Viewing posts categorised under: Spain

BREXIT and our right to remain in Spain

By Barry Davys
This article is published on: 29th November 2018

29.11.18

Brexit and our Right to Remain in Spain

There is much work still being carried out by both teams in the Brexit negotiations, despite the Withdrawal Agreement. However, until all issues have been agreed upon, including the Northern Ireland border issue, fish and Gibraltar, and the UK Parliament has approved the agreement, nothing is certain about the Brexit.

For those of us living in Spain, there is something we can do now which provides some protection. We have been recommended to do this by the British Embassy in Spain. The action we can take now is to register for “Permanent Residency”.

Without having to give up our British passport or take Spanish citizenship, we can apply for permanent residence if we have lived here for more than five years. This gives us the same rights as a Spanish person to reside in Spain. Making this application whilst Britain is still part of the EU will be easier than when Britain is not part of the EU.

If you already have a residency card, please check to see whether it contains the word “Permanente”. If it does, you have already completed this process. If you have a card that does not include this word, you should complete this process.

I am applying for permanent residency as I write this article and it is not (famous last words) onerous. Other people who have completed it have found the same. There are good notes, including information on what is required to make the application, at this web address. There are two forms that are required: one is the application form and the other is the payment of the fee form. Supporting documentation is also required; this is listed in the notes on the website above.

The completed forms are submitted at your police station that deals with “extranjeros”. There are several in Barcelona, but in the Costa Brava, Girona is the place to go. Some advice suggests that the payment form should be first taken to the police station and then to the bank. Others suggest payment first (an online option is available) and then taking proof of payment with your application to the police station.

The application form is the Modelo EX-18 here and the payment form is the Modelo 790.

Confirmation of our residency status is essential for our tax situation too. I therefore recommend that if you can, you apply for permanent residency. Please feel welcome to Whatsapp me if you wish to discuss your situation at +34 645 257 525 or email barry.davys@spectrum-ifa.com

Deal or No Deal…?

By John Hayward
This article is published on: 20th November 2018

20.11.18

As someone who has lived and worked in Spain for more than 14 years, and keen to stay here with my family for the foreseeable future (children moving to other climes accepted), I am very interested in the rights of British citizens in Spain post Brexit. A colleague of mine is part of a group in Italy set up to protect the rights of British citizens there. A member of this group has put together a very comprehensive list (non-exhaustive) of things that you may need to do to prepare for a No Deal Brexit scenario, which after the events last week, seems to be becoming an ever-closer reality. I have made the list more Spanish.

Whilst there may be some deal agreed anywhere up to teatime on the 29th March 2019, there are several items on the list which many people should already be applying.

At the same time we don´t want to get caught up in scaremongering, I have come across several reassuremongers who just choose to live in the “it won´t affect me” world. There are already changes being made to British statutes in readiness for leaving the EU, with or without a deal. Getting one´s house in order now is almost certainly going to be easier than from 30th March 2019 onwards.

Here is your almost definitive list of things to do to prepare for a NO Deal Brexit.

1. MAKE SURE YOU ARE LEGALLY RESIDENT IN SPAIN UNDER CURRENT RULES.

That means you should:

Apply for residencia under the current rules. As an EU citizen you must register as a resident if you plan on living in Spain for more than 3 months.
You should register in person at the Oficina de Extranjeros (immigration office) or designated police station in the province where you live.
Before going to your local Oficina de Extranjeros or designated police station, you must make an appointment online, which can be done on the Spanish public administration website.
Once on the online appointment booking system, you should select the province where you live and then the option “Certificados UE” and follow the instructions to select and confirm your appointment time.
When you go to your appointment, you will be required to provide documents to support your application. You will need evidence of a specified minimum level of financial income which could be in the form of a letter from your Spanish bank manager and, if you are not working, private health insurance or an S1 (which you obtain from the UK if a pensioner). This will evidence your legal residence in Spain and give you proof that you were legally resident on 29 March 2019. This may be like gold dust in the case of a no deal exit, and if there is a Withdrawal Agreement it will help you benefit from a streamlined process to receive a new card if necessary under post-Brexit rules.
Years of living in Spain do not necessarily count – only legal residence. So if you have been living ‘under the radar’ so-to-speak, try to rectify the situation in advance of 29th March 2019.
Apply for a Residencia de carácter permanente (‘permanent residence’) under existing EU provisions if you have been legally resident for at least 5 years. It is the best evidence that most of us can have of our long-standing residence in Spain.
Make sure that you’ve submitted tax returns in Spain. As a resident, (whether in the first 5 years or afterwards with Residencia de carácter permanente, you are required to submit tax returns and pay tax in Spain on your global assets, income and gains even if all of them originate from the UK).
Make sure that you either have private health insurance (obligatory for the first 5 years of residence unless you have an S1 from the UK or are working), or that you’re registered in the Spanish health system (e.g. you already have a Residencia de carácter permanente under existing EU provisions).

2. CREATE, AND KEEP UP TO DATE, A DOSSIER, AS IF YOU ARE APPLYING FOR RESIDENCIA OR RESIDENCIA DE CARÁCTER PERMANENTE OR CIUDADANÍA ESPAÑOLA, IN PARTICULAR:

Collate copies of as many of your tax returns as you can get – tax returns, proofs of payment and receipt. These days there is online access to your tax files and records.
Put together a file of utility bills for at least 10 years if you can. This will prove your continued residence.
If your name is not on the bills for your household, or on any utility bills, get it added now.
For women in particular: make sure that the name on bills, bank statements, pension statements, payslips etc. matches the name on your passport if possible.
Put together a file of bank statements, wage slips and/or pension statements for the last 5 years if you’ve lived here that long. Longer is even better – 10 years is best. You may need these to prove the stability and sufficiency of your resources.

