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Finding a Financial Adviser in Barcelona

By Chris Burke
This article is published on: 27th December 2014

The number of British people moving abroad is rising, with about one in 10 British people now living overseas.

Despite its obvious economic difficulties, Spain continues to be one of the most popular destinations for British expatriates, as the laid-back lifestyle and improved transport links with the UK gives it an allure that is hard to resist.

However, setting up residence in a Spanish city, such as Barcelona, involves a great deal of upheaval, both on a personal and practical level, and it’s a sad reality that expats can be particularly vulnerable to poor financial advice.

How to Choose a Financial Adviser

In practical terms, one of the most important things to get right as an expat is your finances, and having the right banking arrangements is a fundamental part of life overseas. Banking services should ideally meet at least two main criteria: flexibility (money should be easy to access and transfer between countries); and financial security (in a reputable bank that complies with international financial regulations and has a solid capital base).

But what other factors should you take into consideration when searching for a Financial Adviser in Barcelona?

  • Are they regulated? Do your research, visit websites, and confirm registration with the IFA before choosing an adviser.
  • Qualifications: Every nation has different rules relating to how qualified a financial adviser needs to be to gain authorisation, but the UK is a world leader in terms of required qualifications. So if you’re speaking to a British adviser abroad, you can gauge their industry education based on the British qualifications they have.
  • Experience: You can ask your adviser how long they’ve been qualified and giving advice, and you can research the brokerage to see how long they’ve been in business.
  • Are they independent? Ensure that your adviser is independent rather than tied to one financial institution, so that they are able to advise you on suitable products from the entire financial market place.
  • Testimonials: If your IFA is good at their job, they are highly likely to have a list of satisfied clients, from whom you can request a testimonial.

The Spectrum IFA Group

At The Spectrum IFA Group, we provide financial advice to expats on all aspects of living, moving and working in Spain.​ From calculating the cost of living to choosing a good school for your children, our guides to money management and family finances will help you prepare for the challenges of living and working abroad – so you can make the most of your expat experience.

We provide Insurance Intermediation advice and assist clients in their choice of Investment Management Institution. Mutual respect is earned by working together, looking after your best interests and by adding value to your financial planning through qualifications, experience and enthusiasm.

UK Pension Transfers – Update for Expats

By Chris Burke
This article is published on: 24th December 2014

The rapidly changing landscape of pension schemes in the UK has led to a great deal of confusion, and it’s not just UK pensioners who are affected: the rule changes also impact expats living outside the UK, especially those considering the benefits of a Qualifying Recognised Overseas Pension Scheme.

As an expat, it’s hard to know which route to take. Should you transfer to a QROPS or leave your pension in the UK? What are the benefits and drawbacks? What impact have recent changes had on your options?

Let’s look at the facts…

Reasons to transfer

● Pension Commencement Lump Sum of 30% of the fund. This is tax-free if UK resident but could be taxable if resident outside of the UK.

● No pension death tax, regardless of age, in Gibraltar and Malta

● Greater investment freedom, including a choice of currencies

● Retirement from age 50 (Malta), and 55 in Gibraltar and Isle of Man

● Income paid gross from Malta (with an effective DTT), and only 2.5% withholding tax in Gibraltar

● Removal of assets from the UK may help in establishing a Domicile outside of the UK (influences UK inheritance tax liability)

 

What will happen if you leave your personal pension in the UK

● On death over the age of 75, a tax of 45% on a lump sum pay-out.

● Income tax to be paid when receiving the pension, with up to 45% tax due, likely deducted at source,

● Registration with HMRC and the assignment of a tax code.

● Proposed removal of personal income pension allowance for non-residents. Although this is still on the agenda, it has been confirmed that there will be no change to non-residents’ entitlement to personal allowance until at least April 2017.

● Any amounts withdrawn will be moved into the client’s estate for IHT purposes, if this is retained and not spent.

● As the client will be able to have access to the funds as a lump sum, these could potentially be included as an asset for care home fees/bankruptcy etc.

● No opportunity to transfer from many Civil Service pension schemes from April 2015 (Only five months remain for public sector workers to review their pension and then make their own informed decision)

What Does All This Mean?

