Wednesday, March 25, 2015

Wealth tax vs the Modulo 720

You will notice that the methods used for calculating the values for the 720 are very similar to that of the wealth tax.

If you file the 720 and it looks like you have more than the minimum threshold of assets, expect to get a nasty letter in the future if you don’t subsequently file the wealth tax.

However, there are several instances where the calculations will end up differently.

The most important difference happens when you buy a capital asset (like a house or stock), or pay off a loan, or receive a loan in the last quarter of the year.

Worst case example, let’s say you have 500.000 euros in a foreign bank account that you use to buy a house in Germany Dec 31st. Your modulo 720 Your average balance is 500.000 plus you have a house worth 500.000.

However, for the purposes of wealth tax, you would exclude the 500.000 from your average balance calculation and end up with a bank balance of 0, plus a house of 500.000.

Here’s a good link on the subject.

Tuesday, March 24, 2015

Modulo 720 time

The horrible day has arrived when I am actually going to have to file the dreaded “informative” 720 form for the Spanish tax agency. Deadline is end of the month.

But first a joke:

A man knocks on the door of a shop saying “I’m a tax inspector, please open up”. The owner opens the door and the man pull out a gun and says “I lied. I’m just here to rob you!” “Thank God!”, says the owner.

The 720 is the equivalent of the US FBAR form, and as a US citizen living in Spain you now have the joyful privilege of filling out two copies of the similar information, except you have to do all the calculations differently. Also, everything that is excluded from one is included in the other.

There are a couple really stupid parts of this declaration:

  • Bank accounts: you have to declare the average balance in the last trimester (Oct-Dec). Not only that, but you also need to convert it to Euros. Thankfully there is a clarification that you can calculate the average using the local currency and then convert it to Euros on the Dec 31st rate. Thank God for small mercies.
  • Stocks: if you like trading stocks, this is a freaking pain in the ass. Instead of just declaring your brokerage account, you need to declare each stock individually, and if you bought lots on different days, each lot ends up with a separate entry.

If you make a mistake, the fines are astronomical, starting at 10.000 euros.

Realize that when you declare something on the 720, you can expect a letter from the wealth tax collectors thereafter, wondering why you haven’t paid up.

For the sake of anyone who wants it, I made a short program in C# that can read and write the crazy fixed ascii file format that they use (I used it to generate the 720 file and then import it into their web app):

Wednesday, January 28, 2015

Hanergy scam: how can this possibly end well?

Hanergy is currently the worlds largest (by market cap) solar energy company, supposedly worth $18 billion. Financial times just published an article trying to figure out exactly what this company does and if it actually makes any money at all.

My guess is that people will be scratching their heads a year from now wondering how any idiot could have fallen for this scam.

Here’s how it works:

The public Hanergy has only one customer, its own parent company Hanergy Group. However, it’s parent company doesn’t actually “pay” for anything and almost all of the assets of Hanergy are actually accounts receivables owed by its parent group.

The public company makes “equipment” that is used by nine factories owned by the parent group. These will supposedly manufacture huge amounts of solar panels, although none of them has actually shown up in the wild.

It’s not clear that Hanergy (the public company) even has any products that anyone other than the parent company would want to buy, so if the parent company ran into problems, Hanergy would have no customers and be worth nothing.

Wednesday, January 21, 2015

Tax advantages of being an American citizen living abroad with children

I know I complain a lot about having to file US taxes every year, but for many Americans living abroad with children, they may actually be missing out on a significant tax refund:

Juan and Jill live in Spain. Jill is a US citizen; Jill makes 80,000 annually and Juan is a native Spaniard who doesn’t work. They have no other income. They have 3 little kids all under 17.

There are three options:

1) Jill doesn’t file US taxes and risks getting in trouble if she ever goes back to the US.

2) Jill files US taxes using the Foreign Earned Income Exclusion, end up owing 0 in US taxes.

