Viewing posts categorised under: Tax in Spain

Spanish tax on UK property

By John Hayward
This article is published on: 29th March 2022

29.03.22

In February I wrote about the impact on investments with Russia’s invasion of Ukraine and inflation rearing its ugly head. For the last month or so, the movement of global stock markets has attracted comparisons to a violin player’s arm joint and the undergarments of a professional lady. This is possibly the future for investments for a while although there appears to be more positive than negative movement (at the time of writing in case there has been a sudden catastrophe).

In the meantime, away from the uncertainty of how much a tank of fuel will cost in 6 months’ time, I want to mention something regarding Spanish tax on UK property.

31st March 2022. The end of the declaration period for everyone’s favourite, the Modelo 720. Although this is not a tax declaration, it does highlight assets and how these might be taxed in the future, whether this be capital gains tax, wealth tax, inheritance tax, or income tax. Focusing on the latter, I believe that it is generally not appreciated that a tax resident in Spain has to pay income tax on a UK property, even if it is not rented out.

Download your guide to tax in Spain here

It is (fairly) well known that, if you are a not tax resident in Spain, and you own a property in Spain, and you receive rental income, you have to pay Non-Resident Income Tax (NRIT) or Non-Resident Imputed Income Tax (NRIIT) if you do not receive rental income, perhaps both depending on how much of the tax year (1st January to 31st December) it is rented out. Imputed rent is a fictional amount of rent that the Spanish tax office decides is what you are receiving based on the cadastral value. It works the other way around. That is, if you are a tax resident in Spain with a UK property, and you do not rent it out, you still have to pay tax on the imputed rent.

How is the tax calculated? UK properties do not have a thing called a cadastral value. Some have said on the (not always reliable) worldwide web that it would be the rateable value that would be used. The actual rule is that, if there is no cadastral value, the tax is based on 50% of the original purchase price with the application of a rate of 1.1%. That gives you the imputed rent. It is this figure that would be used for income tax purposes.

For some people, this may not introduce a problem, especially when considering the double tax treaty between the UK and Spain. It is the fact that those who should have been declaring this “income” have not been and my message could prompt a chat with their tax agent. The Spanish tax office is regularly sweeping up what they (or their computer) see as outstanding items, often up to 4 years old in line with Spain’s statute of limitations.

Contact me today for more information on how we can help you to protect your assets from unnecessary taxation and make more from your money, protecting your income streams against inflation and low interest rates, or for any other financial and tax planning information, at john.hayward@spectrum-ifa.com or call or WhatsApp (+34) 618 204 731.

How to reduce your taxes in Spain (legitimately!)

By Chris Burke
This article is published on: 28th January 2022

28.01.22

Taxes are present all over the world. Just because tax rates may seem high here in Spain or because the system may seem complex, it doesn’t mean that you don’t have to pay them! It’s important that you gain an understanding as early as possible on how the system works. By doing so, you may be able to take vital action early which could potentially save you large sums of money by the time your tax bill comes around. In this article, I’m going to provide an overview of the tax situation in Spain whilst offering tips on how to reduce your tax bill legitimately.

First and foremost, it must be said that you do not have the option to choose whether or not to be a tax resident in Spain. Just because the taxes may be cheaper in the UK or the US or wherever you are from, or because you understand the tax system in your home country and not here, it doesn’t mean that you can elect to pay your taxes there. Ultimately, it boils down to if you live in Spain and if so, how many days of the year you spend here. Once you have spent 183 days in Spain in a tax year, which runs from 1st January to 31st December, you are then obliged to declare all of your income and assets and pay tax. These 183 days do not have to be consecutive. For example, in the tax year you could spend 170 days here before then leaving, coming back for a week and then leaving and coming back for another week, taking your total amount of days spent in Spain to 184.

Just because you have a residency card does not mean that you automatically become a tax resident immediately. For example, if your NIE or TIE application gets accepted and you decide to move to Spain in August 2022, and spend 5 months or less living in the country in 2022, in that tax year you will not be liable to tax. Therefore, you would have a few months to assess and take action to protect your assets from Spanish tax before becoming tax resident in the following year.

