Viewing posts categorised under: Barcelona
Why robots will never replace Investment Advice
By Chris Burke
This article is published on: 7th June 2017
07.06.17
Particularly when markets are/have done well like recently, Stock picking (A situation in which an analyst or investor uses a systematic form of analysis to conclude that a particular stock will make a good investment and, therefore, should be added to his or her portfolio) is somewhat discredited these days, because low-cost passive fund managers argue that their tracker model delivers better value to savers by betting on an index, not individual companies.
And there is good argument to back it up
An article in The Wall Street Journal shows that between 1926 and 2015, just 30 different shares accounted for a remarkable one-third of the cumulative wealth generated by the whole market — from a total of 25,782 companies listed during that period. These statistics demonstrate that “superstocks” are what produce the true profits in the long run.
The research also calls into question the cult of equity, which has been followed by professional investors for more than 50 years. The experts argue that shares decisively outperform bonds and cash over time. But Bessembinder’s research shows that the returns from 96% of American shares would have been matched by fixed-interest instruments, which generally offer more security and liquidity, and suffer from lower volatility than stocks.
Spotting a business that can grow 10 or 20-fold over a period of years is a rare art
Of course, getting stock selection right is very difficult indeed when such a tiny proportion of shares contribute so much to total performance. It requires investors who are truly patient and at times extremely brave.
Amazon is one of the heavy hitters that delivered a quarter of all wealth creation in the stock market during the 90 years to 2015. Yet between 1999 and 2001, the online retailer’s shares fell by 95%. Many investors probably gave up then, and having been burnt once, shunned its 650-fold appreciation over the past 16 years.
While empirically that may appear to be correct, intuitively it feels questionable
Economies grow thanks to new technologies and entrepreneurs, who run a fairly small number of outstanding companies funded through private capital. Half the top 20 wealth creators referred to above are in sectors such as pharmaceuticals and computers. Identifying those sorts of promising industries is not too hard. But I do not believe there is a computer program — or robotic system — that can pinpoint the great achievers of the next 10 or 20 years.
Choosing the special businesses and executives that will create enormous value, and probably large numbers of jobs, is as much a creative undertaking as a scientific one.
Rigorous analysis must include a host of variables that artificial intelligence would struggle to understand — adaptability, trust, motivation, ruthlessness and so forth. I suspect all the best investors emphasise the importance of judging management when backing companies; I am not confident that computers can do that better than humans. In mature economies such as the UK, such sustained compound growth happens all too rarely.
To achieve it, a business should enjoy high returns on capital, strong cash generation, plentiful long-term expansion opportunities and a powerful franchise. And you need to buy the company at a sensible valuation. In a world awash with cash, such attractive businesses command very high prices. But if you believe the model can endure, they might be worth it.
Article written by Luke Johnson, who is chairman of Risk Capital Partners and the Institute of Cancer Research.
Sources: Bessembinder’s research and The Wall Street Journal
To read the article in full, click here:
Why a robot will never pick the superstocks of the tomorrow
A look at tax rates across Europe
By Chris Burke
This article is published on: 31st May 2017
In a recent article in the Guardian newspaper, Patrick Collinson examines how the average burden on British people earning £25,000, £40,000 and £100,000 compares with taxes paid by similar earners in Europe, Australia and the US.
Chris Burke from The SpectrumIFA Group in Barcelona calculated the figures for Spain and explains “homeowners also pay an annual tax on the value of their property, currently around €900 on a home valued at €300,000, so slightly less than typical council tax rates in the UK. However, he says that inheritance tax has shifted enormously in recent years, having been raised to 19% during the financial crisis but now starting at just 1%”.
Labour’s plan to tax incomes over £80,000 more heavily is a “massive tax hike for the middle classes” that will “take Britain back to the misery of the 1970s”, according to rightwing newspapers. But are British households that heavily taxed?
A comparison of personal tax rates across Europe, Australia and the US by Guardian Money reveals how average earners in Britain on salaries of £25,000, or “middle-class” individuals on £40,000, enjoy among the lowest personal tax rates of the advanced countries, while high earners on £100,000 see less of their income taken in tax than almost anywhere else in Europe.
The survey found that someone earning £100,000 in the UK in effect loses about 34.3% of their pay to HM Revenue & Customs once personal allowances, income tax and national insurance are taken into account. The one-third reduction is roughly the same as the US, Australia and Spain, but a long way behind the 38% in Germany, 41% in Ireland, 45% in Sweden and up to 59% in France (though the French figures include very large pension contributions).
