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Inheritance Tax in Catalonia

By Chris Burke
This article is published on: 11th October 2019

11.10.19

*There have been recent updates of 1st January 2020 – please click here for the new rates

In the circle of life, it’s an unfortunate occurrence that parents or relatives pass on from this world we live in and leave an inheritance, whether that is property, money, investments or other assets. The value of this inheritance may or may not be the kind you are used to having or looking after, and that is where we/ I come in, to make sure this your inheritance is safe and looked after, taking into account your life situation both now, and in the future.

How is this inheritance taxed in Catalonia though? I hear many stories or ideas among people I meet but no one seems to know for sure, or get it right anyway. One of the reasons for this is that it depends on where the money comes from, i.e. which country and what asset is being received. Many of my clients are from the UK, how does it also work there? In the UK it is usually very simple, if someone dies being resident in the UK and leaves you assets up to £325,000,there is usually no Inheritance Tax (Paid by the estate); anything over this is taxed at 40%. However, in Catalonia it is not that simple (Surprise surprise, I hear you say!) and alongside what is declared and maybe tax payable in the UK, you must also declare and pay the relevant tax here

Firstly, Inheritance tax in Catalunya is paid for by the receive, not the estate, and very importantly, you have 6 months to declare this inheritance, EVEN if you haven’t received it yet (this is from the date of decease) or you will be fined the following way, on the amount of tax you are liable to pay:

5% in the following 3 months (i.e. months 6-9 since death)
10% from 3 months to 6 months
15% from 6 months to 12 months
20% plus interests after 12 months

The good news is that there are discounts on inheritance tax in Catalonia, and most people are surprised by the amount of tax they have to pay, in a good way. To start with, there is usually no tax to pay on the first €100,000 being received if you are a child or spouse of the deceased. If you are a parent of the deceased, the allowance is €30,000 and any other relative receives a €50,000 nil tax amount including grandchildren.

From this point on, there are further reductions between 97-99% and there are also other factors to be taken into account, such as are the children under 21, disabled or if from a family business. The quickest and simplest way, I feel, to give you an idea of what tax you would pay is if I use the most common example, of a parent living outside of Spain, leaving their child whom is living in Catalonia an amount of money/asset not including property (there would potentially be extra tax deductions for receiving this):

Example (guideline) of someone tax resident in Catalonia, inheriting from a parent in the UK:

Amount to be inherited	Tax due in Catalonia
€100,000	€0
€250,000	€383.82
€500,000	€4,300.05
€750,000	€16,866.68
€1,000,000	€40,473.29

These are approximate and we always suggest getting in touch to confirm exactly what the amount would be, and for help declaring it. For the assets themselves, it is worth knowing that many assets overseas are not always efficient to have while living in Catalonia. For example, investments or Isas in the UK are declarable and tax payable on any gain in Spain annually, EVEN if you do not take any of the money, unlike in the UK. This is where we help our clients to get organised efficiently and manage the assets if needed.

If you have any questions relating to any of these points, or anything similar, don’t hesitate to get in touch.

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Tax Advice in Spain for Expats

By Chris Burke
This article is published on: 24th September 2019

24.09.19

Whenever someone gets in touch with me, the first, most important thing I suggest they do is to make themselves and their family as tax efficient as possible, i.e. tax planning. There is no point having a ‘leaky bucket’: their money earning interest but more than needs to is pouring through the ‘tax holes’ they haven’t plugged or planned for.

So, apart from the obvious reason of minimising the current tax you pay, why is it important to review your tax situation? It is to make sure you are aware of ‘stealth taxes’. Stealth taxes are those which are not easy to detect and that many people are not aware of.

If you are a government, you want to win as many votes as possible to be elected (or re-elected). You need money to spend, but raising taxes on the upper echelons will damage your votes, raising taxes on the working classes will also damage you votes, and both will be very vocal. Therefore, what has become increasingly popular with governments is to increase taxes that won’t necessarily hurt voters’ pockets on a day to day basis, but which could do in the future.

A good example of this is something called the lifetime allowance. This is the ‘ceiling’ under which the value of your UK private pension will be in the regular tax bands. However, if your pension pot overshoots this limit, you will pay increased tax of up to 55% on anything over that ceiling. Never heard of this tax? Well, I can assure you there are some very normal, everyday, hard-working people who are not in the upper echelons of society and who, due to long pension contributions and having good investment advice, will reach this limit in their lifetime.

To explain this a little more, the lifetime allowance ceiling was introduced in 2006 and was £1,800,000 at its maximum. Over time, it has been reduced and reduced to its present rate of £1,055,000. During that same time inflation has increased, people’s earnings have increased, contributions to pensions have increased; so why should the ceiling go down? Stealth tax.