Regardless of the proposed legislation amendments, transferring to a QROPS still provides certain benefits that the UK equivalent would not be able to offer, although it’s fair to say that both still hold a valid place in expatriate financial planning. The answer to which pension is more suitable for you will ultimately depend on your individual circumstances and long term intentions.

Certainty and Predictability for your Investments

By Jonathan Goodman
This article is published on: 1st December 2014

01.12.14

The PruFund range of funds are designed to spread investment risk by investing in a range of different assets, such as company shares, fixed interest bonds, cash and property – from both the UK and abroad.

Prufunds are managed by Prudential Portfolio Management Group Ltd (PMG), dedicated multi-asset fund managers with a team of over 30 economists, investment strategists, analysts and mathematicians, specialising in different areas of the investment world.

How PMG Manage Your Money

PMG believes that investment success should be built on clear philosophy, demonstrable processes and a team based approach. They believe that this will not only deliver superior returns, but also provide greater continuity and dependability.

They believe in the importance of asset allocation and the key role that multi-asset funds play as an investment solution for many investors. They also believe that asset allocation is a specialist skill which should, to avoid conflicts of interest, exist separately from the other investment activities in any fund.

PMG takes many factors into consideration when managing your money.

They focus on:

  • Minimising reliance on economic forecasting
  • Looking for irrational behaviour
  • Taking a long-term approach
  • Fund management
  • Asset-liability management

PruFund Growth Providing Smoothed Returns

PruFunds offer a unique smoothing process designed to help protect an investment from some of the daily ups and downs associated with direct investments, providing less volatile and more stable returns over the medium to long-term, in line with each fund’s objective and allowable equity parameters.

The Prudential PruFund smoothing process has two elements:

  • Expected Growth Rates (EGR) applicable to each of the funds, normally applied on a daily basis. The EGR is the annualised rate that is normally used to increase the value of your unit price each day, and they are set quarterly by the Prudential Directors having regard to the expected long-term investment return on the underlying assets of the funds.
  • Upwards and downwards pre-defined unit price adjustments are applied in line with fully transparent process requirements.

For more information on PMG and the PruFund range of funds or to contact one of our Financial Advisors to arrange a full financial review of your current situation please use the contact form below.

Do You Fear For Your Financial Future?

By Jonathan Goodman
This article is published on: 24th November 2014

24.11.14

How do you choose your investments when you are an expatriate?

International investors face many choices, and taking personalised advice can be vital, especially in the current economic climate. With high inflation and record low interest rates, volatility, complexity, uncertainty and a huge amount of change sum up the current state of the global economy.

Picking the right investment opportunity with maximum return objectives can be a risky and complicated process, and mapping a financial strategy that enables you to better navigate these turbulent financial times is a must.

The International Prudence Bond (Spain)

The International Prudence Bond (Spain) is a medium to long term bond designed with the needs of international investors in mind. Tailored to each market and sold via professional Independent Financial Advisers, it allows access to a range of unit-linked investment funds with the aim of increasing the value of the money invested over the medium to long term.

The PruFund Range of Funds includes guarantee options where the choice of guarantee can be linked to the anticipated year of retirement. The funds utilise the asset allocation expertise of the Portfolio Management Group and offer a truly global investment perspective.

Benefits

  • Funds denominated in euros, sterling and US dollars
  • A minimum investment of only £20,000, €25,000 or $35,000
  • A minimum allocation rate of 100%
  • No set investment terms
  • Top-up facility from £15,000, €20,000 or $25,000
  • Cumulative allocate rate on top-ups
  • Flexible withdrawal options so clients can access funds when it suits them
  • PruFund Protected Funds guarantee

 

How Spectrum Can Help

Spectrum’s role is to provide Insurance Intermediation advice and to assist clients in their choice of Investment Management Institution. Our Financial Advisors can help you decide which investment opportunity is right for you.

For more information or to contact one of our Financial Advisors to arrange a full financial review of your current situation please use the contact form below.

Spectrum sponsor the Barcelona English Radio Party – 20th November

By Spectrum IFA
This article is published on: 14th November 2014

Barca Radio sponsor64The Spectrum IFA Group are delighted to be sponsoring the English Radio Party on 20th November, 2014.