3. CHECK YOUR PASSPORT
Make sure your passport will be valid for several months after 29 March 2019. If not, consider renewing it early. Also, check your signature.

4. MAKE SURE YOU ARE IN SPAIN ON 29TH AND 30TH MARCH 2019
This is probably not the best time to make a family visit to the UK! Transport could be chaotic, with no agreements on air or other travel between the UK and EU.

5. TOP UP YOUR MEDICATION

If you currently rely on an S1 form for access to the Spanish health service and/or you need regular medication, think about making sure you have a good supply of it on 29 March 2019.
If the worst happens and the reciprocal health care system stops on that date it might take several weeks to get an alternative system up and running and there may be short term chaos. Making sure that you have the permitted 3 months of long-term medication would mean that you’d avoid having to pay full whack for your meds or being without a family doctor while the situation was resolved.

6. CHECK YOUR DRIVING LICENCE

If you’re still using a UK driving licence, apply for a Spanish licence now. It’s relatively straightforward and for most people, it can be exchanged (with some fees and a medical) without having to take a full Spanish driving test (theory and practical). It’s possible that UK licences will not be valid in the EU in the case of a no deal Brexit.
Consider applying for an International Driving Permit if you regularly drive in the UK.

7. THINK ABOUT MOVING MONEY
If you have bank accounts, savings or investments in the UK, consider moving them to Spain or into Spanish compliant vehicles, or some other EU jurisdiction now. Sterling may drop suddenly in the case of a no deal exit; there may also be temporary problems moving money in and out of the EU.

8. TRY TO HAVE A FINANCIAL BACKSTOP
If at all possible, try and make sure you have access to enough cash to see you through two or three months, especially if your income comes from the UK and is transferred monthly.

9. CONSIDER YOUR PERSONAL PENSION
If you have a personal pension (not state or public service occupational) and have not yet retired, think seriously about cashing it in if you’re old enough (take financial advice on the tax implications of cashing it in before doing so), or transferring it. A detailed pension analysis would be required to look at the suitability of doing so but it might just be possible to remove your pension from future UK political and tax problems as a result of No Deal Brexit scenario. There may be issues with passporting rights after Brexit that could cause problems with insurers making payments to those living outside the UK.

10. LOOK AT WAYS YOU CAN MAXIMISE YOUR INCOME AND MINIMISE YOUR EXPENSES

This applies particularly if the bulk of your income is in sterling, which may take a serious hit after a no deal exit. Can you survive if sterling hits parity? Goes below parity? What’s your bottom line? What can you do to turn your income into euro income?
Create a personal financial contingency plan. Look at ways you can cut your spending temporarily, and at ways you could create additional income.
Get any potentially expensive dental or optical work done now.

11. IF YOU HAVE A BUSINESS THAT RELIES ON ATTRACTING PEOPLE FROM THE UK.

Can you change your client demographic? Whatever the deal or no deal, British people may limit their travel to the EU next year and you may need to find new clients if you’re to survive financially. Make sure you have a website in the language of the nationality of people you may wish to attract, if you haven’t already, and that you begin to advertise NOW to attract other customers.
But …
If there is a no-deal Brexit, it is uncertain as to whether you will be able to continue to run a business at all.
Even if there is a deal, you may not be able to provide services to customers in other Member States: that is still to be decided.

12. PUT SOME WORK INTO LEARNING SPANISH

Whether there is a deal or not, we may be required to re-apply for residencia and/or Residencia de carácter permanente.
We do not know whether a minimum level of Spanish language ability will be required (to date it has not been), but it is a good opportunity to work on the language skills. If nothing else, it opens other social doors and means you don´t have to stick to the same bar, club, or shop

13. THINK ABOUT, OR RE-THINK ABOUT, APPLYING FOR SPANISH CITIZENSHIP

For many people, their British identity and nationality is important to them and the idea of taking out Spanish citizenship has been regarded as ‘only as a last resort’. For some of us, a no deal Brexit might be that ‘last resort’. Spanish citizenship won’t guarantee all the rights you currently hold as an EU citizen (mutual recognition of professional qualifications, for example) but it will guarantee you the right to reside and to work – and as an EU citizen you’d continue to benefit from full free movement rights.
It you are thinking of applying for Spanish citizenship, try to ensure your application is lodged before 29 March 2019. The Spanish authorities do not say how long the process will take but assume at least months (las cosas de pálacio van despacio). In addition, language tests will be required (see point 13). If you’ve already made the application, there is more chance of everything passing through than if you wait till after 29 March when all the rules may change.
Be aware that taking out Spanish citizenship may affect the taxation of certain pensions and you should take good financial advice before applying.

14. MARRY A SPANIARD
This may not be as easy as it once was, with changes to immigration laws, but it might be a solution for you, especially where children are involved.

15. GET YOUR PROFESSIONAL QUALIFICATIONS RECOGNISED NOW

The European Commission has said that, whatever the outcome of the negotiations, Brexit does not affect decisions made pre-Brexit by EU27 countries recognising UK qualifications under the general EU directive on the recognition of professional qualifications (Directive 2005/36/EC). For details of which qualifications are covered see
https://ec.europa.eu/growth/single-market/services/free-movement-professionals/qualificationsrecognition_en
So if you have a UK qualification covered by that Directive and you need to be able to use it, apply to get it recognised before March 30th 2019.