Moving forward, stealth taxes are likely to be the most popular way for governments to increase their income without the majority of people noticing.

Let’s think about this. What else could the government do along these lines to increase revenue? How about tax those British people living outside of the UK more? They don’t live there, they don’t have the same rights as everyone that does, so are they not an easier target? So, what could they do? Tax UK state pensions (currently they do not tax non-UK residents, although they are taxable in Spain)? Or how about tax those with UK private pensions a ‘non-resident tax’? Or tax those who move their UK pensions outside of the UK and not into a place where the UK government has an agreement with? In fact, the last one they do already!

What can you do? Well its quite simple really; plan now so that should any of the above or anything like this happen, your assets or monies are arranged to be as tax efficient as possible to mitigate these circumstances. If your assets are working just as effectively as they are now, but are much more tax efficient, it could save you and your family a lot of money in taxes in the future.

Perfect preparation prevents P*** P*** performance I believe is the phrase!

Moving to, or living in Spain after Brexit – What do you need to do?

By Chris Burke
This article is published on: 20th August 2019

*UPDATED 1st January 2020

If you have been living in Spain lawfully for at least five years, you will be able to apply for indefinite permission to reside there, which is termed ‘permiso de residencia de larga duración’ simply meaning ‘long term residence permit’. Note that you cannot apply until the UK has ‘potentially’ finally left the EU.

Apart from this, there are four main conditions to be able to remain in Spain after Brexit:

No criminal record
That you have not been ejected from Spain OR from a country which Spain has a verbal agreement with
You have private health insurance
You have a net monthly income of at least €799 for a family of two, and a further €266 per month for each additional family member

However, if after Brexit you have not been in Spain for 5 years but are living there legally, there is no great need to worry. The time you have spent there will count towards the 5 years and as long as you meet the above criteria, you will then be able to apply for the ‘permiso de residencia de larga duracion’. What you might have to do though, is apply for permission for what you will be doing in Spain. For example, if a retiree, you might need to ask to be that in Spain. Or, if you wish to work (see more about this below) you will need to apply for this also. If you wish to holiday for less than 3 months at a time, then you should not need to apply to remain in Spain for this. Before Brexit, obviously none of this was required.

Working, or not working, in Spain – after Brexit
If you wish to move to Spain after Brexit, but NOT work in Spain, you will need to apply for a ‘permiso de residencia no lucrativa’ meaning essentially a ‘non profit visa’. You will also have to prove you have money to live on, such as a regular permanent income (a salary would not count for this) or through bank statements showing that a minimum balance has been maintained over at least the last year, with your name and account number.

If you are an employee of a company in Spain, then they should be taking care of your application to stay.

Moving to Spain after Brexit as self employed
If you are looking to move to Spain and work for yourself, you can apply to be self employed, or ‘Autonomo’. You will need to be able to demonstrate the following, as well as applying for permanent residence as set out above, i.e. ‘permiso de residencia de larga duración’. The commercial activity you will be doing must comply with Spanish rules and you must:

have the relevant qualifications
have sufficient funds to invest in the activity to make it viable
give the number of people you will employ, if any
have sufficient funds to support yourself, on top of the funds for the activity (see above)
Provide a business plan which makes sense to the Spanish Authorities
not be suffering from a serious illness

Retiring in Spain after Brexit
When looking to retire in Spain after Brexit, there will be several criteria to fulfil and adhere to in your application. Those are:

No illnesses that are a serious public risk (eg smallpox, SARS)
€2130 monthly income for the main earner in the family, and an additional €532 for each dependant
Proof of ability to sustain this income for one year

Note, after you have resided in Spain for 5 years, you can then apply for ‘permiso de residencia de larga duración’ as mentioned above and will only need to adhere to those criteria moving forward from that point.

The process – what happens when you are accepted?
When you have been accepted, you will be issued a visa within 1 month and you must enter Spain within 3 months for this to remain valid. If you have permission to work and you do not register with the social security office within three months of your arrival, your right to remain will lapse.

Where to apply when moving to Spain, after Brexit
To apply for permission to live in Spain, you go to your local Spanish Consulate, even if you are not living in your country of origin. The process is thus: the Spanish consulate confirms whether all the relevant documents are in order and that everything has been provided that needs to be. They, in turn, send this to a Spanish Government office who will decide if they will give you permission to move to Spain.

If your application is successful
If applying to live in Spain without working and you are successful, you can then pick up your visa within one month. If applying to work, you will then be asked to make this application, again within one month, once you have been given the ok to reside in Spain.

