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Saving tax in Spain

By Pauline Bowden - Topics: Investments, Spain, Tax Efficient Savings
This article is published on: 19th April 2022


Thank goodness for the Spanish compliant investment bond!

It is a very efficient way that we can legitimately avoid taxation in Spain, as long as we purchase the correct financial products.

In the UK most people are well aware of the tax-saving nature of pension plans and ISA’s. The Spanish compliant investment bond is a tax-efficient investment solution that can be used to invest in a wide range of fully licensed and regulated investment funds while also reducing or negating your Capital Gains Tax liability.

Spain has a reputation for being a relatively ‘high-tax’ country. As a result, many UK Expats manage their affairs in such a way as to ensure the continuation of UK tax residence. The situation is becoming a greater challenge for those that find themselves spending more time in Spain each year. The Spanish tax authorities now require individuals to show concrete proof of time spent outside the country. Brexit has exacerbated the issue further; anyone who finds themselves in an ambiguous position should take professional advice to clarify their status.

Those that have chosen to take up permanent residency in Spain may find that their UK investment platforms, though tax efficient in the UK, are not so in Spain. Meeting a fully licensed Financial Adviser here in Spain could help review your current investment holdings and advise on their suitability for tax efficiency in Spain.

Based on our expectation that most people are looking for a positive return from investment markets over the medium to long term, our recommendation is that the investment product is held for a period of 5 to10 years. Whilst the appropriate holding period for each individual client will be determined by their personal investment objectives the term should be sufficient to recover from short term volatility in investment markets.

How safe is my cash?

By Pauline Bowden - Topics: Spain
This article is published on: 17th February 2021


Many people view cash as a safe investment because they’re not exposing their money to any direct stock-market risk. However, tying up too much of your savings in cash doesn’t mean you are risk free. Low interest rates: Interest rates are at historically low levels.

This is not good news for savers. That’s because the interest is unlikely to grow their money enough to help them achieve their financial goals. Then there’s the effect of inflation. Inflation erosion: Whilst inflation is at such a low level, you may think to yourself why should this matter? When it comes to your longer term investment plans, typically 5-10 years, you should consider how much the price of goods has risen over the last five years. If the cost of goods has risen, for example 1%-3% a year, and the interest rates continue to be low, it becomes clear how the purchasing power of cash savings may actually fall over time.

What are savers looking to do with their cash?
If you’re sitting on too much cash, either in your bank account or your investment portfolio, you could be missing out by not being fully invested. Tax efficient investments, compliant in Spain may be your answer to a diverse investment portfolio.

Cash is no longer the safe haven people once considered it to be, for long term investment. While it’s important as part of your financial plans, having too much could mean your money isn’t working as hard as it could, meaning that you may not realise your financial goals. Everyone should have a cash buffer in case of emergencies, but it’s important to get the right balance between your short- and long-term plans. This is where professional advice becomes invaluable.

Speaking to a financial adviser will help you to identify the most suitable way for you to make the most of your cash. Together you’ll be able to define your aims as well as formulate a personalised plan.

Modelo 720: Final Date for Submission is 31st March 2019

By Pauline Bowden - Topics: Modelo 720, Spain
This article is published on: 19th February 2019


Within the framework of the “anti-fraud” plan launched in 2013, the Spanish government imposed the obligation for Spanish tax residents to declare all their foreign assets through the form Modelo 720. This reporting obligation was mainly directed at discovering assets of Spanish citizens with irregular assets located offshore. However, it also directly affects the members of the international community living in Spain that have assets abroad.

The duty to inform through the Modelo 720 is linked to tax residence, that is, if the person is considered a tax resident in Spain, you are subject to this obligation of reporting foreign assets.

Who is Subject to Model 720?
Any person, corporation or permanent establishment who qualifies as a tax resident in Spain and is the owner, titleholder, representative, authorised person, beneficiary, or has disposal powers of assets located outside of Spain worth more than €50,000 (see assets below), must report the value of these assets.

When is a Person a Spanish Tax Resident?
A person will become as a Spanish tax resident if any of the two following circumstances are met:

(i) The person is physically present in Spain for more than 183 days in a specific calendar year. Sporadic absences are considered as days spent in Spain for computing this period, unless tax residence in another country for more than 183 days can be proved. This proof must be in the form of a certificate from the other country’s tax authorities confirming such tax residence.
(ii) The person has his/her centre of vital interests or economic interests in Spain, either directly or indirectly. There is a presumption that a person has his/her centre of vital interests if his/her legal spouse or minor dependent children are tax residents in Spain.

