Viewing posts from: November 2000

Can I keep my UK ISA living in Spain?

By Chris Burke
This article is published on: 19th November 2021

19.11.21

As explained on the UK government website, you can keep your UK ISA open if you move abroad. However, it is not possible to add money to the ISA in the tax year after you move (unless you are a crown employee working overseas or their spouse or civil partner). Furthermore, as soon as you stop being a UK resident you must inform your UK ISA provider. If you decide to move back to the UK in the future then you may continue to contribute to your ISA.

ISA’s in Spain – can I get a Spanish ISA?
In simple terms, it is not possible to get an ISA (Individual Savings Account) in Spain. In order to be eligible for a UK ISA, you must be a tax resident of the UK (or a crown employee working overseas or their spouse or civil partner). However, there are financial products available in Spain that are similar to an ISA which can be considered as a viable alternative.

Spanish compliant investment bonds – the ISA alternative?
Similar to the UK ISA, Spanish compliant investment bonds offer tax benefits. Only select accounts are eligible for these benefits, so one must be careful to open an account specifically designated as a Spanish compliant portfolio bond. Although in Spain the gains from the performance of the investment are not completely tax free like the UK ISA, the gains from the Spanish compliant investment bonds still hold notable tax advantages. These advantages can be summarised in the following table:

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Benefit	Explanation
Capital Gains Tax Reduction	No capital gains tax is charged until a withdrawal takes place, allowing the power of compound interest to grow the value of the investment over time.
Tax Savings on Withdrawals	Unlike ‘normal’ investments in Spain, you only pay tax on the growth of the investment as opposed to the overall percentage gain. The original investment is known as initial capital.
Annual Tax Return	Does not need to be reported on the Modelo 720.
Different Currencies	Can be held in a variety of currencies – it is not required to be held in euros.
Inheritance Tax Reduction	It can be held jointly meaning that the policy would pass to the survivor in the event of death, preventing complex legal hurdles.
Fund and Provider Choice	A wide range of regulated funds qualify, which are offered by international firms such as Prudential and Quilter PLC.

Spanish Compliant Investment Bond – Tax Saving Example

Initial Partial Surrender (Part Withdrawal) of €5,000)

Premium (Initial Investment)	€100,000
Surrender Value	€130,000
Partial Surrender (Withdrawal) Amount	€5,000
Policyholder/Spanish Resident Before Chargeable Events	Yes
(Initial Investment/surrender value) x partial surrender amount (€100,000/€130,000) x €5,000	Non-taxable Portion €3,846
(Initial Investment – non-taxable portion) €5,000 – €3,846	Taxable Income €1,154
19% tax on the taxable income €1,154 x 19%	Tax Due €219
Amount Paid to Policyholder	€5,000 – €219 = €4,781
Surrender Value – Partial Surrender Amount (€130,000 – €5,000)	Closing Surrender Value of Bond €125,000

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In essence the more the Spanish Investment Bond grows, the more your tax is offset.

If you would like to find out more about the ISA alternative here in Spain or to talk through your situation and receive expert, factual advice, don’t hesitate to get in touch with Chris.

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Gift tax in Spain

By Chris Burke
This article is published on: 14th November 2021

14.11.21

I hope you are all well; so far so good in getting back to a ‘normal world’ but you never know how near we are to a ‘Black Swan’. This month’s TT covers the following Hot Topics:

UK to Spanish driving license – another update
Gift tax in Spain – assets received from a UK parent, what tax would you pay in Catalonia?
UK private pension age to be increased from 55 -57
UK budget – inflation forecast of 4%+

UK driving license update
Last month I mentioned that anyone with a UK driving license in Spain could use it until the end of October. The UK government has just announced this has been extended until the end of 2021, so watch this space and let us hope an agreement is reached to exchange them for Spanish driving licenses, eventually.

Do you undertstand your tax liabilities in Spain if you still hold assets in the UK?

Gift tax from a parent in the UK?
Inheritance tax is constantly a hot topic in the UK and living abroad also, but for many people it’s not always clear as to what the rules are. In Spain for example, it’s regional on what you might pay for inheritance tax/gift tax and depends on many variables, including the amount to be received, the relationship to the donor and your country of residence.