The visas are valid for one year, when it needs to be renewed for periods of two years moving forward. During this whole time, you need to abide by the rules mentioned above including having the required income to live/run your business. Then, after you have lived in Spain for five years you can apply for ‘permiso de residencia de larga duración’ and solely adhere to those rules, again as mentioned above.
Once you have moved to Spain legally, your rights, taxes and your families rights will be the same as any citizen of the EU. Like everyone else, having lived in Spain for 10 years, you can, if you wish, apply for Spanish residency. To do this you need to demonstrate that you have integrated into Spanish society, including speaking the language and understanding the culture.

If you would like to receive further important updates on living in or moving to Spain, as an English speaker, sign up to Chris’s Newsletter here:

Tips on Moving to Spain before Brexit

By Chris Burke
This article is published on: 24th July 2019

24.07.19

*UPDATED 1st January 2020

With the UK likely to leave the EU in 2019, many people are making the move and leaving the UK whilst it is arguably still easier to do so than it will be after Brexit. But what are the key things you need to do in order to be organised from a personal financial advice point of view? Here I have listed my ‘Top Tips on moving to Spain’, the main areas I point people in when making the move, or having just arrived in Spain. This could save you a lot of time, money and headaches, and is only a small example of the way I help clients living here in Spain.

Confirming Non UK Resident Status with the HMRC
Potential Tax Rebate
National Insurance Contributions Whilst Abroad
Checking Your National Insurance Contributions
Becoming Tax Resident in Spain
Existing Investment Organisation
Inheritance
Healthcare
Life Insurance
Wills
Property
Private Pensions
Banking
Why Move to Spain Before Brexit

Please click on each link below to find out more regarding that area of expertise:

Confirming Non UK Resident Status with the HMRC
Tell the HMRC that you will no longer be a UK resident by filling in form P85, informing your local council and the UK state pensions department. This is important for the following reasons:

Potential Tax Rebate

In many cases you could receive a tax rebate, depending on which part of the tax year you leave in. Tax is taken from your wages and worked out on what you are paid each month, starting with the first month. Therefore, if your final UK salary payment is in September having been earning £4,000 per month, for example, that means the following months until the end of the tax year, in March, you won’t be paid anything. Therefore, because the HMRC would have been taxing you on the basis of completing that financial year, the tax you owe could well be reduced and in many cases a rebate will be applicable.

National Insurance Contributions Whilst Abroad

You can apply for Non Resident relief when living abroad, meaning that you can pay National Insurance contributions in the UK at half the cost, so around £11 per month (which mathematically is worth doing, considering life expectancy in Europe of 84). You can also backdate these up to 6 years if you have been out of the UK that long and haven’t been paying.
www.gov.uk/national-insurance-if-you-go-abroad

Checking Your National Insurance Contributions

You can see how many years National Insurance contributions you have by entering your number on the link below:
www.gov.uk/check-national-insurance-record

Becoming Tax Resident in Spain

It is important that when you move to Spain you choose the right tax regime to be part of. For example, if you are working for a Spanish entity, you may be able to apply for The Beckham Law, which means all worldwide income will be taxed for 5 complete tax years at least, at a flat rate of 24% (as opposed the normal rate of up to 46%).

Or, if you live in Spain, work for a Spanish company and spend up to two weeks of the month outside of Spain on business, you may be able to deduct tax for every day you are away proportionally. So, that could mean up to half the tax payable.
IMPORTANT – Some of these tax regimes only give you a limited time to apply for them. For example, within 6 months of paying tax here you have to apply for the Beckham Law.

It may also be of benefit to set up a Spanish company instead of becoming self employed, the main rule of thumb here being if your income is likely to be consistently over €60,000 per annum.

Existing Investment Organisation

Any investments you have when you become tax resident in Spain (that is, spending more than 6 months a year in Spain and having your economic centre of interests there being the deciding factors) will be reportable in Spain and might not be as tax efficient as they should be. For example, many asset classes such as ISAs or stock/share/fund investments (unless structured in a certain way) are declarable each year and tax is payable on any gains, whether you take any of that money or not. In some cases, you can have your assets organised so this is not the case, and the tax can potentially be reduced when you do withdraw any money.

Inheritance

In Spain, rules on giving away your assets are very strict and you are limited in what you can give away per year without incurring any tax. This is an area that is worth considering and organising before you leave the UK. In the UK there is usually no inheritance tax to pay on small gifts you make out of your normal income, such as Christmas or birthday presents. These are known as ‘exempted gifts’. There’s also no inheritance tax to pay on gifts between spouses or civil partners. You can give them as much as you like during your lifetime, as long as they live in the UK permanently. However, other people you gift to will be charged inheritance tax if you give away more than £325,000 in the 7 years before your death. See the sliding scale below:

In Spain, gift tax depends on the age of the person and their relationship to you. In many circumstances you receive a €100,000 exemption, following which a sliding scale up to 20% is applied in tax. Spouses can claim up to 99% relief. It is imperative to look at this before you move.