What to Declare?
There are three main groups of assets that must be declared if the total joint value of the group exceeds €50,000:

  • Funds in accounts in financial institutions abroad, e.g. banks: such funds can be held through the figure of the owner, co-owner, representative, authorised person or beneficiary. The valuation of the funds should be the highest of (i) the balance at December 31 or (ii) the average balance at the closing of each quarter
  • Securities, rights, insurance and income deposited, managed or earned abroad. Life insurance policies and temporary or lifetime income generated from lending money, rights or other assets to foreign entities are included, whilst pension plans and stock options are excluded
  • Real estate and rights over real estate located abroad

It is worth noting that once the limit of €50,000 is surpassed for a group; all assets in all groups need to be declared, regardless if each asset does not pass the limit. Additionally, the obligation to report exists where the specific asset(s) are over €50,000 regardless of how many holders/owners hold a particular asset(s). Each holder/owner should declare the total balance/value (not the pro –rata value), indicating the percentage held/owned.

When to Declare?
The reporting period is between January 1 and March 31 of each calendar year, with respect to assets held as at 31 December of the previous year. For example, the reporting period for assets held as at December, 2018 is until March 31, 2019.

Frequency to Report?
Form 720 only has to be filed once if the person meets the conditions described in question 2 above. The person will only be obliged to file Model 720 again when, in relation to any of the three groups of assets, there is an increase of €20,000 compared with what was declared in the last Modelo 720 filed.

How to Report?
The form is to be completed on-line. The form is not a standard format and requires navigation through various options and drop down menus. Assistance from an experienced adviser is recommended.

The consequences for failing to file Modelo 720 in time, or not filing it at all, are very severe. The specific penalties are as follows:

(i) Penalties for late reporting: The penalty for voluntary late submission is 100 euros per item declared and a minimum fine of €1,500 for each group of assets.

(ii) Penalties for failure to report: The penalty for failing to file Modelo 720 is €5,000 per infraction with a minimum fine of €10,000 for each group of assets.

Additionally, the undeclared assets will be treated as unrealised capital gains and will be consequently included in the general base of the income tax return (Impuesto de la Renta de Persona Físicas) for the earliest year of such tax not prescribed. Finally, interests and an additional penalty of 150% paid income will also be levied.

The regulation establishes that if declaring late, the formal penalty is much lower (€100 per data, with a minimum of €1,500 per group of goods) than by not declaring or declaring incorrectly (€5,000 per data, with a minimum of €10,000), but the other two possible sanctions or consequences are the same, both for not declaring and for declaring late: the Administration can attribute as unjustified patrimonial gain the value of the goods abroad in the IRPF of the last year not prescribed (2012), and additionally apply a sanction of 150% on the resulting IRPF quota, unless it can be clearly demonstrated that the goods abroad correspond to income declared or obtained when one was not resident in Spain.

It is worth noting that the penalties will apply even if the statute of limitations for other tax filings and obligations relating to those assets (and incomes) has expired, as the statute of limitations does not apply to Modelo 720.

However, if the tax payer can prove that the funds came from income earned whilst he/she was not a Spanish tax resident, or that the funds came from taxed income, the income tax and income tax penalties will not be levied. In case of a tax inspection, it is thus extremely important to present a detailed and backed-up response and justification to prove the assets were obtained before becoming a Spanish tax resident, or that they have been subject to taxation by a foreign tax authority.

The European Commission’s response to Model 720
In November 2015, the European Commission (EC) started an infringement procedure against Spain confirming that there are two aspects of the Modelo 720 that may violate EU legislation: (i) the disproportionate sanction regime, and (ii) the imputation as unjustified capital gains of assets not declared on time without the possibility of claiming the expiration of the statute of limitations. The EU Commission requested Spain to amend such regimes. However, up to this date, the Spanish tax authorities have not modified any aspect of Modelo 720 as per the EC’s recommendations and have continued to strictly apply Modelo 720 and its penalties.

Given the obligations under Modelo 720, its severe penalties and the increasing automatic exchange of information treaties between states, we strongly recommend that clients seek advice to analyse whether they are subject to Modelo 720 and if so, to make the appropriate filings.

Investment Categories

By Pauline Bowden - Topics: Investment Risk, Investments, Spain, wealth management
This article is published on: 3rd March 2018


The risk scale, i.e. volatility of return, for general investment categories sorts investments from 1, least risk, to 8, highest risk.