Many people are accruing more and more assets from parents when they pass on from this life, and these assets are accruing more and more in value. However, inheritance tax is not changing that much, meaning in real terms people are paying or will be paying more money in tax. Therefore, many are choosing to try to pass their wealth on as gifts before this tax continues to escalate and plan to mitigate as much as possible.

However, for those in Catalonia inheriting/receiving a gift from a parent the tax is nowhere near as much as people might think. What is important is that you declare it, and do it on time so as not to receive any penalties.

As I stated earlier, it’s very difficult to give exact numbers as everyone’s situation is different. However, if I use a regular scenario I come across it will give you a very rough idea of what you might pay:

Potential Inheritance Tax
A British person, living in Catalonia, inheriting from a parent an amount of £250,000 would pay approximately €4,000 in tax.

Potential Gift Tax
A British person, living in Catalonia, being gifted from a parent an amount of £250,000 would pay approximately €16,500 in tax. (Note this gift amount is based on the receiver owning up to €500,000 in assets prior to the gift being received and reporting this gift to the notary.

As I say, these are approximate figures, but it will give you an idea of what you might pay.

We help clients declare this correctly and also plan what is the best thing to do with their money, including buying property, paying off mortgages, increasing its intrinsic value or protecting it against inflation.

Private/company pension access ages are to be increased
In 2015 The UK government changed pension rules so that anyone with a private pension could access the monies from age 55. This was greatly publicised, helped by an MP at the time who stated ‘If people do buy a Lamborghini but know that they’ll end up just living on the state pension, that becomes their choice’. Some people were worried people would spend all their pension money and then only have their state pension to live on. For the majority this did not happen (so far!).

Now the government has increased the age you can access your private pensions to keep in line with state pensions by 10 years, with UK state pensions claimable from age 67 for the most part. So from 6th April 2028 you must be 57 to access your private pensions.

This largely makes sense, although for many people who had started planning their retirement from age 55 it creates a problem. I have already starting helping many clients ‘plug the gap’ for this extra 2 year period which is more about changing what they are doing now to cover this eventuality in the future.

4% – inflation rising – the value of your savings decreases
In my last Top Tips I highlighted that inflation is starting to become something everyone needs to be aware of, after a decade or two of being very low. The impact it can have on your money is substantial.

The UK government in their latest budget have forecast this will go up to 4% in 2022 and maybe even higher. As I mentioned, for £100,000 you have in a bank account, in real terms this would be devaluing by £4,000 per year. CPI, the most common index that is used for measuring the ‘average basket of goods and services’ increasing or decreasing, went up by the MOST amount it ever has this last August (recorded by CPIH National Statistic 12-month inflation rate series) by almost 1% in a rolling 12-month measure.

This also brings real concerns for many people with private or corporate pension schemes, as nearly all have limits on what they will increase inflation by for your pension. This ranges from 2.5% up to 5%, therefore if inflation was to go above this your pension would not keep up with the increase in goods/services. We help clients plan and manage this potential eventuality.

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What can I do with £100,000 that I might want access to in a year or two?
One of the hardest to plan for and the most common questions I receive is what to do with a set amount of money that clients might want to use in a year or two, but want it to gain an interest/keep up with inflation until then. In many cases, this ‘1 or 2 years’ very often turns into 5 or 6 years and that can be a very dangerous situation, especially taking into account inflation at 4% (that’s 20% decrease in value after 5 years).

There are a few things we highlight to clients, such as some ‘not so well known’ good interest savings accounts, using Premium Bonds and also talking through their situation to professionally plan their finances taking this into account. Over a long period of time this can make a big difference.

As ever our chosen partner for exchanging currency is ‘Smart Currency’, register here with them for free and see how much they could save you and transfer your monies safely, quickly and effectively.

Click Here to read reviews on Chris and his advice.

If you would like any more information regarding any of the above, or to talk through your situation initially and receive expert, factual based advice, don’t hesitate to get in touch.