Years between gift and death	Tax paid
less than 3	40%
3 to 4	32%
4 to 5	24%
5 to 6	16%
6 to 7	8%
7 or more	0%

Healthcare

When you first arrive in Spain, registering at your local health centre should be a priority in case of illness. The requirements can change, but at present the following should be sufficient for you to acquire an individual health card (Tarjeta Sanitaria). This will enable you to register with a doctor, visit a health drop in centre (in Barcelona a Capsalut) and purchase prescription drugs:

NIE (tax number/residence certificate)
Rental contract of your apartment
Social Security number
Empadronamiento (document from the town hall confirming where you live)

Life Insurance

Insurance in Spain, in general, can be much more expensive than in the UK, and life insurance is an example of that. Many insurance companies will allow you to carry on with the life insurance you have in the UK, but you must get this confirmed in writing by them. To give you an example, I have seen an insurance cover in the UK at £22 per month, costing over €100 euro per month in Spain, and the cost is not fixed for life like it generally is in the UK.

Wills

Foreign residents of Spain are not permitted to give away more than the freely disposed part of their estate (one-third) as the rest is reserved for the ‘obligatory heirs’. If an international or Spanish will is made stipulating that the laws of a person’s home nationality apply, however, no aspects of Spanish inheritance law will apply to either Spanish or worldwide assets. In layman’s terms, if you are British, you can choose UK law and therefore leave your assets as you see fit without having to adhere to Spain’s rules.

If your estate is dealt with under Spanish inheritance law, ‘forced heirship’ rules apply (known as the ‘Law of Obligatory Heirs’ in Spain). This means there are restrictions on how you distribute your estate, as a certain percentage needs to be set aside for certain relatives.

The Law of Obligatory Heirs states that if the deceased was married at the time of death, the spouse keeps 50 percent of all jointly owned property. The remaining 50 percent is put towards the estate. The estate is divided into three equal portions:

One-third is divided between surviving children in equal shares
One-third is reserved for surviving children but can be distributed equally or unequally according to instructions in a will. The surviving spouse retains a ‘life interest’ (usufruct) in this part of the estate and the children do not inherit until the spouse dies
One-third can be disposed of freely in a will
If there are no children, then surviving parents are entitled to one-third if there is a surviving spouse, or 50 percent if not

Property

This is currently a very popular asset to buy in Spain. Key points to be aware of compared to the UK are the extra taxes/costs (approx 13% costs on top of the purchase price of a property in Barcelona) and that the market is not as regulated as the UK, which means that there are estate agents out there that are just interested in their commission. You MUST make sure you purchase a property with a Cedula (certificate that the building has passed health and safety required by Spanish law) and certificado de habitabilidad (this means the property meets the minimum standard for living in), otherwise, you might not get a mortgage and also it will be difficult to sell later as it is not a legal place to live.

If you have never lived in the place you are moving to, I strongly suggest renting an apartment for a period of time, maybe even a couple in different Barrios/areas. That way you will get a feel of what works for you. In many cases, renting actually works out cheaper than buying somewhere, even taking into account the recent rental price increases.

Private Pensions

There are sometimes tax implications on moving your pension outside of the UK, which many people have done for the resulting benefits. In the last couple of years, 25% taxes have been implemented depending on where you move your UK pension to. There are opinions that this charge could apply to the EU, should Brexit go ahead. If you are planning to move abroad, either before or after Brexit, looking into this possibility will give you the options and knowledge to assess and make an informed decision.

Banking

Banks in Spain can be very ‘charge’ friendly and don’t always fully explain how your account works. Usually when you arrive banks will give you a ‘Non resident’ account, incurring extra costs and charges. However, you can quickly open up a ‘Resident’ bank account with no everyday running costs, such as bank transfers or costs for withdrawing money from their own ATMs. To qualify for a ‘Residents’ bank account and bypass potential costs you need to transfer in €600-€700 per month.

Why Move to Spain Before Brexit?

There will be certain criteria to meet to be able to move to Spain after Brexit, in particular if you are self employed or own your own business. This is expected to include a year’s cash flow in the bank, private medical insurance, proof that your business is viable and if retiring, a minimum income of around €2,200. I have a much more in depth article you can read if you wish to know more about this.

If you have questions relating to these points, or anything similar, don’t hesitate to get in touch.

