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Investment planning should be a continuing process to ensure your investment aims are still right and your investments correctly aligned with those objectives.

Financial Information Sharing for 2016 - Published December 2015

Where it happens does not matter. Portugal or overseas, whether its rental income, bank interest, bond yields, dividends, or even gains from the sale of a property, such personal financial information will be automatically shared from 1st January 2016.

For many who have undergone financial planning, or have been involved in reporting their affairs for double taxation matters, to date this has been largely confined within the source country and also the declaration of income from capital overseas (more specifically bank interest) that usually has not been declared under a Portuguese tax residence. 

However, from next year this new tax net will be more universal, far-reaching and instantaneous.  In fact some financial commentators have described this as financial martial law.

If you have come across any of the acronyms FATCA, AEoI, CRS or OECD these have been part of the architecture born by the G20 which have been gradually phased into our global financial reporting systems for launch in 2017 (a year after the start here in Portugal).  The latest presentation is now mostly referred to as the Common Reporting Standard or the Automatic Exchange of Information.

This exchange of information contains details of all such financial transactions undertaken by individuals and duly presented between many tens, if not hundreds, of countries and their respective governments where a source and recipient is concerned.  Suffice to say this is not voluntary or optional but rather mandatory like the annual accounts of a company undertaken by an accountant throughout the year.

According to the most recent of OECD documents, it would appear that not only all income or gains from capital is to be reported, but also all of your account balances and certain life insurance contracts.  The latter are widely used by high networth individuals and expatriates alike and referred to as offshore portfolio bonds.

These being the facts, then how will this be administered and, more importantly, will it affect you?

The fact is that this new reporting is unprecedented therefore the Portuguese Finanças have no experience on how to undertake this global multi-jurisdictional process.  Many of you who have been taking professional guidance in the past already have valid structures in place and should have been reporting income, gains or withdrawals from portfolio bonds under the correct guidance.  Organised compliant and legacy structures must be reviewed to ensure their position regarding tax compliance come 2016.  This would certainly twist and warp any well-oiled machine and put all other valid aspects of financial planning out of joint.

For the remainder who have not been reporting or at least forwarding information for assessment here in Portugal unfortunately cannot remain below the pulpit.  Tomorrow’s world will not be offshore or other fiscal paradises but simply either you are in or you are out.  If you are out you will most likely suffer a flat tax of 35% on all such transactions.

The central banks have been printing money for some time now and loose monetary policy has led to governments using austerity to push free cash into our financial lives.  In turn austerity and the tightening of fiscal policy has pushed a lot of this cash underground and maybe the only way to recover that cash is to now tighten tax collection, making it work at every border and every door.  If in doubt, don’t wait and see but speak, in confidence, to an experienced and also knowledgeable adviser to prepare for a new era where sound personalised advice will certainly pay off.

This article represents our understanding of tax law and tax authority practice, both of which can change.

Raoul Ruiz Martinez is a resident and independent consultant for Finesco Financial Services Ltd., Glasgow and advises private clients on financial investments in both the UK and throughout Europe under MiFID regulation.  He can be contacted at the offices of euroFINESCOs.a. either by telephone 289 561 333 or email raoul.ruiz@finesco.com.
Finesco Financial Services Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Some of the services provided are not regulated by the FCA because they are not included within the Financial Services and Markets Act 2000.

Raoul also has regular radio appearances with Raoul’s Rant on the Owen Gee Solid Gold Sunday show and the Money Minute on the Kiss FM Breakfast show, every week, from Tuesday to Thursday.

Financial Information Sharing for 2016