UK tax rebates in Spain

By Chris Burke
This article is published on: 1st September 2021

01.09.21

The TT – Top Tips Newsletter

Hi everyone, I hope you are enjoying some well needed freedom and a good summer. This month’s TT covers the following Hot Topics:

UK passports – VERY important news on travelling to Europe
UK tax rebates for those moving abroad
New working/retirement rules in Spain

UK passports
The first news out this year, importantly for those travelling to and from Europe, was that you must have 6 months left on your UK passport to enter the country now that the UK has left the EU; this applies even if you are a resident. Those travelling may have noticed that as well as joining the ‘Non-EU passport queue’, your passport will more than likely have been stamped. The UK has issued a statement saying that if you present your TIE resident card at passport control, they will not need to stamp your passport. In my experience this is not the case so far, even though I have given them my TIE as well. This might be an issue for those people who travel regularly, as once your passport stamp pages are full a passport is not usable. You would then need to apply for a new passport on the basis of ‘exhaustion of pages’. What’s more is that some countries will not allow entry without two blank passport stamp pages. If you are renewing your passport, it might be worth requesting the larger version with more pages to cover for this eventuality. Which leads me nicely onto my next topic.

UK red passport expiry date
Those who have not renewed their UK passport in the last year probably will have the old red colour passport. An important announcement was made recently in respect of these and is as such: these passports are ONLY valid for 10 years exactly. What this means is, if when you last renewed your passport and had months added that were still valid from the previous passport, these do not count anymore. Thus, these passports are only valid from 10 years from their date of ISSUE.

This will not affect everyone, but for example, if your current red passport was issued in January 2012, but expires in May 2022, because there were 4 months remaining on the previous passport which were added to the new one, you will be affected. In this instance, Europe/Spain will have this passport expiring in January 2022 and to enter you must have 6 months remaining to this date.
It’s good to have things like this to worry about, because there just isn’t enough in life is there?!

UK tax rebate for those moving abroad
Anyone who has left the UK in the last four tax years is allowed to apply for a UK tax rebate. There is no way to trigger an automatic tax refund; the HMRC needs you to submit an official claim before they can refund your tax overspend.

UK tax is calculated on your projected annual income, so if you don’t complete a full UK tax year this could be wrong, and in many cases very much so.
The main reasons you should look at this are:

Personal allowance – you have not used the entire amount in the year you emigrate/leave
You continue to be a UK taxpayer but are employed in another country

The process to find out if you are due any monies is fairly straightforward:
Complete form P85, sending parts 2 & 3 of your P45 that you should have received from your employer, or a self assesment form if you were self employed.

You can read about how to do this on the official government website here:
www.gov.uk/tax-right-retire-abroad-return-to-uk

New part time working/retirement rules in Spain
Until recently in Spain, you either had to be working or retired from a Spanish state pension perspective. That is to say, you could not work and receive your state pension. I know, I know, it just doesn’t incentivise people who arguably have the most experience in life to contribute to the economy, as if they continue working in any capacity they cannot receive their hard worked for state pension. However, recently this has changed.
You can now receive 50% of your Spanish state pension, pay a reduced autonomo payment (self-employed monthly payment) and continue to work. As a reminder, to receive a Spanish state pension you must have contributed for 15 years and two of those years must have been within the 15 years preceding actually retiring.

If you would like more information regarding any of the above, or to talk through your situation initially and receive expert, factual advice, don’t hesitate to get in touch with Chris.

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Top three financial tips for expats living in Spain

By Chris Burke
This article is published on: 22nd July 2021

22.07.21

Hola

This month we are covering the following Hot Topics:

UK financial advisers are not legally able to advise EU based clients anymore
The important ‘rule of 72’ for investing
Spanish state pension inflation worry

UK investments & pension law changes
Many UK based financial advisers can no longer legally look after anyone resident in Spain or the EU due to Brexit legislation, most having already written to their clients informing them of this. However, it’s not all bad news; most UK based investments including ISAs are not tax efficient in Spain/EU, with many having to be declared annually and tax paid on any gains, EVEN if you don’t access the money. This does depend completely on your circumstances and I help people analyse their personal situation, managing their UK assets or arranging for them to become Spanish compliant moving forward.