Hot investments: It’s time to get creative

By Chris Burke
This article is published on: 18th June 2019

18.06.19

Investing needs savvy, like a game of chess. It’s best to make carefully thought through moves so that it’s not left to chance. The most crucial part of investing is being in the know.

As a financial advisor, this is something I research and stay on top of so that I can best inform clients. And I only recommend what investments I would feel confident investing in myself. That is very important for clients to know.

When it comes to the stock market, it’s about knowledge and catching the wave at the best time. Right now in the world of investment it’s prime time for investing in some promising and exciting creative industries, namely the e-sports /online gaming industry and AI (Artificial Intelligence).

As we all know, the internet, Amazon and Netflix have totally changed the entertainment industry. We are no longer controlled by which shows are on television or in the cinemas, as we now have the luxury of watching whatever we want whenever we want. But perhaps the most massive surprise in the past year has been the overwhelming popularity of esports – which is simply fans watching professional video gamers compete online. Ever heard of Twitch? Well, there are more people logging on to watch pros gamers competing on streaming sites like Twitch than there are watching CNN or NBC.

Last autumn, a shocking 57 million people tuned in to watch a professional video-gaming (esports) match. It was triple the audience of the actual 2018 NBA finals. As a result of this success, the biggest companies including Coca-Cola and T-Mobile have spent hundreds of millions to sponsor these matches.

So, as e-sports and gaming continue to conquer all, which types of companies might be good to get in on? The top gaming companies you might want to consider investing with are Nintendo, Valve Corporation, Rockstar Games, Electronic Arts, Sony Computer Entertainment, Ubisoft or Sega Games Co. Ltd.

And behind every great game is the hardware required to make it fanstastic. NVDA might not be a name you’ve heard, but literally all video games require ultra-high-performance chips and NVDA chips are the crème de la crème, used by over 85% of professional gamers.

(Forbes, 2018)

The ever-growing world of AI (Artificial Intelligence) has been booming and helping companies solve and manage many previous b2b and b2c issues and right now France is aiming to be one of the forerunners in the industry. Last year President Macron announced his government was investing €1.8 billion over 4 year period. A few of the top French AI start-ups are insurance fraud detection companies like Shift Technology; the AI voice assistance platform, Snips, which manufacturers can utilise for their products and Saagie, the online protection platform to store and guard our precious data for banks and insurance companies.

So, there are some exciting and creative opportunities for investment out there but as a financial advisor, when it comes to investment portfolios research and timing are crucial, as is ensuring clients are in a financial position where they able to play the market without the fear of losing their life’s savings.

Before considering any investments, I always start by advising clients to ensure they have sufficient funds they can access quickly and easily and then discuss what length of time they would like to invest other sums for, as it’s my first priority to nurture and protect their financial future. I would not recommend any client to invest in something that I would not invest in myself, but each client is well-informed in the knowledge that if they have the money to try their hand at investing, it is of course a risk. But it’s a risk that can be rewarding and a real learning experience as well.

How to retire like a pro!

By Chris Burke
This article is published on: 24th May 2019

24.05.19

Over the years I’ve helped many clients prepare for retirement. To come up with the best solutions, there are several matters and concerns to consider that don’t automatically come to mind. Some people think they have carefully planned out their glory days, only to find out there were a few things they didn’t consider; not only on the financial side, but also on the every-day-life side of things. So, here are some of my top tips on retiring like a pro, enjoying life to the fullest and sleeping well at night.

Before going into all the financial ins and outs, stop to consider this: Where do you stand financially right now? And, what life goals or dreams do you have for the coming years? Remember, we want these years to be golden, not feel like walking on hot coals. So, starting with where you are and what you really want helps provide realistic focus.

When it comes to planning ahead for your post-work life, there are (for a great number of people) three main sources of cashflow which, when orchestrated carefully, can together ensure a comfortable retirement: company pension (or employer savings plan), social security and personal savings. For others – particularly the self-employed – retirement will entail savings, investments, assets and most likely continuing with your projects whilst learning to detach a bit. No matter which camp you lie in, knowing what you will receive from each source and then working out your monthly living budget will be is a great place to start for setting out what lifestyle you can plan.

After taking into account what monthly living allowance you will have, probably the most crucial thing on the “how to retire for dummies” list is devising and then maintaining a lifestyle you can afford. Practicing frugality whilst enjoying life is indeed a quality many fail at. It’s about knowing what you have to live on and living within those means. Being prudent with your finances does not mean being tight or ungenerous. As Coco Chanel said, “Some people think luxury is the opposite of poverty. It is not. It is the opposite of vulgarity.” And none of us want to be vulgar. We want to be financially prepared and savvy.