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Note that these figures are a rough guide only. International tax comparisons are bedevilled by large numbers of factors. We compared rates for a single person with no children and with no special allowances. Most countries tax individuals rather than households, but France taxes couples, which has the impact of reducing the burden on a high earner with an at-home partner. Autonomous regions within countries impose their own varying taxes. We converted euros, dollars and krona into sterling at a time when the pound had fallen rapidly; some earnings might have translated into higher tax bands abroad before sterling plunged.
Some countries, such as the US, raise relatively large revenues from property taxes. Others squeeze revenue from sales taxes – 25% in Sweden, 19% in Germany. While there is some harmonisation of income tax rates, social security varies dramatically. Australia imposes a small medical levy of 2%. France’s charges can be as high as 30%.
One of the most striking facts to emerge is church taxes. In Germany, individuals are expected to give 8% of their income to the church.
EU officials may look forward to the day when the single currency is teamed up with a single tax policy. But what emerges from our survey is how elaborate each country’s tax and social security systems are. Britain’s actually looks relatively simple compared with France’s. The Brexit negotiations will be a walk in the park compared with any attempt to harmonise the EU’s 27 national tax and social security systems.
France
Gross salary £25,000
After tax £17,050
Tax rate 31.8%
Gross salary £40,000
After tax £23,520
Tax rate 41.2%
Gross salary £100,000
After tax £40,600
Tax rate 59.4%
Spain (Catalonia)
Gross salary £25,000
After tax £20,812
Tax rate 16.7%
Gross salary £40,000
After tax £31,000
Tax rate 22.1%
Gross salary £100,000
After tax £65,700
Tax rate 34.3%
Germany
Gross salary £25,000
After tax £18,923
Tax rate 24.3%
Gross salary £40,000
After tax £27,256
Tax rate 31.8%
Gross salary £100,000
After tax £61,740
Tax rate 38.3%
Sweden
Gross salary £25,000
After tax £19,500
Tax rate 22%
Gross salary £40,000
After tax £30,000
Tax rate 25%
Gross salary £100,000
After tax £55,000
Tax rate 45%
Ireland
Gross salary £25,000
After tax £21,183
Tax rate 15.3%
Gross salary £40,000
After tax £29,624
Tax rate 26%
Gross salary £100,000
After tax £59,000
Tax rate 41%
United Kingdom
Gross salary £25,000
After tax £20,279
Tax rate 18.9%
Gross salary £40,000
After tax £30,480
Tax rate 24.8%
Gross salary £100,000
After tax £65,780
Tax rate 34.3%
To read the full article please click here
First published Saturday 27 May 2017, author Patrick Collinson
Who would inherit your Assets if you die without a will?
By Chris Burke
This article is published on: 26th May 2017
You might be surprised to know that 59%, that’s over half of UK adults, have not written a Will. And if you are over 55 there is a 36% chance you haven’t either. The main reason for this…….most people believe they are not wealthy enough to need a Will, or they are too young to make one. But what would happen to your assets if the worse did happen?
Is there a living husband, wife or civil partner?
If you are married, or have a civil partnership then it’s actually very straightforward and they would inherit your entire estate. But would you want that? And how about if by some awful miracle both of you departed this happy land, what would happen to your assets then? But let us put those to one side for now; imagine you have children, whom decide where they will be raised and who with? If you are living away from the UK this makes it even more complicated. If you don’t have a Will, you are leaving all of this to the authorities and not planning to protect yourself and your loved ones for the sake of a simple document.
Imagine you have a partner, but are not married and not in a civil partnership, would you be surprised to know they have no right to your assets? How would that affect them?
Let’s imagine, as more people these days are for various reasons not having children, that down the family line to Great Aunts/Uncles there is no one related to you. You might not be very happy to know that ‘The Crown? Inherits your assets, that is the Royal Family. In fact fewer people in the UK have Wills than a year ago.
Back in August 2015 the Wills laws changed in Europe, with the main different being you can CHOOSE which laws you wish your Will to follow. The choice is either your country of domicility (usually where you were born/hold a passport for) or the country you reside in now. If you are British most people choose the UK as the laws are easier, you have more control and less complex than those in Spain.
