The Spectrum IFA Group exhibited at the Barcelona International Community Day
By Jonathan Goodman
This article is published on: 26th October 2016
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.
[nggallery id=”63″/]
Supporting Women in Business 10th November
By Spectrum IFA
This article is published on: 24th October 2016
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
British Chamber of Commerce, Spain and The Spectrum IFA Group
By Spectrum IFA
This article is published on: 3rd July 2016
Here in Spain, the British Chamber of Commerce (BCC) is a very strong and successful organisation. In fact, it has just won an award for being the best Chamber in the World for promoting British trade! It was therefore no surprise to hear that the Summer Cocktail was UK themed and included Mini Cars, Scottish Beers and British Gins, amongst other things.
At the party, The Spectrum IFA Group were honoured to be presented with a plaque to thank us for 20 years of membership of the Chamber. The award was presented to Jonathan Goodman, Development Director of Spain, who has overseen our business here for the last 20 years. During this time we have worked closely with the Chamber on a large number of matters and events. In addition to the more formal associations it is always a pleasure to meet other members at their many social gatherings.
We would like to thank the BCC for their recognition of The Spectrum IFA Group and we look forward to working with them for at least another 20 years!
[nggallery id=61]
Making a Will and EU Succession Planning in Spain/Europe
By Chris Burke
This article is published on: 15th June 2016
The Laws on making a Will in Spain/Europe changed on the 17th August 2015. These changes could greatly affect what would happen to someone’s estate/inheritance when they die and it’s therefore important you understand what these are and how they could affect you.
The reason for these changes in that is essence European states have differing laws on who inherits an estate. Many of these are complicated and unclear, making it uncertain who will inherit exactly what.
For this purpose, EU Succession Regulation introduces common rules on which State’s laws apply if there is a conflict between countries’ succession laws.
The following countries are bound by the new regulation:
Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.
Notable Absentee’s are the UK, Ireland and Denmark.
Where you are ‘habitually resident’ that country’s laws will apply
To give you an example, a person dies leaving assets in France, Spain, and Germany and resides here in Spain. Due to the fact they are resident in Spain, the assets will be governed by Spanish law.
So what are the rules of Habitual Residence?
How long you are in and how often you visit a state/country as well as the conditions and reasons for you being there. Simply put, for most people, more than 183 days in one country, living or retired there makes it your main residence.
Making a Choice of Law
This default position can be overridden if you choose to apply the law of your nationality via a Will. For example – a German national dies leaving assets in France, Spain, and Germany. They are habitually resident in Spain but have stated in their Will that German law will apply to their estate. All of their assets will be governed by German law.
What about the UK?
As the UK is not bound by the Regulation, UK assets can never be governed by the law of another EU state. However, those states bound by the Regulation have to allow the application of UK laws to assets in their state if someone so chooses.
How might this affect me?
Many EU states have laws of ‘forced heirship’ under which certain assets (such as holiday property) can only be inherited by certain people. The inheritance laws in England and Wales allow you greater freedom to leave your estate to whomever you wish when you die. If you have assets in any of the states bound by the Regulation it may affect which laws will apply to them.
Who does it affect?
All foreigners who have their habitual residency in Spain and die on or after the 17th of August 2015. Spanish nationals may disregard these changes as they are unaffected by the changes.
Examples of which Will you may need
• I am a British/Irish national and NOT resident in Spain. I Don’t Plan to become Resident in Spain.
In such a case this Regulation does not affect you. It only affects existing residents in Spain or else those who at some point in the future plan to take up residency in Spain. There is no need for you to make a new Spanish Will.
A WORD OF WARNING HERE! If you are not truly a resident in Spain i.e. spend less than 183 days a year here, then that’s perfectly ok and you have nothing to worry about. However, if you are PRETENDING you are not resident in Spain, be very careful. More and more people are getting caught out by various means, and fines can be punitive. The reasons for wanting to be UK resident are currently negligible compared to being a Spanish Resident. Inheritance tax is almost nothing if anything in many cases here in Catalonia at present, and the other taxes you pay here are again currently very similar to that of the UK. Why run the risk of getting caught?
Examples of who this may affect?