Outside of whatever your retirement plan is, it is also important to ensure you have set aside, in a separate account, an ample emergency backup supply. “Emergency” meaning for any one of a hundred things that might unexpectantly pop up and require a quick financial outlay. It will help you sleep better at night.

Retirement isn’t always all sunshine and happy days. Many retirees struggle immensely with the sudden and somewhat shocking change of lifestyle. They go from being busy and surrounded by colleagues and friends, to being at home looking for a new purpose whilst trying not to step on the toes of their partner. For some, the extreme change of lifestyle and the thought of being on a continuous holiday can be scary and depressing. However, it should be thought of as a new opportunity to work on relationships, invest in travelling, both inward and outwards, and to learn new skills.

Nowadays, many post-retirees are creating projects to generate new income as well as keeping their minds sane and boosting their overall quality of life and health. This can also help to improve your self-worth and the relationships you hold dear. It doesn’t mean you have to work from 8 to 8. It can just be involvement in projects that help to provide a balanced life.

When it comes to retiring, there’s a dirty word we all must know and understand: inflation. As Sam Ewing said, “Inflation is when you pay fifteen dollars for a ten-dollar haircut you used to get for five dollars when you had hair.” When we are working, salaries are supposed to keep up with inflation. However, when the salary stops and you’re living off savings, inflation is like an armed robber. There are now online inflation planners which can quickly calculate both pessimistic and optimistic inflation rates and help you formulate what to expect living, household and medical costs to be in future years.

Lastly, I would suggest having a pool of money that you leave untouched and allowed to grow, until you need it later in retirement to help offset increasing expenses. If you have income from property, this is great because it more or less keeps up with inflation rates. Otherwise, consider some inflation-protected security investments – a balanced mix of stocks, bonds, short-term investments, at different levels of risk and potential growth. Considering all options and forming a good plan is something I can help each client with.

Retirement doesn’t have to be scary. If you’d like to discuss any aspects of financial planning for your retirement, please email me for a complementary face to face meeting.

Taking a Lump Sum from your Pension when Resident in Spain

By Chris Burke
This article is published on: 13th April 2019

*UPDATED 1st January 2020

There are conflicting stories on how much lump sum/one off amount can you take from your pension if resident in Spain and what the tax will be. Indeed, many people with UK pensions believe it is better to take their UK pension lump sum in the UK before (grey line here if they have already moved!) they move to Spain permanently, as they will pay less tax. Firstly, even if you have a UK pension but are resident in Spain, this has to be declared in Spain. Secondly, if you finished contributing before 2007 you actually can receive MORE tax relief in Spain than in the UK (dependent upon the pension you have and how you take it).

To clarify, in the UK you can currently take a 25% tax free amount from all your private pensions and anymore would then be taxable.

If resident in Spain, you have the right to take up to 100% of your personal pensions in one go (100% in capital), to receive part in capital and part through regular payments or to receive the whole amount through regular payments. If you receive an amount in capital (a whole or a part) then you can apply for a tax reduction of 40% of the amount received for any contributions you made prior to 2007. This option can only be applied once, so, if you have more than one pension plan, you have to receive all of them in the same tax year if you want to apply this reduction. To clarify, it is the value the contributions have accumulated to today that is tax exempt, not the amount of actual contributions made back then.

From January 2007 there is no tax exemption, zero. Therefore, any contributions made from this point receive no tax exemption, however if the contribution to the pension runs before and after this date the tax exemption is calculated the same way.

If you take the amount as a regular payment you will have to pay income tax as if you have received any other general taxable income (a salary for example). In both of these cases, the amount that is taxed (with or without the 40%) is subject to the general income tax rate.

Lump Sum Pension Tax in Spain Lump Sum

Total amount of pensions:	£150,000
Amount to be taken in lump sum/one off:	£50,000
Amount tax exempt in Spain:	£20,000
Pension lump sum amount income taxable:	£30,000 (added to your annual income tax band)

Now if we look at the UK example we shall see the difference:

Total amount of pensions:	£150,000
Amount to be taken in lump sum:	£50,000
Amount tax exempt in UK:	£37,500
Pension lump sum amount income taxable:	£13,000 (added to your annual income tax band)

However, in the following scenario the Spain example works more in your favour:

Lump Sum Pension Tax in Spain Lump Sum

Total amount of pensions:	£100,000
Amount to be taken in lump sum/one off:	£100,000
Amount tax exempt in Spain:	£40,000
Pension lump sum amount income taxable:	£60,000 (added to your annual income)

UK Example

Total amount of pensions:	£100,000
Amount to be taken in lump sum/one off:	£100,000
Amount tax exempt in Spain:	£25,000
Pension lump sum amount income taxable:	£75,000 (added to your annual income tax band)

Important points to note here are:
If you cash in your UK pension OVER 25% and are registered in the UK as a non resident, an emergency tax code is likely to be used up to 45% and you will have to claim back what is owed to you. Unless you are able to provide a P45 from the current tax year following withdrawal from employment and/or current pension plan,

The pension provider already holds a P45 or up to date cumulative tax code received from HMRC as the result of previous withdrawals from that pension plan, and can apply it.