16. ABOVE ALL…DON’T PANIC.

This is about hoping (and working) for the best, while preparing for the worst. Whatever happens, you won’t be alone.

And there you have it. There isn’t a better list anywhere about what to do in a NO Deal Scenario. I would like to say that I think that some kind of deal/arrangement will be agreed in the end because there is too much at stake on both sides of the Brexit divide, BUT I have to admit that I was wrong about Brexit happening in the first place and also about the election of Donald Trump as US president. I was convinced neither would happen. This time I am taking precautions and implementing most of the items on this list. I hope you do too.

Arts Society de la Frontera – Costa del Sol, Spain

By Spectrum IFA
This article is published on: 20th October 2018

20.10.18

The Spectrum IFA Group again co-sponsored an excellent Arts Society de la Frontera lecture on 17th October at the San Roque Golf & Country Club on the Costa del Sol. We were represented by one of our local and long-serving advisers, Charles Hutchinson, who attended along with our co-sponsors Richard Brown and Harriette Collings from Tilney Investment Management. Tilney were invited to a private lunch afterwards where they met potential clients.

The Arts Society de la Frontera (previously named the Decorative & Fine Arts Society) is a leading arts charity which opens up the world of the arts through a network of local societies (such as in Spain) and national events throughout the world.
With inspiring monthly lectures given by some of the world’s top experts, together with days of special interest, educational visits and cultural holidays, the Arts Society is a great way to learn, have fun and make new and lasting friendships.

At this event, over 175 attendees (probably a record Spectrum sponsored attendance) were entertained by a talk on Gold in paintings and wall coverings entitled “As Good as Gold” by Alexander Epps who is one of the UK’s top experts in this field. She gave an excellent talk and engaged the audience for almost an hour!

The talk was followed by the sponsored drinks reception which included a free raffle for prizes including CH produced Champagne, wine, a tea set and a lovely coffee table book on Gold craftsmanship. Tilney also supplied a cocktail shaker designed and beautifully crafted by Viscount Linley, the Queen’s nephew, which caused a further stir after their last event’s prize!

All in all, a great turnout and a very successful event at a wonderful venue. The Spectrum IFA Group are very proud to be involved with such a fantastic organisation and we are booked to sponsor further lectures this December and March next year.

Brexit uncertainty and much more…

By John Hayward
This article is published on: 19th September 2018

Brexit uncertainty, losing access to UK bank accounts, victims of mis-sold pension and investment plans, personal visits from HMRC, and kids (sort of) go back to school

Brexit uncertainty
Not for the first time, I was asked how Brexit would affect my work in Spain. My standard answer is I don´t know, in the same way I don´t know for sure what the weather is going to be like tomorrow, irrespective of the forecasts which are given. Based on warnings, especially from social media sources, the weekend should have seen us floating down to Masymas on a dinghy. As it turned out, we had a pretty heavy shower providing some surface water in which a toy dinghy would probably have avoided running aground. Of course, I understand that other parts of Spain have suffered; coastal areas have been hit with tornadoes and waterspouts. My point is, even if you have a good idea what is going to happen, it is rare that things will happen as predicted. In fact, I´m not sure that anyone actually predicted the tornadoes. This happens so often in the financial world. With Brexit, I do not know what will happen. Deal or no deal. Take the money or open the box. Perhaps just phone a friend when necessary. I will just continue to jump the hurdles as they are laid out and not base my actions, or those of my family, on media guesswork, which is often a mile off the result.

Losing access to UK bank accounts
Headlines, both in newspapers and on the television, gave a couple of elderly people a shock. They believed they would lose access to their UK bank accounts after a no deal Brexit. This story first appeared in August this year and was highlighted again this week on television. The fact is that there will be certain banking facilities which, if there is no deal, may or may not, be available for a person living outside the UK. This refers more to deposit and loan arrangements, not to the account itself. Receiving money in the form of a pension may also be an issue in that, according to those who appear to know, making a payment from a UK pension to an EU country will be illegal. The alternative will be to have the payment made to a UK bank account for onward transfer to, say, Spain. For those, especially pensioners, who do not have a UK bank account after moving to Spain, it would be a good idea to open one in readiness for what might happen.

Mis-sold pension and investment plans
Unfortunately, I am being asked to help more and more with people who are suffering from poor financial advice. They have savings and pension arrangements that contain investments which arguably are not suitable and, to make matters worse, have not performed leaving policyholders with significant losses. In some cases, there is little we can do. The damage has already been done. However, in other cases we can restructure without incurring additional large set up costs, which are often part of the reason why these plans have not performed. We are always willing to take a look at investments without charging anything. If there is something that we can do, it will be organised in a fair and equitable manner with the details, blood, guts, and all, explained before you commit.

HMRC comes to the Costa Blanca
There was a presentation in Moraira this week with representatives from Her Majesty´s Revenue and Customs focusing on the obligation for UK tax residents to declare income from assets they hold outside the UK such as rent from a property or interest (no joke intended) on bank deposits or gains on investments. People have up until 30th September 2018 to make this declaration. For more detail you can visit this page from the UK Government website: https://www.gov.uk/government/news/hmrc-warns-its-time-to-declare-offshore-assets

The concern for some people was that they, as Spanish residents, had to declare, having missed the point, understandably, that the declaration was to be made by UK residents for foreign assets outside the UK. We already have the asset declaration for Spanish tax residents in the form of the Modelo 720. At Spectrum we can show you ways to position money within investments in what will still be EU jurisdictions post Brexit so that a) you don´t have to worry about what happens once the UK leaves b) you don´t have to declare the investment separately as this is carried out on your behalf and c) the beneficial tax calculation will still apply.