As a result, it can be highly beneficial if you are planning to move to Spain that you take action early. For example, if you decide to move to Spain in August 2022 and therefore do not become tax resident in Spain in that year, then you can dispose of your assets in that year free of tax in Spain. Therefore, you could sell your property or shares avoiding capital gains tax here and instead pay capital gains tax in your home country. Furthermore, there is no capital gains allowance in Spain. In the UK in 21/22, and 22/23, there is £12,300 capital gains allowance meaning that you will not pay tax on any capital gain up to this amount (which rises to £24,600 if you are married, joint own the asset and combine your allowance with your partner’s).

Example 1

August 2022 – Bill moves to Spain
August 2023 – Having been living in Spain for over 183 days in 2023, Bill sells his house in the UK. As he is now a Spanish tax resident, and this is not his primary residence, he is now required to pay capital gains tax in Spain (supposing he has made a gain on his property)

Example 2

August 2022 – Bill moves to Spain
September 2022 – Having been living in Spain for one month in 2022, Bill sells his house in the UK. As he is not yet a Spanish tax resident, he is not required to pay capital gains tax in Spain and he may benefit from the £12,300 tax free UK Capital Gains Allowance. The first £12,300 of profit made from selling his property may be tax free, depending on other factors such as if he has already used up his capital gains allowance for the year

Contact Chris to discuss your current tax liabilities

Alongside the normal income and capital gains taxes, Spain also imposes an annual wealth tax. This wealth tax, although only paid by individuals who own over €700,000 (€500,000 in Catalonia) in worldwide assets, can result in a discouraging annual tax bill. The wealth tax, into which I will go into in more detail in a future article, is only payable at between 0.2% and 2.5% on assets over the annual allowance (€700,000 or €500,000 in Catalonia).  There is a way to avoid, or at least mitigate this wealth tax. Following the previous example, if you decide to move to Spain in August 2022, and therefore not spend the required 183 days in Spain which you need to spend to become a tax resident, then you may be able to avoid the wealth tax in Spain by gifting your assets. However, this can prove to be a complicated process so it is recommended that you speak to us directly prior to doing this.

As the tax system in Spain may be different to your home country, financial products and ‘tax wrappers’ that are tax free there may not be tax free in Spain. Taking the UK as an example: ISAs are tax-free wrappers in which any gains or dividends on assets held in this wrapper are not subject to UK tax. However, you need to declare your UK ISA if you are a tax resident in Spain and any gains within this ISA, although it would not be subject to UK tax, would be subject to tax in Spain. Furthermore, in the UK you can draw the initial 25% from your pension tax free. In Spain, the same withdrawal would be taxable, although there is another tax exemption for this who contributed to their pension prior to 2007. For this reason, it’s very important to strategically plan ahead and our advice is straightforward: make the most of your tax-free allowances whilst they are available.

Yes, I need to discuss my tax planning opportunities

There are various ways in which you can restructure your assets in order to take advantage of tax planning opportunities here in Spain. For example, you can utilise Spanish tax-effective investment arrangements such as the Spanish Compliant Investment Bond (similar to a UK ISA) which will significantly reduce your tax bill compared to holding the same investment outside of this wrapper. You could also transfer your pension to Spain and adjust how you take income from it.

Everyone’s circumstances are different, but the above points go to show that the way you hold, dispose and take income from your assets can make a large difference to how much tax you pay in Spain. However, it many cases it is not as straightforward as it seems and it could be highly beneficial to seek specialist advice as early as possible to reduce future tax liabilities.

If you would like to seek specialist advice, Chris Burke is able to review your pensions, investments and other assets and evaluate your current tax liabilities, with the potential to make them more tax effective moving forward. If you would like to find out more or to talk through your situation and receive expert, factual advice, don’t hesitate to get in touch with Chris via the form below, or make a direct virtual appointment here.

Minimising exposure to tax in Spain

By Charles Hutchinson
This article is published on: 29th September 2021

29.09.21

Probably the most burning issue here on the Costa del Sol for expatriates is minimising exposure to Spanish taxes. Everywhere I go to meet and discuss matters with both clients and prospective clients, this same subject always arises. Over the years I have noticed that this subject has caused so much unhappiness with some people. And it is mostly with men, rarely with women.

