€50k bank balance law – who, when and how?
Further to the notification that ‘Bank balances of €50k or more to be reported to the Tax Authority’ (January 11, 2019), HERE, questions have been raised and answered to clarify some of the implications of the new protocol agreed by Portugal’s government.
What information do banks have to send?
Financial institutions are obliged to report to the Treasury the amounts that a taxpayer has in a bank account or, if they have more than one account at the same bank, how much is in the various accounts that in their name.
They will only have to do so if the balance or total sums exceed €50,000 as at the end of the previous calendar year. Only customers residing in the Portugal are covered by this new regulation.
Will account movements also be communicated?
No. The Treasury will only receive notice of the final balance as of December 31 of the previous year. The Treasury, when it has looked at the previous year’s balance and has cause for suspicion, it then can proceed with an inspection and, in this context, have banking secrecy lifted and look at account movements.
When do banks have to send the information to the Treasury?
Financial institutions must report data relating to the accounts of holders or beneficiaries resident in the national territory by July 31 of each year in relation to the information relating to the end of previous year.
How will the information be sent?
Electronic transmission of data is required. This will facilitate not only the process itself, but also the analysis of the data by the Tax and Customs Authority, which can more easily cross reference other information available to them regarding a taxpayer. The Ministry of Finance will also have to approve the forms and the conditions for submitting the information by electronic means.
When does it start?
The law gives Portugal’s banks 60 days after it is signed off to analyse their customer accounts for the mandatory reporting scheme. A pre-existing account is one which has been maintained by a financial institution as of December 31, 2017. In the case of accounts opened after January 1, 2018, then the process must be carried out by the banks within 90 days after the entry into force of the law. Everything will have to arrive at the Treasury by July 31.
Can the data be shared with third parties?
The Act expressly states that both financial institutions and the Tax and Customs Authority must comply with the data protection rules, security and confidentiality, in particular by ensuring that access to data by third parties is prevented. In short, there will be no exchange of information, unlike data from non-residents which the Tax Authority receives and passes on to the US and other European tax administrations.
What if the banks do not comply?
If they do not file or file outside the legal deadline, when they communicate the data to the tax administration, the banks will be fined between €500 and €22,500. If the information follows, but contains omissions or inaccuracies, there will be a fine of between €250 and €11,250. Banks must register and retain the documents proving that they have fulfilled this new obligation. If they do not, the fine can go from €250 to €11,250.
What was the government’s goal?
The Executive took advantage of the European directive on compulsory automatic exchange of tax information for non-residents and has used it to track residents’ accounts as well.
It did so in the name of combating fraud, tax evasion and money laundering, associated with the under-reporting of income, and stressed that there was no justification for the Treasury not to have access to information that it already was harvesting for foreign tax authorities.
Last year, Portugal’s President vetoed the proposal, saying the new law was badly timed, given the difficult situation banks were going through. The Government kept pushing and the new law now is approved, with the votes of the Socialists, Bloquistas and Communists.
What about non-residents?
With the entry into force of this new law, a resident in Portugal with accounts will see the balances and interest of most of their financial investments communicated to the Treasury, when these exceed €50,000.
A non-resident (an emigrant, for example) with accounts in Portugal will see the Portuguese Treasury informing the Treasury of the country where the customer resides. Anyone who lives abroad and has money there faces a symmetrical process: foreign tax authorities collect the same kind of information from their financial institutions and send it to Portugal. In case of money is in the US, this transfer of information also takes place if savings exceed €50,000.