Kids back to school
Friday 7th September was the last day of summer holidays for our children, although my son will argue that they will continue until Christmas when the festive season kicks in. Since they were last in school, what seems like 10 months ago, but is actually only (!) 10 weeks, it is guaranteed that there will be a book missing or a broken pink pencil, our daughter´s favourite. However, we cannot get too excited. For our daughter, September is only half days and so work/school juggling is still a skill we have to develop.

To find out how we can help you with our financial planning in a manner protecting you and your loved ones, contact me at john.hayward@spectrum-ifa.com or call/WhatsApp 0034 618 204 731

Exchange of Information – CRS

By Chris Webb
This article is published on: 30th August 2018

30.08.18

It surprises me that today I am still meeting with people who are blissfully unaware of the global exchange of information, or common reporting standards, that started back in January 2016, with the first actual exchange of information taking place in 2017.

Why am I surprised? Well, for starters, I meet with and hear of people who still attempt to keep their assets under the radar of the relevant tax office, in the belief that if they haven’t declared it or aren’t actively using the asset it won’t appear on any tax or government system.

In Spain, this immediately brings the Modelo 720 reporting requirement to mind, but that’s another topic, which I have already written an article on and which can be found on our website. The CRS is bringing AUTOMATIC exchange of information to the table…

Ultimately, this means that it is now more important than ever to make sure you have reported and are declaring income and assets in the right country.

From January 2016, financial institutions in around 50 countries began collecting information on their clients and their accounts. The purpose of collecting the data in 2016 was to share it with the client’s country of residence in 2017, which was the start date for the actual sharing.

This is not a one-off thing; the exchange of information will be repeated every year, and every year more and more countries are joining the group. According to the Gov.UK website another 53 countries started collecting the information in 2017 to report it in 2018, and in 2018 another 4 countries will begin the process and fulfil reporting to the relevant authorities in 2019.

Looking at the list here: https://www.gov.uk/guidance/automatic-exchange-of-information-introduction you will see that most countries of any relevance to the majority of us are listed. Refer to the note relating to the US as the US exchanges information globally under its FATCA initiative – the Foreign Account Tax Compliance Act.

In fact, I only know of one person who could possibly be in the section where no agreement is in place… yet.

It is important to note that this is a regulatory procedure and there are no choices. It is carried out under the Common Reporting Standard (CRS), developed by the Organisation for Economic Co-operation and Development (OECD).

Quite simply, this means that there is nowhere to hide anymore; this loss of financial privacy affects us all. If you live in one country and have assets in another, your information WILL be shared between countries. Your local tax authority will automatically receive information on the financial assets you own overseas.

One potential client fully believes that this will only happen if your tax affairs are being investigated or if the tax office is querying a specific asset. This is not true, they do not have to request the information because they will receive it automatically.

As an example, if you are a tax resident in Spain and have bank accounts in the UK and investment portfolios in the Isle of Man, the Hacienda will automatically receive the information on these accounts / portfolios from the tax authorities in the countries where the assets sit.

You will probably have noticed that your banks or financial institutions, from outside your country of residence, have been sending you forms to complete to confirm your tax residency. This is a legal requirement on their part. Even not returning these forms doesn’t help you as they will simply assume you are still a resident of the country that you last registered with them, therefore will still report to that tax authority.

The information they will be sharing about your financial assets includes personal data such as your name and address, country of tax residence and tax identification number. They will also be reporting information relating to your accounts such as account balances, investment income, interest earned, dividend payments, income from certain insurance policies and any proceeds from the sale of assets.

As you will have seen above, this sharing / reporting requirement is now firmly in place. In September 2017 the first jurisdictions exchanged their data. Importantly for my clients this list of Jurisdictions includes the UK, Spain and most other EU countries. It also includes the Isle of Man, Jersey and the Cayman Islands which were, historically, places people looked at when placing their financial assets.

Hopefully you can see the importance of understanding exchange of information, or CRS. Think about the complications that could arise… When the local tax office receives information about your assets or income abroad, they will automatically be able to cross reference whether you have accurately reported total global income on your tax return.

For residents of Spain it has taken the Modelo 720 reporting requirement to another level. The Hacienda will now be able to compare the data they are given with your Modelo 720 declaration. In my opinion, it makes the Modelo 720 redundant, BUT it is still a legal obligation to file it!

Tax residents of Spain are liable to pay Spanish tax on their worldwide income, gains and wealth. This includes most income which is also taxed elsewhere, although double taxation agreements mean you aren’t taxed twice. It is still a common misconception that if you have income taxable in the UK then it doesn’t need to be declared in Spain. I can’t reiterate enough how wrong this is. Even if you have made a tax declaration in another country you still need to make the declaration in Spain.

If you haven’t been doing this, I strongly recommend that you regularise your tax affairs as soon as possible. This would also be the right time to look at all your financial affairs.

Most people I meet have several bank accounts and sometimes several investment portfolios and products. When asked they don’t really know why they are set up the way they are, it has just been that way for years. Streamlining your financial affairs can ease the administrative burden now and certainly later in life.

Living in Spain makes it even more important to review your financial assets. What may be “tax free” in the UK is not necessarily “tax free” in Spain.
Are your financial assets approved here in Spain? You probably wouldn’t know unless the differences had been explained to you.