Find out here who would inherit your assets by clicking on this link:
www.gov.uk/inherits-someone-dies-without-will
To enquire about making a Will, don’t hesitate to get in touch and we can arrange for you to talk this through with a Will writer so you know:
- The process involved
- The costs
- How it works
- There is no charge for this peace of mind
Sources:
HMRC website
*unbiased.co.uk research conducted by Opinium Research between 19 to 23 August 2016, among 2,000 nationally representative UK adults aged 18+
Spanish State Pension system about to go Bankrupt?
By Chris Burke
This article is published on: 4th April 2017
04.04.17
During 2017 or early in 2018, the Spanish State Pension system is due to run out of money. At one point, the reserve fund the government created for this was standing at 66 million Euros.
Why has this happened?
During the crisis, millions of jobs were lost, and with them, an almost parallel reduction in contributions to the Social Security. Furthermore, a large part of the new jobs are precarious – temporary, part-time or free-lance – and with low salaries. This means that contributions to the system are way below expectations and the minimum required for it to be able to meet outgoings with incomings.
While this has been happening, payments to retirees have been increasing. In the last 11 years the number of actual pensioners has increased by over a million (8.3 million up to 9.4 million). The average pension amount paid out has also increased, from €647 per month to €906 from 2006 to 2016. In 2007, 79 billion Euros was paid out in pensions, compared to 117 billion in 2016, an increase of 48%. In real terms, the annual deficit for the year is 19 billion Euros.
This issue of funding pensions is made even harder by the lack of people in employment. In many European countries it’s normal for 50% of the population to be in work, in Spain it’s only 40%.
Ideas on how to solve the problems being explored
These range from not putting a cap on contributions (this would generate more income in the short term, but mean more pensions payable in the long run). A more popular idea is to allow those people retired to still work and receive their entire pension, which would generate increased state contributions. Gaining more support is the change to stop those who are not contributing to the system to not receive state pensions/handout, such as widows and orphans. These would instead be funded from current tax revenues.
In essence Spain may have to look at what many other countries are changing, such as making people contribute for more years and lower percentages to effectively cut the average pension payments. As well as increasing Social Security contributions. But what does remain clear is, if you are ONLY relying on the state to fund your retirement, you could be looking at grave consequences.
To talk through what your retirement looks like, and what you can do to shape it, feel free to contact Chris.
(Source ‘The Corner’ Fernando Barciela)
The ABCs of Spanish taxation when investing in real estate in Spain
By Jonathan Goodman
This article is published on: 8th March 2017
08.03.17
For a long time, Spain has been considered a country of interest for real estate investors. It is a Western European country with many types of attractive properties available: residential, retail, offices, logistics, industrial, and more. And all this in a place that enjoys a stable legal system, over forty million consumers, and a great climate.
The Spanish tax system, however, is one of the most complex in the world. This being the case, it is essential to know the taxation associated to each of your investments in order to avoid surprises. We have written this guide as a quick introduction for first time investors. Nevertheless, you must consider it just an introduction since every property has its own peculiarities. We would be happy to help you make your investments a success.
This article was written by AvaLaw and first appeared on www.avalaw.es
Banks have floors?
By Chris Burke
This article is published on: 24th January 2017
24.01.17
After a surprising final ruling by the European Union’s top court, some Spanish bank shares tumbled by as much as 10 percent recently. Spanish banks, including Banco Popular Espanol SA and Banco Bilbao Vizcaya Argentaria SA, may have to give back billions of Euros to mortgage customers.
Why?
Judges at the EU Court of Justice ruled in Luxembourg that borrowers who paid too much interest on home loans pre-dating May 2013 on so-called mortgage floors, are entitled to a refund from their banks. Banco Sabadell SA fell as much as 7.5 percent, while Banco Popular slipped as much as 10.5 percent, the largest decliner in Spain’s Ibex 35 benchmark.
The court said that a proposed time limit on the refunds is illegal and customers shouldn’t be bound by such unfair terms. Some banks are still making provisions for bad loans, which also adds pressure to profit.
The size of the problem
With €521 billion, home loans are one of the largest parts of Spanish bank lending business as they grew their real estate exposure during a construction boom in the country that burst at the end of the last decade.
BBVA estimated in July that the maximum impact from a negative ruling would be 1.2 billion Euros, while CaixaBank SA said at the time it would have to refund homeowners as much as 1.25 billion Euros. CaixaBank has already provisioned 515 million Euros, it said.
The EU court case comes as Spanish banks are under pressure from low interest rates and weak demand for credit, affecting their traditional business of lending.