  1. Bank Account
  2. Cash or Money Market Funds
  3. Debt Investments: Bonds and Bond Funds
  4. Common Stocks and Shares (Equities) and Equity Funds
  5. Real Estate
  6. Collectibles and Commodities ( stamps, art, gold, diamonds, oil etc)
  7. Options
  8. Futures

Categories 1 and 2 usually have returns that are near to the rate of inflation. In other words, not a good return on your investment in the long term, though they are low risk.

Category 3 usually has better returns than 1 and 2 and in most cases Bonds provide a fairly safe investment. However, there is a wide range of risk within this category; from Junk Bonds with very high risk to Treasury Bonds with lowest risk.

Category 4 is where most investment is based. In general, mixed, managed, well balanced stock markets funds are safer than individual stocks because of diversification and professional management. The professional management allows the investor to concentrate more on family, job etc. instead of having to spend large amounts of time managing a portfolio of individual stocks.

Category 5, real estate, is a very localised investment fraught with more “negatives” than most people realise and not easy to sell at short notice i.e. illiquid. However, it can be – if bought, managed and sold correctly – a great source of wealth.

Categories 6, 7 and 8 should only be considered by experts in the relative fields. The risk is too high for investors without specialist knowledge.

Before making any investment decisions, be sure of your personal risk rating, diversify your portfolio and get advice from a Licensed Independent Financial Adviser. Call Pauline Bowden on 616 743 108 or email for a free, personal, confidential consultation.

Are you legally here in Spain?

By Pauline Bowden - Topics: residence, Residency, Spain
This article is published on: 29th January 2018


In order to be considered as fully resident in Spain, you must have registered on the Padron i.e be on the electoral register. Being on the Padron means a lot more than being able to vote in local elections.

Many benefits in Spain are based on years on the Padron. Usually a minimum of 5 years is required in order to claim disability benefit and other help as a carer etc. Remember to register your children too. Even though they cannot vote until age 18, they might in the future need to claim a benefit and if not registered as soon as they arrive in Spain they might have to wait to get something they are entitled to.

Citizen’s Advice Spain is very helpful when dealing with specific cases and could help you apply for a historical Padron ( getting your Padron back dated, though this is not easy to do).

With Brexit on the horizon it is even more important to be fully registered as living in Spain. Residencia, annual tax return, 720 tax return, which is due before the end of March. All of these things matter if you want to be “legally” here in Spain.

Are you Positioned for the Innovation Revolution?

By Pauline Bowden - Topics: Spain
This article is published on: 14th December 2017


I am perfectly serious when I suggest a world in which we can be in instant contact with each other wherever we may be, where we can contact our friends anywhere on earth, even if we don’t know their actual physical location. It will be possible in that age, perhaps only 50 years from now, for a man to conduct his business from Haiti or Bali just as well as he could from London

Arthur C Clarke, Science fiction writer and Futurist. BBC Horizon in 1964

There’s no chance that the iPhone is going to get any significant market share, no chance

Steve Ballmer, CEO Microsoft, 2007

Technology is important to the world’s future, so should part of your portfolio recognise this?

Are you participating in the world’s future?

If you would like to discuss this or any other financial matter in more detail call Pauline Bowden on 616 743 108 or email:


By Pauline Bowden - Topics: Costa del Sol, Investment Risk, Investments, Spain, wealth management
This article is published on: 24th July 2017


Most of us can’t join the Millionaires Club…..or can we?

So what do Millionaires do with their money? They mostly use private banking and private investment companies to manage their wealth. These institutions are usually a closed shop for the majority of investors. The private banks often want a minimum of £500,000 just to open an account!
Most of the top 100 US investment managers would expect $5,000,000 from a private investor! This same manager’s expertise can be accessed via a life assurance bond for as little as £20,000!
The Private Investment Companies are set up by very wealthy families who are willing to pay experts to manage their fortunes.
These wealthy families are guided by a philosophy of continuity. Successive generations of the family have invented investment structures to preserve and grow their wealth.

So why should we mere mortals be interested?
A few of these Private Investment Companies have opened their doors to the public, via financial institutional structures such as portfolio bonds or Life Assurance investment bonds.

This specialist investment expertise, previously denied to the likes of you and I are now allowing investments from as little as £50,000.
That may still sound like a lot of money, yet long term savings or endowment plans, the sale of a property or your tax free lump sum payable on retirement can easily exceed this amount and needs to be “preserved and grow” just like the millionaires money.

There are, of course, many tax efficient, financial instruments and structures available to suit all levels of wealth. Designed and suited to each person’s individual requirements and future financial needs.

To take advantage of this unique opportunity or to discuss this or any other financial matters, contact me for a confidential review of your personal situation.