The unhappiness stems from the conflict between the heart and the pocket. The heart says I want to live here, revel in this micro climate, enjoy my golf, wine and dine with my friends and basically enjoy a healthy outdoor life. My pocket says I don’t want and will not pay these taxes – particularly wealth tax. Wealth tax is alien to North European nationals, whose countries by and large do not impose this tax.

The result for some is that they are sentenced to be constantly wandering the world, on the move from one jurisdiction to another throughout the tax year, always ensuring they are not there long enough to be caught in the tax net. This can also result in stress, instability, the feeling of not belonging anywhere and some cases the cause of divorce. Women on the other hand just want to live where they will be happy, where they have access to their social circle, to their children and grandchildren, either close by or at the end of an easy inexpensive short flight. For them, the tax issue is secondary.

One only has this life once and so why not take the course of most happiness for you and your family and accept the fact there are two sure things in life – death and taxes (to quote Benjamin Franklin)? You cannot take your money with you when you depart this orb, but you can certainly minimise your taxes whilst here and leave your money to your beneficiaries with either very little inheritance tax or none at all.

Contact me to discuss your tax planning

Saving in Spain, ISA, Tax Free Saving in Spain

Thus, it is best to confront the tax implications head on to see what is entailed and what your potential liability is. Apart from wealth and inheritance tax, there are two other mainstream taxes in Spain – capital gains tax and income tax. These too can be mitigated and often eliminated with careful tax planning. Investment income can be sheltered from tax as well as capital gains if steps are taken early enough, particularly if you are coming to live here from another jurisdiction. Here in Andalucia, inheritance tax has for all intents and purposes been eliminated. Wealth tax carries generous allowances (particularly in the case of shared assets). There is even talk of once more eliminating wealth tax altogether but we will have to wait and see.

Of course, tax and investments are intertwined so it is important to have a good financial adviser on board. Spectrum has been advising thousands of their clients for many years with the assistance of locally qualified tax experts on the subject of taxation, which you can see in the many other articles on this website.

Download your free Guide to Tax in Spain here

If you would like to talk to me more about this subject and the points raised, please contact me as per below and I would be happy to discuss this further.

UK tax rebates in Spain

By Chris Burke
This article is published on: 1st September 2021

01.09.21

The TT – Top Tips Newsletter

Hi everyone, I hope you are enjoying some well needed freedom and a good summer. This month’s TT covers the following Hot Topics:

UK passports – VERY important news on travelling to Europe
UK tax rebates for those moving abroad
New working/retirement rules in Spain

UK passports
The first news out this year, importantly for those travelling to and from Europe, was that you must have 6 months left on your UK passport to enter the country now that the UK has left the EU; this applies even if you are a resident. Those travelling may have noticed that as well as joining the ‘Non-EU passport queue’, your passport will more than likely have been stamped. The UK has issued a statement saying that if you present your TIE resident card at passport control, they will not need to stamp your passport. In my experience this is not the case so far, even though I have given them my TIE as well. This might be an issue for those people who travel regularly, as once your passport stamp pages are full a passport is not usable. You would then need to apply for a new passport on the basis of ‘exhaustion of pages’. What’s more is that some countries will not allow entry without two blank passport stamp pages. If you are renewing your passport, it might be worth requesting the larger version with more pages to cover for this eventuality. Which leads me nicely onto my next topic.

UK red passport expiry date
Those who have not renewed their UK passport in the last year probably will have the old red colour passport. An important announcement was made recently in respect of these and is as such: these passports are ONLY valid for 10 years exactly. What this means is, if when you last renewed your passport and had months added that were still valid from the previous passport, these do not count anymore. Thus, these passports are only valid from 10 years from their date of ISSUE.

This will not affect everyone, but for example, if your current red passport was issued in January 2012, but expires in May 2022, because there were 4 months remaining on the previous passport which were added to the new one, you will be affected. In this instance, Europe/Spain will have this passport expiring in January 2022 and to enter you must have 6 months remaining to this date.
It’s good to have things like this to worry about, because there just isn’t enough in life is there?!