The capital ratios of smaller lender Liberbank SA and CaixaBank will be hit hardest by the ruling, brokerage firm Renta 4 said in a note to clients. Liberbank will see a 75 basis points impact on its CET1 ratio, while CaixaBank will suffer a 40 basis points hit. Banco Popular will have a 36 basis points impact.
The ruling doesn’t affect the solvency of Spanish banks nor the strength of the mortgage market in the country, Spanish banking association CECA said in a statement. The Bank of Spain estimates the maximum amount of mortgage floors affected by the ruling is slightly above 4 billion Euros, an official said.
Should you cash in your final salary pension?
By Chris Burke
This article is published on: 14th December 2016
14.12.16
Potentially millions of people with defined benefit or Final Salary pensions have seen their transfer values shoot up in the last year.
A transfer value, also known as a CETV (cash equivalent transfer value) can be exchanged for giving up the future projected benefits for your pension. In effect, the company buys back the pension.
Over the last 18 months in particular these values have soared.
In many instances people are being offered tens of thousands of pounds more than a year ago with some even being incentivised by their Pension scheme to leave, with a bonus given for doing so. The main reason for this is that the pension company no longer wants the responsibility of having to pay the pension when you retire. Life expectancy in Europe now is 84/85 and in effect people are living longer, meaning the pension scheme has to pay you longer.
For someone with an annual pension income worth £20,000, it is not uncommon to be offered 30 times that amount – in other words, £600,000 in cash.
However this is not the right thing to do for everybody, and there can be significant disadvantages.
‘Unique Circumstances’
Many people have seen their pension transfer values doubled since two years ago, now making it very worthwhile to re-visit these and see what the best advice would be, given this growth in values.
What is a defined benefit pension and the difference between these and a Defined Contribution pension scheme?
Workers with defined benefit pensions know exactly how much they will receive in retirement. Such schemes are either based on a worker’s final salary, or on their career average earnings. Workers with defined contribution (DC) schemes save into a pension pot, which they then use to buy a retirement income. The size of the pot depends on stock market performance. The reason for the increase in transfer values is continuing low interest rates, and particularly low Gilt Rates. Gilts are bonds issued by the Government to raise money, and the rate/interest of these is a major factor used to help calculate a transfer value for a DB pension scheme.
Pension schemes depend heavily on bond yields for their income, and with yields at record lows, many are struggling to meet their commitments to pay future pensions. So they have been offering larger and larger sums to people who are prepared to give up their pension rights.
Transferring your DB/Final Salary pensions can offer a more flexible retirement income, the possibility of extra tax-free cash and upon death the remainder of the pension can be paid out to any beneficiary’s rather than paying a reduced income only to a spouse/dependent partner and then ending.
However, keeping a DB/Final Salary pension can also offer you certainties such as an income for life with Inflation protection, Risk-free income, which does not depend on the ups and downs of the stock market.
There are currently major uncertainties surrounding Brexit and the UK leaving the EU, particularly for those people living outside of the UK. With the almost constant review and changes of UK pensions laws/taxes and the fact that 90% of UK DB/Final Salary schemes are underfunded, it’s important you review your options and the right decision with your pension.
In all circumstances, you should talk to a professional and have your own pension/situation evaluated and see what the best advice there is for you.
The Spectrum IFA Group exhibited at the Barcelona International Community Day
By Jonathan Goodman
This article is published on: 26th October 2016
26.10.16
For the third year running The Spectrum IFA Group exhibited and supported the Barcelona International Community Day held at the Maritime Museum in Barcelona. A great venue and well organised, many new contacts were made as well as the deepening of existing relationships. Chris Burke’s presentation was very well received by a large audience of expats.
The event is very informative and totally in line with The Spectrum IFA Group’s modus operandi and we are certain to be able to assist many new and some not so new expats with their overall long term financial planning.
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Supporting Women in Business 10th November
By Spectrum IFA
This article is published on: 24th October 2016
24.10.16
Jointly organised by Costa Women Barcelona and MumAbroad, Anne Ollerenshaw and Chris Burke of The Spectrum IFA Group are delighted to be presenting short talks on ‘Empowering Women to take control of their finances’ and ‘Working mothers – overcoming your demons’.
Got a business idea but not sure how to make it pay? Or perhaps your business is up and running but you’re meeting barriers – language, culture, legal issues – associated with operating in a foreign country? Or maybe you’re having challenges finding the right customers and getting your message across? Whatever the difficulties you’re experiencing, this half-day conference is for you.