For those with UK private pensions in drawdown, every few years to receive this money you must have a UK accountant rubber stamp this to continue. So again, you will need to find someone locally to do this for you, which we can help with.

If you have any questions or need help in respect of UK based assets, please get in touch for a free, no obligation chat/review of your situation.

Send me your questions

The rule of 72 and poor performing investments
Implementing an investment strategy is not where your investment plan finishes; it is where it begins. Without regular reviews and maintenance there is a strong risk you will finish up with much less than you should have had. Many financial advisors here in Spain are mainly remunerated when taking on a new client, not on the performance of their investment. This is where I/Spectrum differ.

One of the many key aspects of investing is to keep a keen eye on the ‘rule of 72’, which is knowing how long before your money should double in its value. To work out the ‘rule of 72’ for your investment you use the following simple formula: divide the number 72 by the average annual interest you are receiving/likely to receive and it will tell you how many years it would take for you to double your money. So, for example, if you were averaging 4% interest per year it would take around 18 years (72/4 = 18 years), at 5% around 14 years and 6% around 12 years. To put that into a real-life scenario, if we use a starting point of €100,000 and invested over a 25 year period this amount of money would give you:

4% €266,583
5% €338,635
6% €429,187

To put that into context, historically inflation makes your costs double every 24 years, so if your money is not well ahead of that, in real terms your monies are just keeping their present value.

Therefore, it’s imperative you really are seeing your investments growing and working for you. If they are not, I suggest you seek a second opinion and find out how you can have these optimised, because it will make a big difference to you further down the line. The main reasons for investments failing are high maintenance costs and investments that give the financial adviser a ‘kickback’. Many people don’t always understand why their investment funds are growing but their portfolio isn’t as much, and this is usually a starting point to look at.

I work in a different way, making sure it also works for the client by not using this method, but on a transparent fee basis using the best investments & platforms for the clients; not using investment funds that give the adviser more commissions, in essence.

Contact me to make an appointment via the phone or zoom

Spanish state pension inflation worry
Back in 2011, Spain used to have a surplus state pension fund of €66 billion. This could be looked at as ‘well, at least they had a surplus; most countries have never had one’. Just before Covid started in 2019, it was €16 billion in debt. Now the state pension system, like many others, works on the principle that current workers pay for those who are retired now. The key point here is, from a percentage perspective, Spain, compared to others in the EU, has one of the highest proportions of its GDP (total country income) contributed to its state pension, at around 12%. The average ‘replacement rate’, which is the percentage of workers final salary income that they receive in retirement, was at 72% in 2019*, whereas the average in Europe is 45%. They receive, as a percentage, much more on average for their state pension compared to their earnings than their European counterparts. This is great on one hand, however this really is a great burden on Spain to provide that level of state pension to the people.

The only way Spain can carry on providing state pensions is to “increase the retirement age even higher and decrease the amount people receive” says Concepcion Patxot Cardoner, a University of Barcelona professor, as quoted by Bloomberg. That and start to move people towards saving into their own private pensions. However, this last option and the main plan moving forward is going to be difficult to achieve in a culture where only around 26% currently save into a private pension. Compare that to the UK where the latest survey showed 65% of people contribute.

If you also take into account Spain’s tourist industry (before Covid), which is the second largest in the world employing about 2 million people and accounting for about 11 percent of the country’s GDP, you can see that things are going to need to change drastically to balance the books given the current crisis.

What does all this mean? Well, to you and I, it’s even more important that we have a plan in place, whatever that is, to make sure we have provision in retirement. I am here to talk through this with you, using professional analytics tools to help take one of the most important planning aspects of your life and break it down, step by step, making it:

Specific to you
Measurable
Achievable
Realistic
Targeted

If you would like to talk through your situation with someone consultative and knowledgeable, don’t hesitate to get in touch.

Are you self employed in Spain – What expenses can you claim?