Baribau CARRER D’ ARIBAU 131, 08036 Barcelona View Map

Date & Time:Nov 20, 2014 20:00 – 03:00

€7 advanced booking
€10 on the door

DJ Simon Jordan

Beckham Bounces Back in Spain

By Barry Davys
This article is published on: 12th November 2014

12.11.14

When David Beckham (Becks) came to Spain to play for Real Madrid in 2003, a special Spanish tax system was set up for him so he did not have to pay tax on his worldwide image rights. This system has been extended to people moving to Spain, although in an ironic twist, professional footballers will be excluded from the scheme from 1st January 2015.

Tax rates in Spain are falling with plans to reduce the top rate of tax in Spain from 51% (56% in Catalunya) to 47%. The top rate is however still very high.   However, in a bid to attract high earners to Spain the law is being improved.

Why use the Beckham Law?

Well, the three benefits are as follows:

  1. Flat rate income tax of 24% on Spanish earnings in Spain.   If your income is derived from Spanish sources then the maximum rate you would pay will be 24% instead of normal rates up to 600,000€ pa. Above 600,000€ the tax rate is 45%. Here are some specific examples of the saving based on the 2015 Spanish Tax rates.
   Annual Salary €
   Beckham Tax Rule Saving €
   100,000    13,645 pa
   150,000    26,495 pa
   200,000    36,645 pa
   250,000    48,145 pa
   300,000    59,645 pa
   400,000    82,645 pa
   500,000    105,645 pa
   600,000    128,645 pa

 

You are allowed to stay on the Becks rule for a maximum of 5 years. The total saving is therefore the figure above x 5. Your individual circumstances will dictate exactly how much saving you will acheive but the figures above are a good guide.

  1. No capital gains tax to pay on any gains made outside Spain. This includes the sale of property, shares, etc. This point is especially important if you have a property to sell or a business to sell outside of Spain. As an example an owner of a technology company that sells the business for £20 Million whilst on the Beckham scheme will not pay Capital Gains tax in Spain nor in the UK if he/she does not return to the UK for 5 years.

The potential capital gains tax saving in this example could be £8 Million.

  1. Only income obtained in Spain will be subject to Spanish taxation. As an example, bank interest earned from bank accounts outside Spain are not subject to Spanish Tax whilst you are on this method of taxation. Rental income from property outside of Spain is another example.

 

Beckham tax scheme rules

If you meet the following conditions you can reduce your tax by requesting to be taxed on a non resident basis under the Beckham rule:

  1. If you have not been resident in Spain in the last 10 years.
  2. If you apply for the “New” Beckham law within 6 months of arriving.
  3. You must be resident in Spain. The main condition being living in Spain for 183 days a year.
  4. The requirement for work to be primarily conducted in Spain has been reformed.
  5. The requirement to work solely for a Spanish company has been reformed.
  6. The reduced rate of taxation will apply for a maximum period of 5 years.

If you meet these criterias, you should consider using this method of taxation.

References:

SpainRoyal Decree 687/2005
Baker and McKenzie SLP, Acccountants, Spain

 

This information is intended as a guide only. A suitable qualified tax lawyer should always be used to calculate a specific liability. Legislation can be subject to change in the future. 

Have you or someone you know had to pay Spanish non-resident inheritance tax since 2010?

By John Hayward
This article is published on: 11th November 2014

11.11.14

Further to the judgment made by the European Union Court of Justice (ECJ) on 3rd September 2014, that Inheritance and Gift tax rules in Spain were discriminatory between residents and non-residents, several key firms of accountants and lawyers have implied that anyone who has been subject to the higher non-resident rates in the last 4 years could make a claim.

There has not been any formal approval by Spain but proposals are to treat those non-Spanish tax residents living in the European Union (EU) or the European Economic Area (EEA) as if they lived in one of the autonomous regions of Spain where tax rates tend to be heavily discounted. The region will be determined by where you have spent most time in the last two and a half years or by where the majority of your Spanish assets are situated if you live outside Spain.

Gifts outside the EU or EEA to a Spanish resident could be subject to the rules of the autonomous region where the recipient has his/her residency.

Although the changes have not yet been formally approved, lawyers are submitting tax returns on the basis that the qualifying non-resident will receive the tax advantages of the relevant autonomous region.

