I’m moving to Spain – When should I take financial advice?

Brexit removed the previous rules pertaining to “Freedom of movement, goods and services within the EU”. Those who now wish to move to Spain from the UK, making it their home as retirees or working here, newer and tougher rules apply.

Distance working has added a new dynamic, in particular for those in the technology sector who see that this is as an opportunity to work and live in a nicer environment. Speaking to a qualified financial adviser who is regulated here,in Spain is sometimes an afterthought . However, talking to an adviser before you embark on the journey can help avoid some of the issues which expatriates can find themselves encountering. Financial planning is complex, whichever new country one moves to, so a brief summary can help prepare for the future “devil in the detail” elements. Forewarned is forearmed and helps avoid basic pitfalls.

It makes sense to “disinvest” all UK held assets prior to becoming Spanish Tax resident. Timing and deferral is the key to planning a strategy. Note that due to Brexit, UK advisers are no longer allowed to offer continuity of advice Spain for those that become tax resident in Spain.

There are a number of rules regarding Spanish tax residence, which are briefly detailed below. You will be deemed tax resident in Spain in any one of the following cases:

1. Number days in Spain not to exceed 183 days and may include time spent in any EU member country,
2. Centre of Economic interest i.e. source of earnings is in Spain,
3. Spouse and minor children living in Spain.

With regards to your assets, without going into too much detail, the following will apply.

UK property: Disposal once tax resident will be subject to Spanish capital gains tax, even if it was one’s primary UK residence. If retained it will be subject to reporting on Modello 720, a record listing overseas assets. A 20% increase in value will mean a new Modello 720 report. Income derived from letting the property will be subject to Spanish “investment” tax.

UK Pensions: A Pension Comencement Lump Sum is tax free in the UK, it is liable to tax in Spain. So if nearing 55 wait till you take it and then become Spanish Tax resident.

ISAs: An ISA offers tax free growth or income in the UK. They are not tax free in Spain, but there is a Spanish equivalent.

Unit Trust, Shares, Investment & Insurance Bonds, NSI bonds etc: There are some tax breaks in UK but none in Spain.

Inheritance Tax: The UK rules apply to the residual estate whereas Spain applies it to the beneficiary. There is a strong possibility of being taxed twice as estate rules & beneficiary rules are not covered by double taxation agreements.Based on “domicile” there is a different law for bequests & inheritance in Spain. Also, unlike the UK, it has a the variety of laws for each autonomous area,affecting in particular the potential impact of Spanish succession tax. It makes sense to deal with a regulated adviser who is based in or near to an autonomous area you will be living in e.g. Madrid ,Andalucia, Murcia, Valencia.

Having a “ partner “ relationship as opposed to being married, brings its financial own risks in Spain, and arrangements must be considered.

Spanish Property: Some people come to Spain with plans of using their new Spanish property to retire to now or eventually. If it is the latter, the property maybe used to produce rental income either via summer rentals or long term rentals, but in this case there will be tax considerations.

Investing an hour of two of your time before you make the move to Spain can provide peace of mind and financial comfort when planning your new adventure. I can provide “Your guide to tax in Spain” that goes into greater detail. Whether you want to send the guide or speak to me directly, please call or email me on the contacts below & I will be glad to help you. We do not charge for reviews, reports or recommendations we provide.

A Spanish regulated adviser can ensure you are financially prepared for your move, in terms of any investments, savings and taxes which can become due on both income and windfalls you may be expecting after your move.

Please note, we are not accountants or lawyers, but we do work hand in hand with these professionals, and can be the “first port of call”.