By Chris Burke
This article is published on: 26th March 2021

I find people are not always aware of what they can and can’t claim back as expenses in Spain, mainly as there is no easy to understand list explaining this to you. Try asking your accountant and even they might not give you exactly what you need to understand, so, I will try to explain as clearly as possible. The following is what you can claim for, in all times, as long as you have a receipt with your name on and the payment details, using a card/account in your name (adding your NIE/TIE to the receipt is even better, thus providing you with a VAT invoice, or factura simplificada as its known):

Lunch – inside Spain you can spend €26.67 (How did they get to that amount?) and outside Spain €48.08. For a work trip away, you have an allowance of €53.34 for food, and outside of Spain €91.35. This does not include accommodation, which seems to be not capped (I would be careful here obviously).

For freelancers who work from home, Spain’s tax authority specifies certain partial deductions, such as supply expenses (water, electricity, gas, telephone, internet). The deduction is 30% of the expenses in proportion to the square meters of area at home you use, so for example an office. Not many people are aware this also includes for any home you own, on the mortgage interest part of the payment. So, if the space you work from home is 15% of the surface area, you can deduct that proportion. However, you must register your home address as your centre of economic activity when registering as an autónomo. As an autónomo, if you also partially use a vehicle for business, 50% of expenditures on it are deductible for income tax and VAT.

Car hire/leasing is covered, and generally a better way to go than purchasing a car in many cases.

Other things included as deductibles are charity donations (a specific amount) and varied work expenses, so paper, mobile phones and the contract, printers and their costs, client entertaining, travel expenses outside of food/beverage and work events. Usually, a good accountant will send you anything they aren’t sure about before they declare your expenses, so you can confirm what they are and you can then see if they are covered.

The following are importantly NOT covered and cannot be claimed as an expense:

Dry Cleaning
Purchasing of a car (even if solely for work)

If you are earning more than the annual Spanish minimum wage as a self-employed worker or as an autónomo, you will have to pay social security contributions. If you are eligible and don’t pay social security, you won’t get any benefits. These contributions entitle you to health care and, after you’ve paid into the scheme for 15 years, a state pension. You can pay more than the basic amount to get a higher pension or make additional contributions to be covered for accidents or sickness at work.

The current monthly cost to be an autonomo is €289, whilst for many people the first year starts at €60 per month. For months 13–18, you’re eligible for a 50% discount, and from months 18-24, a 30% reduction and after 24 months it reverts to the standard rate. There are also reductions up to 50% if you are on maternity leave. The amount will differ depending on your age (over 50 it is slightly more) and you will need to make these payments even if you don’t earn anything.

Is it better to be self employed
or run a Spanish company?

Setting up a Spanish company costs initially around €2,000 and has a monthly running cost of around €400 per individual approximately. There are also annual reporting costs and declarations, and it costs a similar amount to close a Spanish company down as to open it, so make sure you have thought this through before proceeding. In essence, if you believe your annual income will be above €80,000 then it would be worth looking into this structure. It is a lot more complicated, expensive and administrative. It might be best to run your business for a few years as an autonomo, see where you are and then look into setting up a company. It is also time consuming to close a Spanish company down.

Cryptocurrency Taxes in Spain

By Chris Burke
This article is published on: 10th March 2021

10.03.21

As new investment types become more popular, people generally get in touch with me about them. That is certainly the case with cryptocurrencies such as Bitcoin, and that now large investment firms are starting to invest (Blackrock for example), more people feel comfortable in also investing, or researching whether they should.

Many years ago, due to the technology (or lack of) available, it usually took some time, even a decade or so, for new companies and investments to become well known, sustainable or very successful. Now, with the exponential growth of technology, automation and social media, companies can go from almost zero to mega over a period of months or years. As you may have seen recently in the news with the commodity silver and the company GameStop, technology has become so powerful that groups of people communicating on social media can even ‘manipulate’ investment prices themselves, whether this be a good or bad thing. However, this also creates careful considerations when contemplating investing in these hyped assets.

You need to be very aware that these relatively young and very popular assets show an incredible amount of volatility, and therefore risk. This in itself is not a problem, just as long as you understand it. Investing in anything like this, and I would put cryptocurrency and Tesla or the like into that bracket, as fantastically as they can go up, they can also come down. So the golden rule to consider is, do not invest any monies you are not prepared to lose. Imagine you are walking in to a casino and have a figure in mind that you are going to gamble with; after it is gone you are prepared to walk away without it. That amount can be whatever you like, but you have to understand you can make an amazing profit if things go your way, or, you could lose almost all of it. As long as you are aware and accept this, then you are comfortable to invest in it.