• A non-resident Scottish man who inherits Spanish assets will also pay Spanish inheritance tax.
You cannot opt out or choose your own national Inheritance tax laws on inheriting assets located in Spain. You have to pay Spain’s IHT.
Other potential questions might be:
• Can I choose my own national tax law besides opting for my national succession law? The short answer is no
The regulation entitles you is to choose freely the Succession Law of your own nationality (i.e. England and Wales or Scotland’s) in lieu of Spain’s compulsory heir rules which, following this new Regulation, applies by default if your habitual residency is in Spain at the time of your death on or after the 17th of August 2015.
VERY IMPORTANT – PLEASE NOTE!!!
You CANNOT choose which Inheritance Tax Laws apply to your Spanish estate. It is mandatory to pay Spanish inheritance tax on Spanish Assets, still.
For example, an Englishman resident in Spain and inherits Spanish assets will pay Spanish inheritance tax.
To clarify on Wills……
You are simply choosing the rules of which country you wish the Will to follow. Either way, Spanish assets will STILL be liable to Spanish Taxes.
For example, in Spain assets left automatically go to certain relatives, whether you want them to or not e.g. the husband dies, 25% of any Property goes to any children, whether you want it to or not. This could then cause problems with selling properties, realising assets etc.
What do I need to do?
It is essential to co-ordinate Wills and Tax Planning (look no further) in each country concerned to ensure that your estate will pass to your chosen beneficiaries in the way that is best for you and your estate.
Chris, a partner of the Spectrum IFA Group, makes sure that not only are his clients assets managed correctly, but they are kept up to date and given the best advice for most eventualities that affect many people almost daily, that they do not think about or aren’t aware of.
Common Reporting Standards
By Chris Burke
This article is published on: 13th June 2016
What is it and what does it mean?
Common Reporting Standards is also known as automatic exchange of information (AEI). It originated in May 2014 with 47 countries tentatively agreeing to share information on residents’ assets and incomes automatically as standard practice.
It is the Brainchild of the OECD (Organisation for Economic Co-operation and Development). Previously this information was shared at request, however this was not effective and largely unsuccessful. The main emphasis of this is to battle against tax evasion.
How will it work?
Countries will transfer all the relevant information automatically and systematically including:
- The name, address, TIN (Tax Identification Number) date and place of birth of each reportable person
- Account number
- Name and identifying number of the Reporting Financial Institution
- Account balance or value at end of calendar year, or if closed during that year
- Each country is allowed to determine which accounts are reportable
When will it start?
Most European countries will start reporting in 2017, including Spain and the UK. For note of interest, other countries will report in 2018 including Andorra.
Starting to report in 2017:
Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Dominica, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos Islands, United Kingdom
Starting to report in 2018:
Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Belize, Brazil, Brunei Darussalam, Canada, Chile, China, Cook Islands, Costa Rica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Kuwait, Marshall Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Sint Maarten, Switzerland, Turkey, United Arab Emirates, Uruguay, Vanuatu
What do I need to do?
Make sure you have ALL your assets:
- Reported correctly
- Tax compliant i.e. not in investments/properties that will mean you pay more in tax
- Understand your personal situation, and what your options are.
Declaracion De La Renta
By Chris Burke
This article is published on: 25th May 2016
Impuesto Sobre La Renta De Las Personas Fisicas (IRPF)
Declaracion de la Renta, also known as IRPF is the annual income tax return that individuals have to submit/pay to the state/region of Spain where you are tax resident. In Spain the tax year is from 1st January to 31st December and you have to declare all your worldwide income. This is essentially very similar to the annual tax return you have to complete every year in the UK.
The period to submit your tax return is from the beginning of April to the end of June depending on whether you are self employed, employed or retired. During April you can submit your tax return only if your income is from a salary or a state or private pension from Spain. In May and June you can submit all other returns.
The procedure to submit your Declaracion De La Renta is as follows:
You can ask for a draft of your tax return from the tax office, check it and if needed change the details and then submit it. All this can be done online and this system can also be used if you declare a salary.
If you have a professional activity or a business you cannot get a draft, but you can ask for your fiscal information, that is all the information the tax office already have for you. You should always check this information is correct.