If you take your UK pension as a 25% lump sum, this should be declared in Spain and would apply to the Spanish rules of 40% being tax exempt and the rest income taxable. You would therefore pay any tax owed in Spain.

Only the FIRST Lump Sum is tax exempt so it’s important to realise that and make sure you plan effectively.

Regular payments from your pension fall under income tax

From 2007 onwards there is NO tax exemption of this kind.

Top Tips For Your Pension Lump Sum/One Off
When taking your lump sum, take it in the year that is most tax efficient for you, such as when you have lower income from other sources.

Moving your pension outside the UK could give you more freedom, more choices and potentially less tax to pay in the long term (depending on your situation).

Source: Silvia Gabarró GM Tax Consultancy Barcelona

The Many Benefits of a Financial Adviser

By Chris Burke
This article is published on: 3rd April 2019

03.04.19

by Jannah Britt-Green

It might seem obvious to some, but when it comes to the genuine benefits of having a financial adviser, many people are still in the dark. Some people hold certain ideas or common misconceptions, which hinder them from receiving valuable advice and help with managing their financial life. Namely, people struggle to trust someone else with their money and they believe they will have to pay the financial adviser for their services.

When it comes to trusting someone else with our money and investments, yes – it is a chance we’re each taking. But if you find a good financial adviser, you can trust that they sincerely have your best interests at heart, because they will only gain if you gain. They are educated and experienced at helping clients to come up with an effective plan – a financial philosophy if you like – for choosing wisely and preparing for tomorrow. They also have the objectivity we lack when trying to make financial decisions. They aren’t bound by the emotional ties we have with our money and they understand the complexities of mortgages, investments taxes and laws, so they can help us make better informed decisions without so much stress.

Then comes the assumption that we will have to pay a financial adviser. This is most likely due to the fact that no one believes any good service – especially one wherein you could make money – could possibly come without a price tag. Not only is this untrue, but having a financial adviser can actually SAVE money. This is because financial advisers don’t make money from their clients directly. Instead, they get a cut from the insurance / investment / mortgage companies for bringing your business to them. Even better is that, due to the relationship the financial advisors build with these financial institutions, they by and large get a better deal than clients would receive if they were to try to get the same service on their own. I have tried and tested this out myself by looking into getting the same insurance through the same company on my own and found that I could not find the same deal that my financial adviser was getting me. From this point on, I was convinced.

Recently I interviewed IFA Chris Burke, an experienced financial adviser who has been living in Spain over the past decade, to ask him what he believes are the main ways he has helped and continues to benefit his clients.

The Truth
Like any profession, we as Financial Advisers know what works and what doesn’t, and how well it works. To be a good financial adviser, you have to ask yourself, ‘Is this what I would do?’ or maybe even more telling, ‘Is this what I would recommend my mum to do?’

Honesty
Always tell the truth, even if that means telling them we can’t benefit them at that time. I will always use my experience to help people make the best decisions for them and help them do it, if they desire my services. What we do isn’t for everyone and their circumstances, but it might be one day.
Good Tips/Hints/Advice

People usually come to me for a meeting to see how I might be able to help them, but if occasionally someone isn’t sure whether it’s worth the visit, I will always confirm ‘You will take something beneficial from the meeting; knowledge, advice or a good contact; like a recommended Tax Adviser, or how to top up your UK National Insurance contributions at a discount, there is always something’. And you can continue to receive my advice, free of charge, by subscribing to my newsletter: Chris Burkes Newsletter

Grow Clients Monies/Pensions
If it’s not working, most clients won’t stay with you for long, especially if other solutions/the stock markets are indicating it should be working. Therefore, we continually keep up/outperform these as much as we can. We as advisers invest our monies/pensions where we recommend clients to, which for me is the biggest testimony.

Ongoing Advice/Knowledge
There is no point in having a ‘leaky bucket’, that is to say making client’s money grow but not optimising their tax situation. We are always informing, giving our clients knowledge on the best way to mitigate this and who can help them do it.

Due Diligence
We don’t always get it right, but listening to the experts whom we hold in high regard helps us to get it ‘more right than most’. And we are continually reviewing solutions to find new ways to help clients more.