I meet more and more people who have invested in these areas and then require help in taking their sometimes life changing gain to having it managed at a much lower risk level, consolidating and securing that gain. They have made their money, there is no need to keep the risk level that high, cash some if not all ‘out’ and use your ‘winnings’ to permanently change your life. For example, if you went to the casino and won a life changing amount of money, say €250,000, would you return the following week and carrying on gambling it? At what point would you ‘cash in your chips’ and take the reward? The probability still stays at 50/50 each day whether you win or lose, so, until you have ‘cashed in’ your chips, your high-risk level is still there. By de-risking, you are guaranteeing some of that gain and reducing your exposure.

What about taxes on cryptocurrency?
In October last year, the Spanish government brought in greater controls for this kind of investment. In real terms, this means if you buy, sell, transfer, exchange or use to buy something with it they want to know. However, there is only a taxable event when you dispose of this type of investment.

In terms of the tax to pay, this would come under savings tax in Spain (or capital gains tax as it is also known). These rates are currently:

• From 0 to €6000 you pay 19% in tax
• From €6001 to €50000 you pay 21% in tax
• From €50001 to €200,000 you pay 23% in tax
• From €200,001 + you pay 26% in tax

This is only on the gain/profit you have made, not the amount you sell.

Key considerations to take into account
Cryptocurrency is also applicable under wealth tax in Spain, should the region you are tax resident in be applicable to this.

If your cryptocurrency investment should incur a loss, these can be offset against any gains you have over the next 4 years, so that is something important to bear in mind.

Buying using cryptocurrency
If you sell cryptocurrency and buy another investment type having made a profit, then this would be taxed as a gain at the above rates. If you use Bitcoin to make purchases for products or services, then 21% IVA (VAT) tax would also be applicable.

If you do not make the relevant declarations or pay the necessary taxes, large penalties and fines will apply, so you must make sure you not only do this, but perform it correctly.

If you would like help in looking into investing in Bitcoin or other cryptocurrencies, would like help declaring these correctly, or would like to take your already gained profit as tax efficiently as possible and have it managed professionally, don’t hesitate to get in touch.

Financial and Retirement Planning – Cash flow Modelling

By Chris Burke
This article is published on: 2nd February 2021

02.02.21

Many people seek financial advice, or financial planning, but if you asked them what they would like to get out of it, most people would probably say clarity on their finances, planning how to make their monies work and to have what they need in retirement, or partial retirement. Only 45% of people in Spain save into private pensions, and now with the government reducing the amount you can save that way tax efficiently, retirement planning is even more important.

Most financial advisers will look at your assets, see what you are doing, talk through why, then recommend a product to improve what you are doing. There is nothing wrong with that, in fact that is part of what we do, however this isn’t really giving people what they hoped to get out of the meetings/talks.

A key part of helping people with their finances, as well as making their monies work, is real life planning of what they have now, what their goals are and showing them how to get there. People take in and understand much more visually, as most of us know; in fact 65% of us are visual learners. That’s why it’s important that when planning your finances you consider using a visual modelling system that shows your monies, what they are doing, future monies potentially coming in, and if you save ‘X’ amount into a pension/property/investment this will be the outcome. For example, which of the below would you prefer to see as your advice?

‘We recommend you place your €50,000 with ‘X’ company, and over the years achieving ‘X’ % return. Also, save ‘X’ a month in a savings program and both of these at retirement will give you ‘X’

OR TRY THIS…

What it really comes down to is the expertise of the planning, the knowledge of the financial adviser with whom you are working, and how much is actually put into planning your finances, rather than just making what monies you have work.

This is just one example why I/we at Spectrum stand out as excellent professional financial advisers and planners, if you would like to seriously start planning your retirement and investments or review what you are doing now, don’t hesitate to get in touch, or sign up to my Newsletter below to keep well informed.