If you want to prepare the tax return yourself, in the tax administration web site (www.aeat.es) you can download a program to prepare and submit it (programa PADRE).
If you are a professional or have a business/self employed (what in Spain we call an “autónomo”) it is strongly advisable that you have a digital signature. It will be useful to submit your Income Tax Return and other paper work with the tax office, for both Taxes and Social Security.
Not everybody has to submit a tax return. If you have a salary under €22,000 paid by a Spanish company or income from capital/interest under €1,600 annually, you don’t need to submit it. Nevertheless it could be advisable to check if you are entitled to have some money back, which can happen.
If you are self employed, you don’t have to submit a tax return if your annual income is below €1,000 including income from all sources. As there are other higher limits for income from capital and capital gains only, the key thing here is being self employed.
No matter what, if your capital losses are above €500 you also have an obligation to declare. This, for, example would mean if you disposed of an asset and made a €500 loss on it. Therefore, if you have a salary of €20,000 and capital losses of over €500 you have to declare it/submit a tax return.
If you receive income from outside Spain you have to submit a tax return no matter how much you have earned in one year. So, if your income is below all the limits said before, and you have monies from a bank outside of Spain that has been subject to retention or withholding tax (see EU savings directive) no matter the sum, you have to submit a tax return even if there is no tax to pay.
It might be easier and safer for you to submit a tax return via a Gestor (accountant/tax adviser) so that it is done correctly, on time and perhaps most importantly hassle free.
Company Pension/Final Salary funding update 31st January 2016
By Chris Burke
This article is published on: 8th March 2016
With most UK Final Salary schemes (also known as Defined Benefit) now closing their doors to new members, the schemes are concentrating on trying to manage to make sure there is enough money for those people still in them for retirement. This ‘closing of the doors’ also means there is no ‘New Money’ entering the schemes, which takes away the option of new contributions paying the pensions of those currently retired, as they used to. One of the biggest reasons for this, is that many years ago these often called ’Gold Plated’ schemes were made up on the following mathematics:
People retired at 55, then died at 67.
Thus, approximately 12 years of payments should they live to this point. However, now the mathematics are more likely to be the following:
People retire at 60, and the average life expectancy is 84 in Europe.
You don’t need to be a mathematician to work out why the schemes are faltering, and worryingly in many cases, heavily reliant on their companies contributing millions of pounds to keep them going.
The Pension Protection Fund (PPF) takes these schemes under its wing should the company scheme get to a point that it cannot realistically recover from poor funding. However, it is gaining more and more ‘members’ and will only cover pension income up to a point. Therefore, many client’s believe it is better not to be in the PPF if possible, and have your pension under your own control and in essence not at the mercy of a government body to bail you out. People thought that the Kodak pension scheme would always be ok; unfortunately it was not and left a lot of people with no or little pension benefits.
Below is a transcript of the update from the Pension Protection Funds own website updating what has happened and why. If you have any questions regarding this or what your options are, don’t hesitate to contact Christopher, the article writer (contact information is at the bottom of this article).
Update from the Pension Protection Fund (PPF) of its members
The aggregate deficit of the 5,945 schemes in the UK Pension Protection Fund (PPF) Index is estimated to have increased over the month to £304.9 billion at the end of January 2016, from a deficit of £222.4 billion at the end of December 2015. The funding ratio worsened from 84.9 per cent to 80.5 per cent. Total assets were £1,258.7 billion and total liabilities were £1,563.6 billion. There were 4,923 schemes in deficit and 1,022 schemes in surplus.
The aggregate deficit of the schemes in the PPF 7800 Index is estimated to have increased to £304.9 billion at the end of January 2016, from £222.4 billion at the end of December 2015. The position has improved from the previous year, when a deficit of £367.5 billion was recorded at the end of January 2015. The funding ratio of schemes decreased over this month from 84.9 per cent to 80.5 per cent at the end of January 2016. The funding ratio is higher than the 77.6 per cent recorded in January 2015.
