? First, a lot of tax demands are on shaky legal ground. Second, Spain is not Venezuela—the legal system works if you stand up for yourself. And third, the tax authorities know many people—especially foreigners—will cave in out of fear, so they rely on intimidation.
“Those facing unfair treatment need to push back,” says del Canto. “If they have a strong case and have acted in good faith, the courts will defend them. But nothing will change unless people start fighting back.”
Maybe those glossy adverts mark the start of a fightback. We shall see.
Here’s the text of the advert run in the FT in December:
| WARNING: SPANISH TAX AUTHORITY |
| Time won’t be the only thing you waste moving to Spain. If you’re being exploited under the Beckham law, get in touch and join us. Spain has become a nightmare destination for US citizens trying to do their jobs, accumulate wealth, and Foster investment in the Spanish economy. All US citizens, as well as the international tax authorities and financial Regulators should take notice. Spain is ostensibly conducting an audit crusade based on arbitrary criteria and motivated solely by revenue maximization. The foreign earners targeted move to Spain under false pretenses, having retired – to their detriment – upon receipt of a state certificate of their status under the Beckham law. The Spanish Tax Authority (STA) is now applying discriminatory tactics to improperly extract additional tax dollars from these individuals when they have already fully complied with the law. In the pursuit of these foreigners, the STA acts in a manner inconsistent with fundamental European Union law and human rights. Regulatory changes that provide incentive bonuses to the tax authorities (considered inappropriately excessive when benchmarked internationally) have encouraged waves of ‘shoot first, ask questions later’ audits. Foreign employees who came to Spain expecting to be protected by due process and a robust rule of law have instead been subjected to a tax inquisition that has left them distressed and bitterly disappointed. Victims are subjected to a draconian process which is an international outlier: often denied any explanation of why they are being audited and any right to challenge investigations until just before they conclude. Victims cannot prevent full scale global fishing expeditions and find their fundamental right to an appeal does not stay the enforcement process, leading to potentially disastrous results. This effectively impedes access to justice and can leave individuals and families financially devastated and unable to defend themselves effectively while sustaining reputational harm. This is a tax trap of the worst kind. And the STA allocates to their auditors a percentage cut of the sums recovered, with no disincentive for failed audits or clawback from assessments later overturned. In what is one of Europe’s worst kept secrets, this encourages tax investigators to extort victims into disproportionate settlements with scant regard for the rule of law or fundamental fairness, contrary to the STA’s code of ethics. Fairness, proportionality, and access to legal redress are cast aside, because the priority is to maximize governmental revenue at all costs. Unsurprisingly, this has resulted in the lopsided targeting of foreigners in spain. not exactly the warm welcome they were sold, and detrimental to Spain’s reputation. For the sake of all those individuals, families, and firms whose time, efforts and contribution have been totally undermined by the pickpocketing Spanish tax Authority, we need to address the STA’’s underlying denial of justice. We need to curb its revenue-driven enforcement mechanisms, and its pay-to-appeal policy must be reformed. The STA needs to stop bullying tax professionals. Amsterdam & Partners LLP has been authorized on behalf of its clients to post this notice as a public service. If you or someone you know has been victimized by the Spanish tax Authority visit spanishtaxpickpockets.com. |