Each speaker throughout the morning are experienced business entrepreneurs who have all succeeded in business. This conference is your chance to get close to the experts and drive your professional live forward.
And the amazing thing is that you’ll be helping Syrian refugee children by attending! All proceeds from the conference will be donated to a scholarship fund for needy refugee children to attend the Al Nokhbar School in Istanbul, Turkey. This means that you’ll be helping rescue children from the abuses of child labour, as well as from the risks of social exclusion, criminality, potential radicalisation and, not least of all, you’ll be helping young girls escape the perils of early marriage. What better way to spend your time?
Date: 10th November 2016
Time: 11.00 – 15.00
Where: Crew Lounge, One Ocean, Moll de la Barceloneta, 1, 08003 Barcelona
For more information and to purchase a ticket please click here
Changes in tax for International people living in Spain after the EU Referendum. What changes and what does not?
By Barry Davys
This article is published on: 6th July 2016
06.07.16
If the UK leaves the European Union what impact does this have on taxation for international people living in Spain?
The framework for taxation in all countries is based upon the following:
- Are you tax resident according to the laws of that country?
- Which tax authority is the controlling tax authority for your Worldwide income and gains?
- If you have income or gains outside of the country where you are tax resident, is there a double taxation agreement between the country where you are resident and the country where the income or gain is made?
For those of us living in Spain, the simple test is are we in the country for more than 183 days in any calendar year? If yes, then we will be Spanish Tax resident.
If we meet the residency requirement Spain is our controlling tax authority. This means we have to report our Worldwide income and gains to Spain and our main payment of tax is in Spain.
Double Tax Treaties
The OECD, UN and USA have set up model frameworks for Double Taxation Treaties. Most countries use these frameworks. However, the Treaties are between individual countries. Even if the country is in the EU there is NO EU wide double taxation agreements. Therefore, if the UK leaves the EU it will not affect the double taxation agreement between the UK and Spain. As an example, Spain has 88 tax treaties, 66 of them with countries outside the EU and even if the UK leaves the double tax treaty should stay. The tax treaty between Spain and the UK covers both income and gains.
Beckham Rule
It is not expected that there will be any changes to the Beckham rule (Impatriate Tax Regime). It is available to people from around the World. Therefore people moving from the UK to Spain should still be able to benefit from the lower rate of taxation for five full tax years.
Where we do expect changes
There is a potential economic impact in both Inheritance Tax and Exit Taxes if the UK leaves the EU.
Inheritance Tax
In September 2014, the European Court of Justice instructed Spain to change its rules regarding Inheritance Tax where the deceased person or the person receiving the inheritance was in another country in the European Economic Area (EEA). The effect was to allow these people to claim the allowances that are available to inhabitants of Spain, rather than them being taxed on a special “National” rate. This was because the National Rate resulted in higher taxes.
If Britain is now longer a member of the EEA, it is quite possible that we will have to return to paying the national rate of inheritance tax. Please note, it is possible for the UK to leave the EU but not the EEA and therefore will still qualify. Whilst the loss of the local allowances will only put us back to the situation two years ago it will still be a backwards step.
There are several pieces of Inheritance Tax planning that you can do to reduce the burden of Inheritance Tax. HOWEVER, we have not left the EU, there is some debate about whether we will ever leave the EU and we may yet become part of the EEA. We strongly recommend, therefore, that you discuss the possible planning methods now but do NOT implement any planning on the basis of the UK leaving the EU. This is because once taken, many of the planning steps cannot be undone.
Exit Tax
Exit tax is chargeable to all taxpayers that have been in Spain in at least 5 years of the last 10 years whilst Spanish Tax Resident if:
The market value of the shares and collective investments held exceeds a joint value of Euro 4 Million
or
Only Euro 1 Million if the person holds 25% or more of the shares in a company.
However, currently, if the person moves to another country in the European Economic Area with whom an effective exchange of information exists, the gain will only need to be declared and Spanish Exit Tax paid if during the next 10 years the shares are sold or the person loses his residency in the EU or in the EEA.
It the UK leaves the EU and does not get EEA membership, Spanish Exit Tax would become payable on departure.
CRS – Automatic exchange of information between countries
The OECD has also introduced a common framework for the automatic reporting of information from one country to another of the financial affairs of people who live in the second country, for example UK to Spain where a British person lives in Spain. This framework has been updated and common formatting of reporting leads to common software and much easier analysis of the information.
Please be aware that these reports will still take place even if the UK leaves the EU. Currently there are 101 countries using this common software and standards.