Within the index, total scheme assets amounted to £1,258.7 billion at the end of January 2016. Total scheme assets increased by 0.9 per cent over the month and decreased by 1.2 per cent over the year. Total scheme liabilities were £1,563.6 billion at the end of January 2016, an increase of 6.4 per cent over the month and decreased by 4.7 per cent over the year.
The aggregate deficit of all schemes in deficit at the end of January 2016 is estimated to have increased to £338.4 billion from £265.8 billion at the end of December 2015. At the end of January 2015, the equivalent figure was £392.6 billion. At the end of January 2016, the total surplus of schemes in surplus decreased to £33.6 billion from £43.4 billion at the end of December 2015. At the end of January 2015, the total surplus of all schemes in surplus stood at £25.2 billion.
The number of schemes in deficit at the end of January 2015 increased to 4,923, representing 82.8 per cent of the total 5,945 defined benefit schemes. There were 4,679 schemes in deficit at the end of December 2015 (78.7 per cent) and 5,175 schemes in deficit at the end of January 2015 (85.4 per cent of the 2014 population of schemes). The number of schemes in surplus fell to 1,022 at the end of January 2016 (17.2 per cent of schemes) from 1,266 at the end of December 2015 (21.3 per cent). There were 882 schemes in surplus at the end of January 2015 (14.6 per cent of the 2014 population of schemes).
Understanding the impact of market movements Equity markets and gilt yields are the main drivers of funding levels. Scheme liabilities are sensitive to the yields available on a range of conventional and indexlinked gilts. Liabilities are also time-sensitive in that, even if gilt yields were unchanged, scheme liabilities would increase as the point of payment approaches. The value of scheme assets is affected by the change in prices of all the major asset classes, not just equity markets. However, due to their weight in asset allocation and volatility, equities and bonds are the biggest drivers behind changes in scheme assets; bonds have a higher weight in asset allocation, but equities tend to be more volatile. Over the month of January 2016, liabilities increased by 6.4 per cent. Conventional and index-linked 15-year gilt yields fell by 34 basis points and 20 basis points respectively. Assets rose by 0.9 per cent in January 2016. The FTSE All-Share Index fell by 3.1 per cent over the month. Over the year to January 2016, 15-year gilt yields were up by 33 basis points and the FTSE All-Share Index was down by 7.9 per cent.
UK Pension Tax Changes 6th April 2016 (lifetime allowance)
By Chris Burke
This article is published on: 3rd March 2016
Anyone who has a private or company pension in the UK could be affected by the changes being brought in on the 6th April this year. This may be anyone with private pension(s) whose combined value is around £1,000,000, or a company pension scheme which would give an income in retirement of approximately £40,000 per annum.
In essence, the changes affect the tax you would pay on this money. Up until now, any pensions combined under £1,250,000 in real value would not be subject to any further taxes than those of normal income or inheritance tax. However, any pension with a value higher than this would be subject to additional taxes. This allowance is called a ‘Lifetime Allowance’ (LTA). The tax on pensions over this value can be up to 55%.
As from April this year, this Lifetime Allowance Value is being reduced to £1,000,000. Therefore, any pensions combined worth more than this would now be liable to these potentially additional taxes.
If you have a Corporate, Company, Final Salary or Defined Benefits Scheme this will also be tested against the new Lifetime Allowance. These Schemes are based on your final salary when leaving your employer as opposed to contributions and investment growth, and the amount usually has to be multiplied by a factor of 20 in order to calculate the capital equivalent value. These Schemes also usually pay a tax-free lump sum, and this also has to be included in the LTA calculation. Therefore, depending on the pension(s) this new limit may affect you.
What are the key factors involved in the Lifetime Allowance testing?
Retirement after age 55: Once a lump sum/income is taken from a Pension, these are tested against the LTA.
At age 75: Any Pensions that have not been accessed will be tested against the LTA at this time. Pensions in drawdown will also be tested again at this time.
Death pre-age 75: Pensions will be tested against the LTA to ensure that the limit has not been exceeded.
Transfer to a QROPS (Qualifying Recognised Overseas Pension Scheme – when you transfer your pension outside of the UK): If a UK Pension Scheme’s funds are transferred into a QROPS, the value of the transferred funds are tested against the LTA.