In Spain we have what are deemed compliant products. If you have a compliant bond you will find it is EU based; if you discover your financial solution is based in The Isle of Man, Jersey or Guernsey it is deemed non-compliant. This isn’t meant to be confusing; they are not illegal, but they must be reported to Hacienda and please note that they are taxed differently to a Spanish compliant bond.

The Spectrum IFA Group will only ever recommend a solution that is compliant and tax efficient in your country of residence. In Spain we will not recommend solutions outside of the “approved area”. This is for your benefit!
For a free, no obligation review of you financial assets please get in touch at chris.webb@spectrum-ifa.com or 639118185. If you are in the Madrid region I will personally meet with you, if you live in any other part of Spain OR Europe let me know and I can put you in touch with our local office there.

Are you moving to Spain?

By The Spectrum IFA Group Spain
This article is published on: 11th July 2018

11.07.18

If you are considering a move to Spain, or have recently arrived, there are a few basic steps to follow which will help with managing and improving your finances. The list below is intended for general guidance only, but refers to some of the key points consider as part of your early financial planning.

First, an update on Brexit

Whilst departure terms between the UK and EU are yet to be finalised, the status of British expatriates living in Europe has largely been agreed, in principle at least. From state pension escalation, to health care cover and rights on residency and employment, first phase negotiations concluded (eventually) with consensus on protection of citizens’ rights.
Of course, agreement still needs to be formalised and as the EU/UK progress agreement highlights, ‘nothing is agreed until everything is agreed’. But for now, at least, it is looking like existing expatriates’ rights are likely to be recognised beyond April 2019.

Buying a property

From the initial and legally binding ‘pago de arras’, the legal process of buying a property is markedly different from UK conveyancing.

It is important to engage a knowledgeable lawyer, ideally English speaking if you do not speak Spanish. Your lawyer will liaise with and arrange your meeting with a notary, which is legal a requirement in Spain for the property buying process. Resident and Non-resident tax obligations vary and require reviewing on an individual basis.

Mortgages

Seek guidance on the wide range of borrowing options available, from the national banks to smaller regional lenders. An independent mortgage specialist will identify the most competitive and flexible mortgages available and ensure suitability for your specific borrowing requirements, as well as introducing you to trustworthy and reliable legal and professional services, a must in Spain when purchasing or selling property. It is important to note that banks do not make mortgage offers without the property being secured. (See below for our independent mortgage brokers, Spectrum International Mortgages Spain)

Bank accounts

Familiarise yourself with the various current and savings accounts available, from the cuenta corriente (current account) to tax efficient ‘Cuentas de Ahorro’, or savings accounts. It is important also to note that bank managers tend to move branches frequently, so finding a bank you like is more important in the longer term than a friendly bank manager or ‘Director’.

Tax Residency

Please note you cannot choose where to be tax resident. The law dictates when this will happen and you do not necessarily have to complete any forms to be treated as tax resident. If you meet one of these following conditions you will be a tax resident:

● If you are in Spain for more than 183 days in any calendar year
● If your “centre of interests” are considered to be in Spain eg. If your main income is in Spain, your main home is in Spain or if your spouse and children live in Spain.
● Residency commences from the first day that you declare Spain to be your permanent home.

Tax declarations

When you move to Spain, the Spanish tax authority becomes your controlling tax authority, even if you pay tax elsewhere. The tax year is the calendar year. Worldwide income needs to be declared annually (between April and end of June) and the relevant form is called “La Renta”. (Income taxes and capital gains tax are called IRPF). UK source income from dividends and property rental, whilst taxable in the UK, should also be included in your Spanish tax return. The double tax treaty between Spain and the UK should ensure an accurate tax assessment, but it is important to check that liabilities have been calculated correctly.
Note too that tax-free investments in the UK, such as ISAs and premium bonds, do not hold the same favourable status in Spain. For permanent and long-term Spanish residents, there are tax efficient alternatives available (see Investment section below). Without exception, make full disclosure of income and assets, recognising that there is automatic exchange of tax and financial information between the two countries, under global Common Reporting Standards adopted by the EU in 2017.
The Modelo 720 or M720 is a requirement for all Spanish residents, including foreigners, to complete. It is an informative overseas asset declaration for assets of over 50,000 euros including property, banks accounts, offshore investments, shares and other assets. This declaration needs to be completed by March 31st following the first full fiscal year of residency. As this declaration can only be completed electronically we highly recommend the involvement of a qualified ‘gestor’ or tax accountant, as hefty penalties could be imposed for providing erroneous information.
Wealth tax obligations change on a regular basis and vary between autonomous regions, so obtaining the latest local rates applicable is important.

Beckham Law

For employed individuals earning over 60,000 euros pa and having not been resident in Spain for the past 10 years before becoming tax resident, the possibility exists of being paid as a non-resident for tax purposes and up to five full tax years. The rate of income tax is 24% plus you avoid the need to declare M720. It is available to company owners as long as they (and their immediate family) do not own more than 25% of the shares. The ability to join this scheme needs to be assessed on a case by case basis.

Inheritance tax

This is a subject that causes some confusion on moving to Spain. In Spain, it is the beneficiaries that are assessed for Inheritance tax. In the UK it is the estate of the person who has died that is assessed for Inheritance tax. This means that different planning is required in Spain although it is possible to plan for both the UK and for Spain in some circumstances.
Like wealth tax, inheritance tax varies from autonomous community to autonomous community. Advice in the community where you are living is therefore very important.