The Beckham Law 2019

By Chris Burke
This article is published on: 8th March 2019

08.03.19

*UPDATED 1st January 2020

Also originally known as ‘The Special Displaced Workers Regime’, The Beckham Law has been in place since it was passed by Spanish Tax decree in 2005. The Law has undergone two reforms/changes since its inception (2010 and 2015) and was originally open to all foreign workers living in Spain adhering to certain conditions.

Why was it brought in?
In essence, it was designed to attract brains, talent and wealth from all over the world, encouraging high earners to become Tax Resident in Spain (spending more than 183 days a year living there) and thus pay 24% income tax (IRPF), as opposed to rising up to 43% (or higher in certain circumstances). It was given its name by one of the first high profile sports people to use it, David Beckham, when he signed for Real Madrid.

Who can take advantage of it?
The main criteria to be eligible for the Beckham Rule are:

You must not have been a Spanish resident in the last 10 years when applying
You must be employed by a Spanish company, or a non Spanish company but with a permanent office here in Spain (You can be a director of a company but hold no more than 25% of the shares)
The rule can be used for the remaining Tax year you start in, and the following five
The application MUST be made within 6 months of starting your employment in Spain
You have to be resident in Spain and also have at least 85% of your work interests there

Reforms/Changes
The Law became infamous and a perfect fit for Spanish football clubs to buy some of the best well known footballers in the world, since the player’s tax would be much lower than in other countries. However, in 2010 the law was changed to address this popularity with high earning footballers, and a rule was brought in to limit the annual earnings applicable to €600,000, three years after David Beckham had left Spain.

Then, in 2015 they went one step further and completely excluded professional athletes from applying for this. However, those already on a contract were not affected. They also removed the limit of €600,000, but any income over that level is now taxed at 45%. Note that any capital gains would adhere to the current rules of 19%, 21% and 23% respectively (not applicable for the first €6,000).

Other Major Benefits
Critically, one of the major benefits of this rule is that under it, you do not pay taxes on any gains outside of Spain. So if you sell an asset with a taxable gain, such as a business or property in another country, you could make a considerable saving.

Moving on from this and to a more regular scenario, you would not pay tax on any property rental income, bank account interest, investments or savings in another country.

You would also not be required to submit certain other annual reports such as the ‘Modelo 720 Overseas Assets declaration’ during this period of time.

Why you might not want to apply for the Beckham Rule
There is no minimum annual earnings to apply, however you do not receive any personal income allowances, thus a general rule of thumb is that earning over €60,000 might make it worthwhile for you to apply.

The other reason you might not want to apply is that if the country you are from has a less favourable tax rate, then paying capital gains tax in Spain could be better.

If you have any questions regarding this, or would like to discuss applying for it or your personal situation, please contact us through the form below:
Source GM Tax Consultancy, Barcelona

Savings Bank Account Comparison in Spain

By Chris Burke
This article is published on: 5th March 2019

05.03.19

The most efficient way of losing money is to keep it in a current account. Many years ago offset mortgages were introduced, which were a great way of saving interest being paid on your mortgage. Effectively, any interest on savings you had in an account that was linked to your mortgage account, reduced the mortgage payments by that amount, more or less (most simplified explanation). So, if you had a mortgage of €250,000 and savings on a linked account of €50,000, each month it’s almost as if the mortgage was only €200,000 and you would only pay interest on that amount.

To understand why current accounts are the main way to lose money, let’s suppose,for example, you have €50,000 sitting in a current account for a rainy day. Inflation has been running at around 3% lately (that’s the increase in the regular items we buy). Therefore, just for your money to KEEP UP with that, it needs to grow by €1,500 per year. Over a period of 4 years that’s €6,000.

Therefore, it is very important that you have this money working for you, especially after the hard work it took you to earn it, both to keep up with inflation so it keeps its purchasing power and to grow to build your wealth.

The very least you should do is have the money in a savings account, or similar. So what are the current bank savings rates in Spain? Well, they will guarantee to lose you money every year, but they are better than having money sitting in your current account:

1.5% ING – interest rate per annum, deposit term 1 month
0.5% WeZink (Banco Popular) – interest rate per annum, paid given monthly
0.3% BNP Paribas – interest paid quarterly

Another way of keeping your money safe and perhaps earning a larger return if you are lucky, in sterling, is having UK Government backed Premium Bonds (annual prize fund interest rate of 1.4%). Did you know that you don’t need to be British OR live in the UK to have these?

If you would like to explore other options, then feel free to get in touch and we can discuss what will work for you AND your money, giving you flexibility along the way. Knowledge and advice will help you plan your finances.