UK pension consolidation living in Spain

By Chris Burke
This article is published on: 1st February 2021

01.02.21

Now more than ever, with the UK leaving the EU, if you have a UK pension/pensions you will need to make sure that they are being properly looked after and managed. This needs to be by someone who can legally practice in the country where you are tax resident. Many UK pension companies are no longer able to give advice to those living outside of the UK, meaning you could have difficulties accessing, managing and securing your pension moving forward. A local adviser also has the advantage of knowing the local regulations, so is able to make sure you are adhering to the rules in addition to being as tax efficient as possible.

When people approach me to speak about their UK private or company pensions, they usually are not clear on:

- What they are invested in, and whether the strategy is appropriate given the stage of life they are at now
- How investment decisions are made, who makes them and when
- The costs of management, what they are and are they efficient
- How to access the pensions, particularly doing it tax efficiently living in Spain
- How to consolidate multiple pensions, reducing costs and creating greater annual gains

When I ask most people what their pensions are invested in, what the annual returns are and when they last reviewed this, they usually don’t know or can’t remember. One of the reasons for this is that being outside of the UK makes all this all the more difficult to manage, and even more so now after Brexit.

Or, if they do know the answer to my questions, they have now found they cannot receive any advice from UK pension companies or UK based financial advisers moving forward.

Consider consolidating several pension pots

If you have several different pension pots, there are potential advantages if you consolidate them into one. These include:

Simplification of administration and keeping track of your pensions
Managing your pension savings more easily and effectively, including potential tax liabilities knowing local, Spanish rules
Saving money if you can transfer from higher-cost schemes to a lower-cost one
Opening up a greater choice of investments if you are consolidating your pension pots into a flexible scheme

In many cases, the first step would be to locate your pensions and then evaluate what you have, how they work, what your options are and then have these managed effectively.

I help clients consolidate their UK pensions, managing them efficiently and effectively, planning for when they want to access them integrating with their tax situation and lifestyle. We can help you achieve all this, giving ongoing advice and moving forward making sure you access you pension tax efficiently, adapting to your life as it changes along the way.

For example, if you are over 55 years of age and currently on the Beckham Law, did you know you can cash your UK pensions in, potentially paying no tax in the UK, and potentially none in Spain? This is because on the Beckham Law, all ‘non-Spanish’ income is tax exempt (this depends on your personal circumstances) and being a NON-UK resident, you have no tax liabilities there either.

If you would like to discuss your various UK pensions and what your options are, feel free to get in touch.

Form D6, Modelo 720, Declaracion de la Renta and Wealth Tax reporting dates

By Chris Burke
This article is published on: 15th January 2021

15.01.21

Whether you have lived in Spain for a while, or are new and trying to understand when you need to submit to the various deadlines, including taxes and overseas assets, I have listed below in an easy to read format what you have to declare and when, to help make your life more simple. These have been the same for the last few years and so should remain moving forward. If you would like help in understanding, declaring and any other questions don’t hesitate to get in touch.

End of January 2021

FORM D6
Stocks, bonds and investment funds that are outside of Spain and are not Spanish compliant. (this is to compliment and not replace Modelo 720). Failure to comply with the obligation to submit this Form D6, can lead to a fine of up to 25% of the undeclared amount, with a minimum of €3000. Late declaration entails penalties ranging from €300 in the first 6 months to €600 after that deadline.

End of March 2021

MODELO 720
This is a declaration of assets outside of Spain value of €50,000 or more. Once declared you only need to do this again if the value of any asset (e.g. a bank account) has risen by more than €20,000). The authorities can fine you anywhere between 100 and 10,000 euro for failure to meet the requirements (as of 2019, the European Union considers Spain to be breaking EU law with these sanctions for people who file the Modelo 720 late).

End of June 2021

Declaración De La Renta
Your annual tax return, showing all assets and worldwide incomes, must be declared for assessment by this date. Not all assets will be taxable, depending on how they are structured. In Spain the financial year runs from January through to December, and in June you are declaring for the previous calendar year’s finances.

Wealth Tax declaration – Catalonia
Wealth tax is applied if your worldwide assets are more than 500,000€ with an additional allowance of up to 300,000€ for your main residence. The tax is based upon your net wealth: assets minus liabilities. In Catalonia the rates of tax start at 0.21% and rises to 2.75% depending on your wealth each year and is taken from the 31st December the previous year. There are ways of mitigating this tax by having your assets structured correctly.