This will mean that, for example, children living outside Spain, inheriting from parents in Spain, will no longer have the much higher (generally) “National” Spanish taxes to pay. Parents will be able to gift property to their children without necessarily needing to make expensive tax avoidable arrangements.

However, not all autonomous regions are so generous with their discounts. Whereas Valencia offers very large discounts to all direct family members, Murcia, next door, only offers significant discounts to those under 21. Also, there are limits on discounts in most, if not all, regions and so they may not cover all of the assets. Therefore it is extremely important to have assets positioned in the most tax efficient manner. This needs to be legal as well.

How can we help?

1/ If you or someone you know has paid inheritance tax on money from an EU or EEA resident who has died in the last 4 years, you may be able to make a reclaim. We have lawyers who can help with this on a no win, no fee, basis. (We are not tax advisers)

2/ We are experienced in helping you arrange your finances in a Spanish tax compliant manner, helping you and your loved ones to reduce the impact of Spanish taxation.

How my Spectrum IFA Group Financial Adviser in Spain saved me 82,947euro in tax!!

By Barry Davys
This article is published on: 5th November 2014

05.11.14

Mr Blood had lived in Spain for eight years. However, as a result of a pension mis-selling review in the UK by a large UK bank he received compensation to cover a pension shortfall. The client was extremely satisfied with the amount of the compensation. Advice was requested from his Financial Adviser (IFA), Barry Davys of The Spectrum IFA Group, on how to invest this compensation to ensure that his pension fund returned to its true value.

Whilst this payment of compensation is tax free in the UK, Mr Blood is resident in Spain. In Spain these types of payment are taxable. Fortunately, the IFA knew the differences in the tax regimes. Barry had a tax lawyer calculate the amount of tax due on the compensation payment and Mr Blood was, not surprisingly, horrified to find that the tax to be paid was 82.947,91€.

Despite the client having signed a letter of acceptance with the bank and the compensation having been paid, Barry reviewed the case and found that the letter of acceptance did not sufficiently identify the issue of Spanish tax, having only emphasised the UK tax situation. Barry opened negotiations with the bank. As the regulatory requirements in the UK required the bank to put the client in a “no loss” position, the payment of tax resulted in a loss. To be fair to the UK bank they accepted this principle and agreed to pay a further compensation to cover the loss from having to pay tax.

The payment of a further 82,947€ could have seemed like a satisfactory outcome. However, any payment to cover the client’s loss as a result of the tax payment would be subject to taxation on the additional payment too. Our adviser again instructed a tax lawyer for the calculation of the gross amount required to ensure the client was put back in a no loss situation. Further negotiation by the IFA resulted in a grossed up additional payment to the client of 178,000€. This resulted in Mr Blood being recompensed in full for the loss.

Case Study Key Points

The key points in this case study show that a knowledge of UK and Spanish tax law was required to identify the problem. Secondly, knowledge of regulatory requirements helped ensure a successful negotiation between the bank and the IFA. Using specialist tax lawyers to calculate liabilities strengthened the client’s position. Finally the IFA’s knowledge of UK and Spanish pension law helped to identify what options were available for reimbursement.

On payment of the additional compensation Mr Blood commented;
“I was frankly shocked to learn that the Spanish Hacienda doesn’t recognize compensation for a loss as exactly that; a compensation. My initial dealings with the bank quickly highlighted my lack of experience with financial matters, and I was relieved that Barry agreed to negotiate on my behalf. His in-depth knowledge of the financial services industry and his negotiation style delivered for me the best possible outcome I could have wished for me and my family. I sincerely believe this outcome was only possible with his support.”

Barry Davys was also pleased. “It is extremely gratifying to be able to help someone in this way. The years of studying taxation, pensions, regulations etc. feel worthwhile in situations such as these. It is an extremely interesting time in Spain with many changes in taxation. I look forward to the challenge of continually helping international people with their financial planning to put them in the best possible position”.

At a time that is convenient for you

Savings solutions in Spain

By John Hayward
This article is published on: 29th October 2014

29.10.14

Stockmarket falls and low interest rates
Have you seen your investments fall by over 4% in the last month? This could be the case if you have been invested in the stockmarket. Most people know that investments can go down as well as up. Over time, stocks and shares can make significant gains. However, it still hurts when one sees a loss of this amount in such a short period. Some people prefer to keep their money in cash but then we have another risk. Interest rates are low and, even with the suggested increases in 2015, they could remain low relative to inflation. What many people want, and probably need, is a steady increase in the value of their savings with as little risk as possible. So what is the solution?