UK tax rebate for those moving abroad
Anyone who has left the UK in the last four tax years is allowed to apply for a UK tax rebate. There is no way to trigger an automatic tax refund; the HMRC needs you to submit an official claim before they can refund your tax overspend.

UK tax is calculated on your projected annual income, so if you don’t complete a full UK tax year this could be wrong, and in many cases very much so.
The main reasons you should look at this are:

Personal allowance – you have not used the entire amount in the year you emigrate/leave
You continue to be a UK taxpayer but are employed in another country

The process to find out if you are due any monies is fairly straightforward:
Complete form P85, sending parts 2 & 3 of your P45 that you should have received from your employer, or a self assesment form if you were self employed.

You can read about how to do this on the official government website here:
www.gov.uk/tax-right-retire-abroad-return-to-uk

New part time working/retirement rules in Spain
Until recently in Spain, you either had to be working or retired from a Spanish state pension perspective. That is to say, you could not work and receive your state pension. I know, I know, it just doesn’t incentivise people who arguably have the most experience in life to contribute to the economy, as if they continue working in any capacity they cannot receive their hard worked for state pension. However, recently this has changed.
You can now receive 50% of your Spanish state pension, pay a reduced autonomo payment (self-employed monthly payment) and continue to work. As a reminder, to receive a Spanish state pension you must have contributed for 15 years and two of those years must have been within the 15 years preceding actually retiring.

If you would like more information regarding any of the above, or to talk through your situation initially and receive expert, factual advice, don’t hesitate to get in touch with Chris.

Click here to read reviews on Chris and his advice

Top three financial tips for expats living in Spain

By Chris Burke
This article is published on: 22nd July 2021

22.07.21

Hola

This month we are covering the following Hot Topics:

UK financial advisers are not legally able to advise EU based clients anymore
The important ‘rule of 72’ for investing
Spanish state pension inflation worry

UK investments & pension law changes
Many UK based financial advisers can no longer legally look after anyone resident in Spain or the EU due to Brexit legislation, most having already written to their clients informing them of this. However, it’s not all bad news; most UK based investments including ISAs are not tax efficient in Spain/EU, with many having to be declared annually and tax paid on any gains, EVEN if you don’t access the money. This does depend completely on your circumstances and I help people analyse their personal situation, managing their UK assets or arranging for them to become Spanish compliant moving forward.

For those with UK private pensions in drawdown, every few years to receive this money you must have a UK accountant rubber stamp this to continue. So again, you will need to find someone locally to do this for you, which we can help with.

If you have any questions or need help in respect of UK based assets, please get in touch for a free, no obligation chat/review of your situation.

Send me your questions

The rule of 72 and poor performing investments
Implementing an investment strategy is not where your investment plan finishes; it is where it begins. Without regular reviews and maintenance there is a strong risk you will finish up with much less than you should have had. Many financial advisors here in Spain are mainly remunerated when taking on a new client, not on the performance of their investment. This is where I/Spectrum differ.

One of the many key aspects of investing is to keep a keen eye on the ‘rule of 72’, which is knowing how long before your money should double in its value. To work out the ‘rule of 72’ for your investment you use the following simple formula: divide the number 72 by the average annual interest you are receiving/likely to receive and it will tell you how many years it would take for you to double your money. So, for example, if you were averaging 4% interest per year it would take around 18 years (72/4 = 18 years), at 5% around 14 years and 6% around 12 years. To put that into a real-life scenario, if we use a starting point of €100,000 and invested over a 25 year period this amount of money would give you:

4% €266,583
5% €338,635
6% €429,187

To put that into context, historically inflation makes your costs double every 24 years, so if your money is not well ahead of that, in real terms your monies are just keeping their present value.

Therefore, it’s imperative you really are seeing your investments growing and working for you. If they are not, I suggest you seek a second opinion and find out how you can have these optimised, because it will make a big difference to you further down the line. The main reasons for investments failing are high maintenance costs and investments that give the financial adviser a ‘kickback’. Many people don’t always understand why their investment funds are growing but their portfolio isn’t as much, and this is usually a starting point to look at.

I work in a different way, making sure it also works for the client by not using this method, but on a transparent fee basis using the best investments & platforms for the clients; not using investment funds that give the adviser more commissions, in essence.