Of course, the main point here for many people is death before age 75. If this happens, as is stands your pension will be subject to this potential tax from £1,000,000 and above.
What are the tax charges?
If the Lifetime Allowance is exceeded, then the tax charges will depend on how the excess is paid from the Scheme.
If as a lump sum (normally the case in inheritance): subject to a 55% tax charge.
If as a Pension Income: subject to a 25% tax charge.
Transfer to a QROPS: subject to a 25% tax charge on the excess above the LTA.
Is there any protection against Lifetime Allowance charges available?
The UK Government has confirmed that from April 2016, the following two protection regimes will be available, allowing individuals a fixed or individual LTA dependent on the value of their Pensions and/or the type of protection:
Fixed protection 2016: This ‘fixes’ the LTA at the current £1.25m. In order for this to apply, no further Pension benefits can be accrued in a Scheme on or after 6 April 2016.
Individual protection 2016: The LTA will be set at the value of the Pension on 6 April 2016, when the new £1m LTA is introduced, so long as it is valued between £1m and £1.25m. This protection does allow further contributions, but any Pension in excess of the protected LTA will be taxed on the usual way when tested.
What about a transfer to a QROPS/Overseas pension scheme?
This currently enables an individual to safeguard their Pension Fund against this tax charge and allows the fund to carry on growing. As detailed above, the fund is tested against the individual’s Lifetime Allowance at the point of transfer, rather than at the point of each pension being tested as per above scenarios, i.e. death before pension accessed etc.
Perhaps the most important information to know regarding this, is that not so long ago the Lifetime Allowance for pensions was £1,800,000 in the UK. It is consistently reducing, which is worrying considering every twenty four years historically inflation doubles, and yet the Pension Lifetime Allowance is dramatically being reduced instead of increased, such as the tax bandings for income tax have been after years of lobbying by the general public. This could lead us to one main conclusion, the UK governments’ need to collect more and more taxes. Therefore, as the years pass by it could be this differential continues to grow and grow, in real terms meaning individuals will pay more and more tax.
The key points to consider with this are:
Having your pension(s) in the UK will enable them to be liable to the UK rules and the government’s ability to change them, including the uncertainty of what these changes may be in the future.
The Lifetime Allowance is consistently decreasing, meaning taxes are consistently increasing.
Understanding of these changes and how it might affect you could save you or your loved ones considerable money in potential taxes.
If you have no plans to retire in the UK and have pensions there, it could be worth having these evaluated to see whether it would be beneficial for you to transfer them securely outside of the UK.
Talking your personal circumstances through will put your mind at rest, or enlighten you on what your options are and how you can best plan for this eventuality.
If you would like to ask any questions regarding this subject, or speak to Christopher, a UK pensions expert who wrote this article, feel free to contact him on the details below.
Don´t bank on low charges
By John Hayward
This article is published on: 19th January 2016
Wouldn’t it be great if every time you were paid your pension or other income, you were paid a commission for receiving it? Then, each time you pay a bill, you receive a commission for paying it? You could make commission twice on the same money! Of course, this is not possible for us. It is for the banks though.
Let’s take an example based on real charges of a well-known Spanish bank and a couple selling a property in Spain for €300,000 and then re-purchasing a smaller property for €200,000 and investing €100,000 in an income paying bond.
On sale, their purchaser pays them €300,000 through a transfer to their bank. The bank charges 0.2% for receiving the money (€600). They then transfer the money to buy the next property and get charged 0.4% on €200,000 (€800). Finally, they transfer €100,000 to a Spanish compliant company based in another part of Europe for their investment. They are charged a further €400.
In total they will have paid €1,800 in bank charges for transactions other banks may not have charged anything for. The main aim is to choose a bank that does not charge. If high charges are the default, perhaps one should move to another bank. We can recommend a bank with no, or low, transfer charges along with no annual account fees.
One must also be aware that banks will probably earn a healthy chunk on currency exchange, selling the benefit that they do not charge a fee. With GBP falling back against the Euro, it is even more important to obtain a competitive rate. Whether it is for regular income payments, or one off lump sums, we can help you get the best deal.