Healthcare

Spain’s comprehensive and efficient healthcare system is considered to be at least on a par with the UK and better in many areas. It is generally accessible to expatriates but the extent of cover available to you, and how to secure access to it, depends on individual circumstances. Eligibility for a Tarjeta de Salud or holding suitable private health insurance, or a combination of the two, are essential to avoid unexpected and expensive bills for medical treatment. This especially applies to dental treatment which is typically very costly in Spain.

Currency exchange

Relying on your bank for foreign exchange transfers is generally an expensive option. Numerous currency transfer specialists provide not only competitive terms and secure, swift transactions, but a range of other benefits including on-line facilities for regular payments, forward contracts and rate tracking alerts.

Pensions

Pensions are a technically complex subject where reliable advice is essential. From understanding UK state pension entitlement, to reviewing all existing personal and/or occupational schemes, there is scope to increase the value, flexibility and security of your retirement finances. British expatriates living in Europe currently enjoy pension freedoms and transfer opportunities that are unavailable elsewhere. However, in relation to both Brexit and ongoing UK pension reform, it is unlikely this flexibility will remain beyond the short term.
Even if Brexit transitional arrangements encourage a smoother economic separation, further changes to pension regulations are already on the UK domestic agenda. Consult an authorised, qualified and experienced specialist to arrange a comprehensive review of your existing pension arrangements. Be wary of any recommendation to transfer a UK pension without receiving a detailed report which explains clearly why a transfer is in your best interests.

Wills and estate planning

Spanish forced heir-ship rules restricts the extent to which you can freely transfer wealth during your lifetime. It also, unless you have planned properly, governs how your estate is distributed upon death – most notably, prescribed heir-ship laws override individual choice when it comes to nominating beneficiaries. However, if you are a British expatriate living in Spain, EU legislation allows you to specify that your estate be administered according to the laws of your country of nationality, rather than your country of residence. Doing so provides valuable flexibility and control over the eventual distribution of your estate. Note this relates to probate law and is unconnected to inheritance tax law.
It is important to establish and maintain a valid will or testamento which fully reflects your intentions. A notary will prepare your will in the appropriate format.

Investments and savings

Recognising that UK assets are taxable in Spain, and that tax free in the UK doesn’t translate to the same in Spain, consider switching to Spanish approved tax efficient investments. Care is needed with possible tax consequences on the disposal of UK assets, so always seek professional advice before restructuring. Seguro de vida are widely regarded as the most tax efficient solution available in GBP and EUR (and other currencies), in English language and with investment flexibility to match individual objectives and risk profiles. Technically a life insurance policy, but in practice an investment vehicle and this is the most tax efficient means of investment in Spain –
Low cost, straightforward, beneficiary nomination, IHT exemptions/reliefs, capital access, income option, portability (UK return),

IFA

Even for the financially experienced it is worth seeking professional advice, if only to ensure that all available investment and tax planning opportunities are being fully utilised. Only deal with an independent, appropriately authorised firm and ideally someone living and working locally who has been recommended by other expatriates in the area.
The regulatory status of an independent broker can be checked on-line at; http://www.dgsfp.mineco.es/regpublicos/pui/pui.aspx, and at any initial discussion with an individual you should be informed about the advisory process, from fact finding and presenting suitable recommendations to responsibility for investment management and ongoing client servicing.

Tax threat: the consequences of CRS – The Spanish Situation

By Charles Hutchinson
This article is published on: 14th June 2018

14.06.18

Unlike the UK non-dom or the Portuguese non-habituale tax rules, Spain does not have a specific tax offereing for those planning to come and live in Spain. A taxpayer is either classifieds as resident (taxed on worldwide income and wealth) or non-resident (taxed only on Spanish income and assets).

Those trying to escape from the 183-days rule of physical presence in Spain to avoid been deemed tax resident could be facing an unexpected problem.

Governments all over the World have amended their domestic legislation over the last few years aimed at gathering as much information as possible from current and potential taxpayers and Spain is no exception. Governments have also signed agreements to exchange that information with each other and to disclose relevant data, primarily under the auspices of fighting money laundering and terrorism. Lately, this has had a direct impact on individuals and corporate taxation.

All these changes and improvements equally affect big corporations, large stockholders, important CEOs and ordinary people. Regrettably, the speed and frequency at which those changes take place makes it difficult for ordinary people to keep up and stay up to date with their obligations. Pensioners living abroad are a group particularly affected.

In our experience, we know many people who were just “out of the loop” by ignorance, going about their daily lives without being aware of how all these changes affect them. One of these new rules is the OECD´S COMMON REPORTING STANDARD (CRS).

As of 1 January 2016, Spain fully adopted the provision of the Council Directive 2011/16/EU on administrative cooperation in the field of taxation and the OECD CRS for the automatic exchange of financial account information.

Under the CRS and EU Directive, financial institutions in participating jurisdictions will report the full name and address, jurisdiction of tax residence, tax identification numbers and financial information of individual clients to their local tax authorities, which will then automatically exchange the data with the tax authorities of the participating countries where the individuals are tax resident.

Spain is one of the 102 committed jurisdictions and the list also includes traditional off-shore jurisdictions such as Gibraltar, Guernsey, Jersey or the Isle of Man. As of 5 April 2018, there are now already over 2700 bilateral exchange relationships activated with respect to 80 jurisdictions committed to the CRS. This link shows all bilateral exchange relationships that are currently in place for the automatic exchange of CRS:

http://www.oecd.org/tax/automatic-exchange/international-framework-for-the-crs/exchange-relationships/#d.en.345426

Financial institutions in all participating jurisdictions will be obliged to ascertain and verify the tax residence status of their individual clients by application of specific due diligence procedures under the CRS.