Contact me to make an appointment via the phone or zoom

Spanish state pension inflation worry
Back in 2011, Spain used to have a surplus state pension fund of €66 billion. This could be looked at as ‘well, at least they had a surplus; most countries have never had one’. Just before Covid started in 2019, it was €16 billion in debt. Now the state pension system, like many others, works on the principle that current workers pay for those who are retired now. The key point here is, from a percentage perspective, Spain, compared to others in the EU, has one of the highest proportions of its GDP (total country income) contributed to its state pension, at around 12%. The average ‘replacement rate’, which is the percentage of workers final salary income that they receive in retirement, was at 72% in 2019*, whereas the average in Europe is 45%. They receive, as a percentage, much more on average for their state pension compared to their earnings than their European counterparts. This is great on one hand, however this really is a great burden on Spain to provide that level of state pension to the people.

The only way Spain can carry on providing state pensions is to “increase the retirement age even higher and decrease the amount people receive” says Concepcion Patxot Cardoner, a University of Barcelona professor, as quoted by Bloomberg. That and start to move people towards saving into their own private pensions. However, this last option and the main plan moving forward is going to be difficult to achieve in a culture where only around 26% currently save into a private pension. Compare that to the UK where the latest survey showed 65% of people contribute.

If you also take into account Spain’s tourist industry (before Covid), which is the second largest in the world employing about 2 million people and accounting for about 11 percent of the country’s GDP, you can see that things are going to need to change drastically to balance the books given the current crisis.

What does all this mean? Well, to you and I, it’s even more important that we have a plan in place, whatever that is, to make sure we have provision in retirement. I am here to talk through this with you, using professional analytics tools to help take one of the most important planning aspects of your life and break it down, step by step, making it:

Specific to you
Measurable
Achievable
Realistic
Targeted

If you would like to talk through your situation with someone consultative and knowledgeable, don’t hesitate to get in touch.

Wealth Tax in Spain

By John Hayward
This article is published on: 10th May 2021

10.05.21

The UK tends to rely on income and inheritance taxes to generate revenue, but countries such as Spain and France, also apply wealth tax (Impuesto sobre el patrimonio). This is an asset tax and can be on cash, real estate, pension funds, shares, investment bonds, ISAs, and even cars. Portugal also has a wealth tax but this relates solely to immoveable property.

Spain eliminated wealth tax in 2008 but then “temporarily” reintroduced it in 2011 and it has been here ever since.

Each autonomous region sets their own allowances and rates after initial direction by central government. The Spanish State’s allowance is €700,000 plus up to €300,000 for one’s main residence. This is per taxpayer. It is important to note here that a property only becomes a main residence after 3 years of continuous habitation. There are a number of exceptions to this rule.

The State’s rates of wealth tax are as follows:

Lower Band Limit (€)	Upper Band Limit (€)	Tax rate (%)
Nil	167,129	0.2
167,129	334,253	0.3
334,253	668,500	0.5
668,500	1,337,000	0.9
1,337,000	2,673,999	1.3
2,673,999	5,347,998	1.7
5,347,998	10,695,996	2.1
Over	10,695,996	2.5

Wealth tax in Valencia has changed over the years. In 2019, it was announced that the tax-free allowance was being reduced to €600,000. With effect from 2021, the allowance is being reduced further to €500,000. This means that more and more people will become subject to wealth tax.

In addition to the reduction in allowances for 2021, Valencia has higher wealth tax rates than the State’s own rate, as follows:

Lower Band Limit (€)	Upper Band Limit (€)	Tax rate (%)
Nil	167,129	0.25
167,129	334,253	0.37
334,253	668,500	0.62
668,500	1,337,000	1.12
1,337,000	2,673,999	1.62
2,673,999	5,347,998	2.12
5,347,998	10,695,996	2.62
Over	10,695,996	3.50

Example:
If a couple have assets totalling €2.5 million, including a main residence worth €600,000, the individual annual wealth tax bill based on the State allowance and rates could be around €600. Using the Valencia allowance and rates, the tax bill could be almost €1,800. To clarify, this is per person and payable each year.