3) File joint US taxes using the Foreign Tax Credit for taxes paid in Spain. Juan elects to be treated as a US resident for tax purposes under §6013(g). They fill out form 8812 “Additional Child Tax Credit” and get a refund of $3000 from the IRS.

Thursday, December 11, 2014

Public sector salaries in Spain

The brouhaha about how much high-level public sector employees is kind of missing the point:

  1. Yes, you need higher salaries if you are going to attract the best people
  2. However, all the current high-level public sector employees are PP flunkies who are barely qualified for their position

What is the solution? A starting point should be minimum qualifications and open competition for these positions.

Tuesday, December 2, 2014

Who is the lucky seller of oil hedges?

Everyone thought that US shale oil producers would get killed by the drop in oil prices. Turns out that they were smart enough to hedge their production back when the prices were high. For example, Miller Energy hedged 1.4 billion barrels of oil at around $95 until the end of 2016. Someone is going to have to mark-to-market $36 billion in losses (and that’s just for one of the producers), and I wonder who the lucky owner will be.

Saturday, November 29, 2014

Gender violence/abuse and protection orders

Spain has a very dysfunctional way of dealing with gender violence, and especially in protecting children from abusive environments. A recent story in El Pais showed that 97% of men with protection orders against them still visit their children. Since 2008, 20 children have been killed during these visits.

From seeing someone go through the court system here in Sant Cugat (everything goes through the court in Rubi, which is pretty bad), here are some of the things that shocked me:

The speedy trial:

  • If you call the police while you are being abused, they will take away the abuser and put in him jail pending a hearing which happens within a couple days.
  • This hearing IS THE TRIAL, so if you don’t have your shit together and can present a coherent case with evidence, etc, it can be difficult to even get a protection order. There isn’t really a chance to work with a lawyer, collect evidence, get translations, etc.
  • If you believe you were treated unfairly, you can appeal, but it will probably take years to get anywhere.
  • Basically if you are in an abusive relationship, but haven’t got the courage to call the police yet, you should at least be talking to a lawyer to prepare a case so that when you do finally make the call to 112, you won’t lose your chance to make a case.
  • Expect your ex to lie outrageously. Remember that there is no penalty for lying in court if you are the defendant.
  • Be very careful of how you answer questions like, since it can mean the difference between shared or exclusive custody later on:
    • “Is your partner a good father?”
      • If you say yes, this will be held against you. The correct answer is: “No. A good father does not hit his wife”
    • “Does he hit the children?”
      • Again, if you say no, this will be held against you. The correct answer is: “He has a tendency for violence. I don’t know how he acts when he is alone with the children.”

Child kidnapping:

  • Expect your partner to take your kids and try to use them as a negotiating ploy. If there is no court ordered custody agreement, your partner keep the kids as long as he likes as long as he tells you where they are.

Evidence:

  • Witnesses may be afraid to testify: there should be a provision for the identity of witnesses to be protected, but as far as I know there isn’t.
  • Audio recordings: even if you have a recordings of your partner yelling or threatening you, it is difficult to get these admitted in court.
  • Medical evidence: there isn’t a standard way for the court to get a doctor to testify as to the nature of any wounds etc. Good luck finding someone in the short amount of time you have before your speedy trial.

Criminal vs civil tracks

  • There are two completely separate “tracks” that your case can take, criminal (try to send your ex to jail) or civil (getting a divorce/custody hearing).
  • Unless you are pursuing the criminal route, you can’t present evidence of criminal behavior in the civil route.
  • Neither can the criminal route determine your divorce settlement.

Leaving the country

  • If the kids have a passport, put it in a safe place.
  • Almost all countries (with a couple exceptions like Japan and Cuba) will immediately force your kids to go back to Spain (with or without whoever took them) with barely a judicial hearing.
  • Your partner can file criminal child kidnapping charges against you and/or gain full custody of the kids while you are gone.
  • Fundamentally you don’t gain anything by doing this, and it will be held against you.