The low risk solution
We at The Spectrum IFA Group have access to an insurance bond offered by arguably the largest insurance company in the UK and one of the largest in Europe. Their investment model has allowed consistent returns of over 4.5% a year (after deducting charges) whilst exposing the investor to a fraction of the risk of a stockmarket such as the FTSE100. Whilst the FTSE100 has fallen by more than 4% over the last month, this low risk approach has produced a gain of almost 1%.

Tax friendly in Spain and the UK
No tax is payable on the pure growth of the insurance bond. Even if withdrawals are made, the tax treatment is vastly more favourable when compared to bank accounts or other non-compliant arrangements (see an example of how tax is calculated here). If you are currently Spanish resident, but you subsequently move back to the UK, the bond can follow you and benefit from the advantageous tax treatment awarded to these policies in the UK.

Outside Spanish inheritance tax (IHT)
With Wills correctly drafted and you are deemed domicile the UK, this insurance bond is outside Spanish IHT because it is not based In Spain. With IHT in Spain extremely punitive for non-residents (law possibly to change in 2015), this is a huge benefit to the non-resident beneficiary. It can be written in joint names so as to avoid Spanish IHT on the resident owner.

No Modelo 720 declaration
As this bond is Spanish compliant, there is no obligation to declare it as an overseas asset on the Form 720. This is because the insurance company declares it to Spain each year.

To find out more about how we can help you arrange your savings in a more beneficial way, contact your local adviser or fill in the contact form below.

How much is Inheritance Tax in Spain?

By John Hayward
This article is published on: 23rd October 2014

There are two sets of rules that could apply; one by the autonomous region and one by the State. For these purposes I will focus on my region, the Valencian Community, which covers the provinces of Castellón, Valencia, and Alicante.

There are several factors which determine how you or your estate is treated. These include;

  1. Your relationship to the deceased or the beneficiaries.
  2. Country and/or region the different parties are resident.
  3. How much pre-existing wealth the beneficiary has.

Unlike the UK, where the total estate of the deceased is taxed after allowances, in Spain it is the individual inheritor who is taxed.

State rules

  1. Basic allowance of €15,956.87 for those who qualify.
  1. 95% reduction on the value of the main residence (max. €122,606.47). The property cannot be sold for 10 years from the date of death to retain this reduction. If sold within 10 years, the tax will be recalculated. This reduction only applies to married couples and close family.

Valencian Community rules

If you are resident in the Valencian community you, or your beneficiaries, can benefit from much higher allowances and less restrictions.

  1. 95% reduction on the value of the main residence (max. €150,000). This cannot be sold for 5 years from the date of death to retain this reduction. If sold within 5 years, the tax will be recalculated. Again, this reduction only applies to married couples and close family.
  1. €100,000 allowance for each qualifying individual. The allowance is more for younger children.
  1. 75% reduction on the final tax bill.

 Example (Husband (deceased) and wife resident in Valencia)

Main residence value                                    €350,000

Wife inherits husband´s half                        €175,000

less 95% reduction (up to €150,000)            €142,500

Net value                                                € 32,500

less Tax allowance                                    €100,000

Result?                                                 NO TAX TO PAY*

If the property was sold within 5 years, or the wife did not want the restriction of having to keep hold of the property for 5 years, the tax bill would work out to about £8,500. However, this would then be reduced by 75% (as she is resident) giving a net tax bill of just over €2,000.

For a non-resident, the tax bill would be around €23,000.

This is a simplified example but it illustrates the enormous difference in tax treatment for residents and non-residents. For a resident couple, there is not likely to be a huge potential tax bill. The problem comes after this when the non-resident children and grandchildren inherit. Spain is under pressure to equalise the rates charged for residents and non-residents and there could be changes in 2015.

 If you would like to know how much inheritance tax you or your loved ones could be obliged to pay, and look at ways at reducing or even negating the tax, contact your local adviser.

Please note that these rules are subject to alteration. We are not employed as tax advisers.
*There could be capital gains tax to pay.
Source: Generalitat Valenciana