The automatic exchange of information related to financial accounts held by the end of year 2015 and new ones opened afterwards began in 2017. Hence, sooner or later, in cases where there was information exchanged that did not match the information provided by the taxpayer in their declarations and tax returns, people started to receive notifications from the tax office.

Those who have not been registered as resident or have not realized that they should have registered as resident, could be in trouble when the Spanish tax authorities receive information about a supposedly resident taxpayer. This information is gathered by the due diligence process that banks and financial institutions, including trustees, have to carry out. In some cases this can lead to the conclusion that they are resident in Spain (i.e., the postal address to where Banks send correspondence, the bank account to where they regularly transfer funds, the country where credit cards are frequently used, etc.). Spanish tax residents who have not fully disclosed their foreign portfolios to the Spanish tax authorities may encounter trouble as well. Full voluntary disclosure by means of late filings could avoid potential tax fraud penalties.

It is crucial to check with your banks, financial agents, trustees, etc. if they have reported anything to a wrong country. Once the information gets to the tax authorities, those authorities will not doubt or care if the information is accurate or not, even if you try to prove otherwise, because the information has been provided by a Government of another country and it is understood that they, as well as the bank or financial entity who has previously reported to that Government, have complied with the regulations. In our experience, at least in Spain, if information provided by a Bank was not accurate, that Bank would have to amend whatever they had previously reported to their Government. Thus in turn it will amend the information sent to the Spanish tax authorities. The taxman will not stop demanding the taxpayer to pay the corresponding taxes unless the Government of the other country recognizes that it was a mistake.

Source: Santiago Lapausa of JC&A Abagados, Marbella

Tax in Spain can be a matter of opinion

By John Hayward
This article is published on: 17th April 2018

17.04.18

In Spain, there can be a huge difference in what autonomous regions charge for income, capital gains, wealth, and inheritance/succession taxes. Rules generally come from central government in Madrid but how that comes out in the fiscal wash in each region can vary considerably. For the purpose of future articles, my focus will be on the Valencian Community incorporating Castellón, Valencia, and Alicante.

There is also an unwritten rule which seems to be rife. The law of opinion. On a subject that you would think there should be clear instruction from the Spanish tax authorities, there is a lot of ignorance on several tax matters and so the law of opinion kicks in. This is especially true for any products which are based, or have been arranged, outside Spain. With the threat of fines for not declaring assets and paying taxes correctly, it seems at least slightly unjust that there is not clear instruction on how different assets are treated for tax.

As my colleague Chris Burke from Barcelona recently wrote, lump sums from pension funds can have special tax treatment, both in the UK and Spain. However, even though most people and their dog know that there is a 25% tax free lump sum in the UK, not everyone is aware that this lump sum is potentially taxable in Spain. Also, it is not common knowledge that there is a 40% discount on qualifying pension lump sums. It is likely that many people have overpaid taxes due to no or bad advice.

Can you tell the difference between margarine and a Section 32 Buyout?
If you can, you could be leader of the Conservative Party, according to the script of The Last Goon Show of All (Actually the comparison was between margarine and a lump on the head but the qualification would seem equally apt almost 50 years later). It is frightening what little knowledge there is with regard to pension schemes, notably with the advisers who make money for arranging them! A Section 32 Buyout plan is just one of many types of pension scheme which have emerged over the last 30 to 40 years. Few people are familiar with all the different types.

A pension fund is, in many cases, the second largest asset behind a property. People are generally familiar with the property expressions such as “doors”, “windows”, “walls”, “kitchen”, etc. They know where these things need to go and when they need repair and maintenance. When it comes to pensions, it is a different story. In a way, that is great for us because it means people need advice. The problem comes when they leave themselves open to advice which is inaccurate, if not complete garbage.

People need to check the qualifications of an adviser and their firm before exposing themselves to potential problems. I have the Chartered Insurance Institute G60 Pensions qualification. You won´t find too many advisers with this, especially not in Spain. As a company we have a team which is qualified and which keeps up to date with pension rules in the UK and Europe. All enquiries go through them before anything is arranged which should give comfort to those nervous about what will happen to their pension funds.

UK Investments & ISAs – Tax Treatment in Spain

By Chris Burke
This article is published on: 16th April 2018

16.04.18

With automatic exchange of financial information between most countries now standard practice, most of us already recognise the importance of declaring our assets properly and fully. In the UK, if your accountant or tax adviser declares your assets incorrectly, they are liable; however, that is NOT the case in Spain. I have been contacted by many people with various stories of how their accountants in Spain have reported assets. Sometimes it feels like people are speaking to numerous accountants until they find the one with the answer they want – if the declaration is incorrect though, and leads to an investigation, you are personally liable. Therefore, it is essential to have your assets reported correctly.

It is quite straightforward to understand the Spanish tax treatment of your UK assets. If they are NOT Spanish compliant – that is to say, not EU based and regulated AND the company holding these assets doesn’t have a fiscal representative and authorisation in Spain – then income and investment growth are taxable annually. Note that investment growth on assets such as shares, ISAs and premium bonds is taxable regardless of whether you have taken any income or withdrawals.