Investments for the Cautious

By Pauline Bowden - Topics: Costa del Sol, Investment Risk, Spain, wealth management
This article is published on: 28th June 2017

One of the largest, most well respected, financially sound Insurance/Investment companies in the UK has an investment product compliant for residents of Spain and Gibraltar.

With 25 million customers worldwide and over 309 Billion Pounds under management, clients can feel more comfortable in the knowledge that thier assets are being well cared for by a long established, successful management team.

So what is different about this Investment Bond?
It has very low risk, with gradual steady growth, giving 3.4%+ annualised net return (after annual management charges) and up to 101.5% allocation of premium to larger investors.

For the long term cautious investor wishing to mitigate against the effects of inflation and wanting up to 5% per annum penalty free income, this could well be the perfect solution. This Life Assurance Investment Bond can be accessed from as little as €30,000, 20,000 Pounds or $30,000 and has a very competitive charging structure.

As part of an overall portfolio of assets – for the cautious part of that portfolio – it would be worth a look.

If you would like more information about this product or to make an appointment to discuss your personal needs and aspirations for your capital, please contact me for a free confidential review of your financial situation.

How can I make my money grow when interest rates are so low?

By Pauline Bowden - Topics: Interest rates, Investments, Saving, Spain
This article is published on: 26th April 2017


“Devastating, that is the effect that low interest rates have had on our income.” This quote shows that the impact of low interest rates is real, not some arbitrary number that may or may not be higher from another bank. Another recent quote from a client is “I am trying to build a pot for my retirement but interest rates will be low for the rest of my working life”.

Arguably, the person above who is still working has the chance to do something about the interest rates. For the couple from the first quote, they had been used to an income of 11,000€ pa from the interest on their bank accounts. When interest rates fell, so did their income to just 2,000€ pa. The Interbank ie base rates are minimal. You would be lucky to get 0.25% interest on a normal deposit account.

How to improve your income and investment return.

Here is a strategy that will help overcome very low interest rates. Firstly, there is no alternative to a bank account for some of your money. If you have planned expenditure then leave this money in the bank. Typically, this would be for a car, cruise or even perhaps a wedding just as some examples. Add to this an amount for an emergency fund. The amount will vary depending on your circumstances but three months of your normal expenditure is a good guideline.

Why do you need to leave money in the bank for these purposes? It is because other forms of investment often need to be allocated for the medium term. And unless you are simply lucky, money put into other investments needs to be allowed time to grow.

Are there alternatives to bank accounts? Yes, there are many alternatives. Do they work in the same manner as a bank account? No, they do not. This is why they can provide a better return on your investment. For this type of investment, do not put all your eggs in one basket. You need different types of investments (different asset classes) to give you diversification. Stick to the basics such as top quality fund management names. You do NOT need to be investing in rainforest woods, bitcoins or oil exploration companies that are about to discover hidden reserves (examples we come across regularly).

The outcome of a diversified portfolio will make a big difference to you, whether you are seeking income or capital growth. A 200,000€ investment with a return of, say, 5% would produce 10,000€ per annum. Not quite the 11,000€ that you may have been used to but certainly better than leaving it in the bank!

Retirement Benefits

By Pauline Bowden - Topics: Pensions, QROPS, Retirement, Spain
This article is published on: 14th March 2017

For people in all walks of life, retirement can be an uncertain prospect. At the very least it raises all kinds of questions concerning personal financial stability and the maintenance of living standards.

For those whose work takes them to a number of different countries during their career, the uncertainty is increased.

Until recently, retirement plans have traditionally offered a restrictive and inadequate package which was expensive to implement and complicated to arrange.

Most people require a simple yet flexible retirement benefits package, offering the possibility of a secure and prosperous retirement. An investment programme that allows you to decide exactly what you want and when you want it, how much and which type of protection you feel is appropriate for your own personal circumstances.

A plan where you can have the flexibility to take it with you from employer to employer and country to country, where you can increase or decrease, or even temporarily suspend, payments. You want to choose at what age you wish to retire and chose how you wish to receive your money on retirement.

Flexibility and choice are the key words to most people when they start a retirement plan. Gone are the days when you worked for one company for 40 years, religiously paying into the company pension scheme. It is each individual’s responsibility to make sufficient provision for their retirement and which route to take to achieve future financial security can be a complicated search of bewildering facts and figures when comparing products available.

To get personal and confidential advice regarding your retirement provision, it is necessary to discuss your own individual future financial needs, together with your full financial planning objectives.