What role do Chris and The Spectrum IFA Group perform?
I am a financial planner/Wealth Manager and we specialise in optimising clients’ assets, including strategies to minimise taxes both now and in the future. We manage clients’ savings, investments and pensions whilst understanding what these are and the role they will play in their lives. I do my best to continually keep clients informed of anything they need to know in respect of these topics.

Spanish private pensions

By Chris Burke
This article is published on: 1st January 2021

01.01.21

Approximately 45% of people living in Spain contribute to a private pension. For someone who is from another Western, perhaps non-Latin country, this would seem remarkably low. Many years ago, in the UK pensions were almost guaranteed as part of an employer package, and a while back it became compulsory for anyone working in a company aged over 22 and earning more than £10,00 a year to contribute to one. But that figure of 45% in Spain could be about to get even lower…..why?

Spain has decided to lower the amount of private pension contributions you will receive tax relief on, from a low €8,000 per year (the UK has an amount you can contribute annually to of £40,000) to a measly €2,000 from 2021 onwards.

I have an open-minded view about pensions; I do not see them as essential, which may seem strange coming from a Financial Adviser. For me, a retirement plan does not need to include or solely be a pension, as long as there is planning in place. The only things I see as good value for the saver with a pension is that employees may contribute into this for you, and the potential tax savings received. I say potential tax savings here, because yes, you may receive tax relief when adding to these pensions, however, more often than not, unless you can mitigate your tax situation, will pay taxes when taking the money out, so more commonly they are a tax deferral system (which is still some kind of potential benefit).

So, if you take away employer contributions, for me private pensions, certainly as an international person living and working away from your country of residence, doesn’t seem all that attractive. If you ever leave that country the pension stays there, under that

country’s rules, and you cannot access this money until age 67 (in Spain) and invariably, in my opinion but seen through clients and performance charts, Spanish private pensions are generally not that good. Look at most Spanish banks’ pension funds and you will find high commissions, too much investment in the Spanish market, and not enough advice.

What should a retirement/pension plan look like? Well, it’s about having a plan/strategy, regularly reviewing and understanding it doesn’t have to be a ‘pension’. It can be property; indeed, one of the reasons private pension contributions are so low in Spain is because culturally they are property lovers, often not just one, but several. These are usually structured within a Spanish company and passed down through the generations, and can be a very attractive investment and also tax efficient. Buying property in Spain is expensive, approximately 13% in Catalunya for example, however if you rent this out as a long-term rental, up to 60% of that annual income is tax exempt.

What this doesn’t give you though is liquidity, so, if there is a property slow down, you could be stuck with that investment unless you want to take a loss on it, or you may have to leave it behind if you move on. It can also be a big hassle, with Okupas (a common problem in Spain of people unlawfully living in your property, and who are very difficult to get rid of, indeed sometimes it can take years to do so and cost a lot of money). Many people working now are almost in a ‘golden generation’ to think about their pension planning. Many of their parents have assets/properties that have grown very well, and will more often than not leave them a considerable amount of money (see my article on inheritance planning for a potential tax problems there!) They seem less worried about their retirement, than perhaps their parents were. Therefore, they don’t necessarily see the benefit of saving money into a pension when they might not need one, with the money being blocked until then and it restricting their current lifestyle.

A more popular and arguably better strategy for someone, perhaps like me for example, living away from my country of birth, is to make my money work by having it invested in a medium term strategy, say 5-10 years, but have more flexibility should I need it, say for school fees, or, in a few years time, buying a property, or anything else my plan entails (maybe even early retirement).

So, build your strategy on a mixture of property, investments and emergency funds where possible, and always review regularly to see which type of these suits you best at any given moment. Some people really don’t want the hassle of having property, so a well managed investment portfolio could be better for you.

I can help with all of this: the planning, helping set up a property investment structure, and organising savings that will be invested and work for you. Alongside this, we can set it up with access to the money should you need it, making sure you have a clear strategy and advice along your journey.