Below you will see the main list of investments that need to be declared and the tax rates that apply annually:

Type of Assets/Investment	Tax Payable	Type of Tax
Investment funds/stocks/shares	Yes, on growth	Capital Gains Tax (19-23%)
ISAs	Yes, on growth	Capital Gains Tax (19-23%)
Premium Bonds	Yes, on gain/win	Income Tax (19-45%)
Interest from Banks	Yes, on growth	Capital Gains Tax (19-23%)
Rental Income	Yes	Income Tax (19-45%)
Pension Income	Yes	Income Tax (19-45%)

Expenses may be able to offset some of the tax on gains, and for long term property rentals you can receive up to 60% discount on net rental income. However, tax reliefs and allowances that applied in the UK are not available to you in Spain.

There are ways of reducing these taxes, by having your finances organised correctly, and in many cases there is also scope to defer tax. This means there is no tax to pay if you are not taking an income or withdrawals from your investment. In fact, the more your money grows, the greater the potential tax saving.

The first thing you should do, and any financial adviser or tax adviser should do, is consider ways of mitigating your tax, both now and in the future. Otherwise you could end up with a ‘leaking bucket’. Many accountants are starting to increase charges for declaring UK assets, which need to be listed individually and where there is often lack of familiarity with the assets held. By the time you have paid the tax for NOT drawing your money, paid your accountant and lost any tax relief that applied in the UK, in most cases there are more cost effective, tax efficient, Spanish compliant options available. Furthermore, for those returning to the UK, there is still generous tax relief which applies to certain Spanish compliant investments.

For an initial discussion regarding your finances and practical guidance on planning opportunities, please get in touch – my advice and recommendations are provided free of charge without obligation – chris.burke@spectrum-ifa.com

Tax and Savings in Spain

By Barry Davys
This article is published on: 28th March 2018

28.03.18

This is an introduction to the differences between the UK and Spanish tax systems and an introduction to a European ISA equivalent. It has been produced to help answer two regularly asked questions. : “What is the difference in taxation between Spain and in the UK?” – followed by “Is there a tax free savings account in Spain similar to an ISA?”.

For those of you not from the UK, I hope that the Spanish part of the table below will still be useful in allowing you to compare it with your home country tax situation.

Tax	UK	Spain
Tax Year Dates	6th April – 5th April	1st January – 31st December
Income Tax Allowance	£11,500	€9250 up to age 64 €10,400 age 65+ €11,800 age 75+
Capital Gains Tax Allowance	£11,300	N/A but some gains can be offset against some losses
Savings Tax Rates (interest and capital gains)	N/A Income Tax and CGT calculated separately	19% to €6,000, then 21% for the next €44,000 and 23% above €50,000
Tax Free Interest	£1,000	Nil
Tax Free Dividends	£5,000 Falling to £2,000 in 2018/19	Nil
Annual ISA Allowance	£20,000	Unlimited (see Euro ISA below)
Pension Contributions Limits	100% of your earnings up to £40,000 pa	€8,000 pa
Inheritance Tax	Above £325,000 at 40% plus possible allowance against main residence of £125,000 in 2018/19	Autonomous community rules. Catalonia and Madrid have large discounts for immediate family
Wealth Tax Limit	N/A at present	Autonomous community rules. Catalonia: over €500,000 with a €300,000 allowance for main residence, rates from 0.21% to 2.75%

The main differences are in Wealth Tax, Inheritance Tax and the way savings are taxed.

Wealth Tax in Spain

In the UK there is not currently any Wealth Tax. There is in Spain and the rates and method of calculation are set by the autonomous communities. In Catalunya the rate is banded, starting at 0.21% and rising to 2.75%.

Inheritance Tax in Spain

In the UK, the estate of the deceased person is taxed as a whole, whilst in Spain, the person receiving the bequest is taxed based just on the amount they personally receive from the estate. The allowances and method of taxation also differ. The rates of inheritance tax in Barcelona and the Costa Brava are the same but will be very different if you live in Andalucia. For more information, please see Inheritance Tax in Catalunya as an example.

However, if you prefer to speak with an experienced adviser who lives in Catalunya please click ‘Inheritance tax help‘

Tax Free Savings in Spain

In the UK, since January 1987 with the introduction of Personal Equity Plans (PEPS), we have been used to having tax free savings. Peps are now called ISAs and the allowance is now £20,000 per annum. If you live in Spain and have an ISA please note it is taxable in Spain. The fact that it is tax free in the UK does not transfer to Spain and you should look at the alternative below.

Spain does not have an ISA system as such but there is a similar investment, sometimes known as the “European ISA”. It is tax free whilst invested and has a very beneficial low taxation basis, especially if you require income from your investment. It is a little more restrictive than the UK ISA but is still worthwhile.

The two big advantages are that there is no limit and it is portable to other countries. If you would like to invest 10,000,000 euros in one year in the “European ISA” you can do! Unlike a UK ISA, the European ISA can go with you if you move country (not to all countries). If you return to the UK, the tax will be proportional to the amount of time you have been in the UK against the time you have had the European ISA. So if you have a Euro ISA for 10 years in total and have moved back to the UK for the last two years of the 10 years, the tax will be reduced. Specifically, the tax will be calculated and multiplied by 2/10ths. An 80% tax saving!

*Sources: https://www.gov.uk/government/organisations/hm-revenue-customs
http://www.agenciatributaria.es/

If you would like more information on Inheritance Tax, Wealth Tax or the European ISA, please contact me on barry.davys@spectrum-ifa.com or telephone on +34 645 257 525. If you have UK ISAs, I will also be happy to advise you on how to make these tax efficient in Spain.