Depending on one’s income, and if one is a resident in Spain, the amount due can be reduced. The wealth tax due cannot exceed 60% of one’s taxable base (e.g., annual pension income, savings, etc.) when adding the wealth tax to personal income tax liabilities with a minimum payment of 20% of the wealth tax due. It is important to make certain that all of one’s assets are eligible for this rule.

Spanish Tax Guide Download

Taxes in Spain after BREXIT

By John Hayward
This article is published on: 12th April 2021

12.04.21

The Times They Are a-Changin’ (Bob Dylan:1964)

With the first three months of the year having seemingly whizzed by, I feel that there is a more positive feeling (generally) compared to a few months ago. More and more people are (slowly) receiving a vaccination of one brand or another. At the same time, we feel disappointed and worried that this could be a short reprieve if people lose their patience. We have witnessed crowds acting as if there is nothing out there to worry about. We may well see wave after wave of Covid-19 as the months and years go by. The main thing is to control it and, hopefully, an annual vaccination will be the least of our concerns.

Away from Covid-19, over the coming days and weeks I will be sharing my experiences relating to the concerns of others and their taxes in Spain, France, the UK, and even the USA. This information will cover income tax, capital gains tax, wealth tax, and inheritance tax in Spain and their link with taxes in other countries. I will also explain how I have helped people solve the bank charges problem, how I was able to find pension funds that the person didn´t know they had, and how I have happy clients whose investments have produced increases at a time when a lot of people have believed that the investment world is in dire straits (Perhaps relying a little too much on certain news channels and newspapers).

Since Brexit, there have been quite a few changes in Spain and I am certain that there are more to come. This has been a pretty steep learning/development curve and, as so often happens in Spain, opinion is rife. Knowledge, however, seems to be in short supply. It is quite frightening how many different answers you can get for the same question. Over the last few months, I have been studying the Spanish Tax Office’s information, steering clear of blog sites. At the same time, I have had meetings with my economista on various tax matters. Familiarity of investments outside Spain is lacking by many lawyers and accountants in Spain. It is for people like me and my colleagues to educate and liaise with clients and also with the professionals themselves.

With most countries having a focus on higher taxes or lower allowances in order to pay for the welcome support provided over the last year or so, and the likely consequence of higher inflation, it has become even more important to have savings and investments in the most tax efficient structures.

SIGN UP TO MY EZINE TO RECEIVE INFORMATION ON LIVING IN SPAIN AS AN EXPAT AFTER BREXIT

Spanish CGT on UK Principal Residences

By John Lansley
This article is published on: 25th March 2021

25.03.21

New residents in Spain wanting to sell their home in the UK, face a small but perhaps very costly change due to Brexit. John Lansley explains.

Like the UK, Spain has a favourable tax regime concerning your home – your principal residence. Here, any gain arising on selling your home can escape tax as long as you use the sale proceeds to purchase a new main residence. If you sell a property for €500,000 and then reinvest €250,000 in a new home, releasing monies for other purposes or simply downsizing, then only half of the gain attracts this exemption and the other half faces a tax liability.

Those over the age of 65 who sell their home enjoy full exemption, whether or not the proceeds are used to buy a replacement.

One little-known feature is that the rules apply to a property anywhere in the EU or EEA, which has been your only or main residence. Therefore, if you move to Spain from another EU/EEA country, selling your old home and using the proceeds to buy a new one in Spain will enjoy exemption, as described above.

However, while this exemption previously applied to those moving to Spain from the UK, Brexit has meant that the UK is in neither the EU nor the EEA, and therefore the sale of your home in the UK, when you have become tax resident in Spain, will expose the full amount of the gain to Spanish Capital Gains Tax.

So, even if you want to use the proceeds, in full or in part, to purchase a new home in Spain, doing so after your arrival will result in a potentially very large Spanish tax bill, which could reduce quite substantially the amount you have available.

What are the Capital Gains Tax rates in Spain?

Up to €6,000 19%
€6,001 – €50,000 21%
€50,001 – €200,000 23%
Over €200,000 26%

If, for example, you are selling a UK property for the equivalent of €500,000, which you bought for the equivalent of €200,000, doing so now you are resident in Spain would produce a tax bill of €70,880, whereas selling before the end of 2020 (and of course reinvesting the proceeds in a new home in Spain) would have meant a zero tax bill.

What is the answer?
The best course will probably be to sell your UK home before arriving in Spain, but check that it does indeed qualify for the full principal residence exemption in the UK first. Selling UK property is usually more predictable than property in other countries, but it shows very clearly that timing can be extremely important. Any delay in exchanging contracts (the operative date) until after you arrive in Spain could prove very expensive.

The desire to tie together the sale of one home with the purchase of a replacement is something we’re used to doing in the UK, but in this case it would appear more sensible to sell your UK property, rent temporarily in either the UK or Spain, and only then purchase your new home in Spain.

Residence in Spain
Since Brexit, moving to Spain has become much more difficult. Working here, or coming here to retire, necessitates much more than it used to, and Spain’s Golden and Non-Lucrative Visa schemes will have to be utilised. The Golden Visa requires the purchase of property valued at more than €500,000, so any unexpected Spanish Capital Gains Tax bills might threaten your ability to do this.

Similarly, the Non-Lucrative Visa requires you to demonstrate your ability to support yourself. If your capital is severely depleted due to an unwanted tax bill, that might prove more difficult.

As always, it pays to seek professional advice, and we will be happy to help you make sense of these rules and apply them to your own circumstances.

I’m moving to Spain – When should I take financial advice?

By David Hattersley
This article is published on: 17th March 2021

Brexit removed the previous rules pertaining to “Freedom of movement, goods and services within the EU”. Those who now wish to move to Spain from the UK, making it their home as retirees or working here, newer and tougher rules apply.

Distance working has added a new dynamic, in particular for those in the technology sector who see that this is as an opportunity to work and live in a nicer environment. Speaking to a qualified financial adviser who is regulated here,in Spain is sometimes an afterthought . However, talking to an adviser before you embark on the journey can help avoid some of the issues which expatriates can find themselves encountering. Financial planning is complex, whichever new country one moves to, so a brief summary can help prepare for the future “devil in the detail” elements. Forewarned is forearmed and helps avoid basic pitfalls.

It makes sense to “disinvest” all UK held assets prior to becoming Spanish Tax resident. Timing and deferral is the key to planning a strategy. Note that due to Brexit, UK advisers are no longer allowed to offer continuity of advice Spain for those that become tax resident in Spain.

There are a number of rules regarding Spanish tax residence, which are briefly detailed below. You will be deemed tax resident in Spain in any one of the following cases:

1. Number days in Spain not to exceed 183 days and may include time spent in any EU member country,
2. Centre of Economic interest i.e. source of earnings is in Spain,
3. Spouse and minor children living in Spain.

With regards to your assets, without going into too much detail, the following will apply.

UK property: Disposal once tax resident will be subject to Spanish capital gains tax, even if it was one’s primary UK residence. If retained it will be subject to reporting on Modello 720, a record listing overseas assets. A 20% increase in value will mean a new Modello 720 report. Income derived from letting the property will be subject to Spanish “investment” tax.

UK Pensions: A Pension Comencement Lump Sum is tax free in the UK, it is liable to tax in Spain. So if nearing 55 wait till you take it and then become Spanish Tax resident.

ISAs: An ISA offers tax free growth or income in the UK. They are not tax free in Spain, but there is a Spanish equivalent.

Unit Trust, Shares, Investment & Insurance Bonds, NSI bonds etc: There are some tax breaks in UK but none in Spain.

Inheritance Tax: The UK rules apply to the residual estate whereas Spain applies it to the beneficiary. There is a strong possibility of being taxed twice as estate rules & beneficiary rules are not covered by double taxation agreements.Based on “domicile” there is a different law for bequests & inheritance in Spain. Also, unlike the UK, it has a the variety of laws for each autonomous area,affecting in particular the potential impact of Spanish succession tax. It makes sense to deal with a regulated adviser who is based in or near to an autonomous area you will be living in e.g. Madrid ,Andalucia, Murcia, Valencia.

Having a “ partner “ relationship as opposed to being married, brings its financial own risks in Spain, and arrangements must be considered.

Spanish Property: Some people come to Spain with plans of using their new Spanish property to retire to now or eventually. If it is the latter, the property maybe used to produce rental income either via summer rentals or long term rentals, but in this case there will be tax considerations.

Investing an hour of two of your time before you make the move to Spain can provide peace of mind and financial comfort when planning your new adventure. I can provide “Your guide to tax in Spain” that goes into greater detail. Whether you want to send the guide or speak to me directly, please call or email me on the contacts below & I will be glad to help you. We do not charge for reviews, reports or recommendations we provide.

A Spanish regulated adviser can ensure you are financially prepared for your move, in terms of any investments, savings and taxes which can become due on both income and windfalls you may be expecting after your move.

Please note, we are not accountants or lawyers, but we do work hand in hand with these professionals, and can be the “first port of call”.

Cryptocurrency Taxes in Spain

By Chris Burke
This article is published on: 10th March 2021

10.03.21

As new investment types become more popular, people generally get in touch with me about them. That is certainly the case with cryptocurrencies such as Bitcoin, and that now large investment firms are starting to invest (Blackrock for example), more people feel comfortable in also investing, or researching whether they should.

Many years ago, due to the technology (or lack of) available, it usually took some time, even a decade or so, for new companies and investments to become well known, sustainable or very successful. Now, with the exponential growth of technology, automation and social media, companies can go from almost zero to mega over a period of months or years. As you may have seen recently in the news with the commodity silver and the company GameStop, technology has become so powerful that groups of people communicating on social media can even ‘manipulate’ investment prices themselves, whether this be a good or bad thing. However, this also creates careful considerations when contemplating investing in these hyped assets.

You need to be very aware that these relatively young and very popular assets show an incredible amount of volatility, and therefore risk. This in itself is not a problem, just as long as you understand it. Investing in anything like this, and I would put cryptocurrency and Tesla or the like into that bracket, as fantastically as they can go up, they can also come down. So the golden rule to consider is, do not invest any monies you are not prepared to lose. Imagine you are walking in to a casino and have a figure in mind that you are going to gamble with; after it is gone you are prepared to walk away without it. That amount can be whatever you like, but you have to understand you can make an amazing profit if things go your way, or, you could lose almost all of it. As long as you are aware and accept this, then you are comfortable to invest in it.

I meet more and more people who have invested in these areas and then require help in taking their sometimes life changing gain to having it managed at a much lower risk level, consolidating and securing that gain. They have made their money, there is no need to keep the risk level that high, cash some if not all ‘out’ and use your ‘winnings’ to permanently change your life. For example, if you went to the casino and won a life changing amount of money, say €250,000, would you return the following week and carrying on gambling it? At what point would you ‘cash in your chips’ and take the reward? The probability still stays at 50/50 each day whether you win or lose, so, until you have ‘cashed in’ your chips, your high-risk level is still there. By de-risking, you are guaranteeing some of that gain and reducing your exposure.

What about taxes on cryptocurrency?
In October last year, the Spanish government brought in greater controls for this kind of investment. In real terms, this means if you buy, sell, transfer, exchange or use to buy something with it they want to know. However, there is only a taxable event when you dispose of this type of investment.

In terms of the tax to pay, this would come under savings tax in Spain (or capital gains tax as it is also known). These rates are currently:

• From 0 to €6000 you pay 19% in tax
• From €6001 to €50000 you pay 21% in tax
• From €50001 to €200,000 you pay 23% in tax
• From €200,001 + you pay 26% in tax

This is only on the gain/profit you have made, not the amount you sell.

Key considerations to take into account
Cryptocurrency is also applicable under wealth tax in Spain, should the region you are tax resident in be applicable to this.

If your cryptocurrency investment should incur a loss, these can be offset against any gains you have over the next 4 years, so that is something important to bear in mind.

Buying using cryptocurrency
If you sell cryptocurrency and buy another investment type having made a profit, then this would be taxed as a gain at the above rates. If you use Bitcoin to make purchases for products or services, then 21% IVA (VAT) tax would also be applicable.

If you do not make the relevant declarations or pay the necessary taxes, large penalties and fines will apply, so you must make sure you not only do this, but perform it correctly.

If you would like help in looking into investing in Bitcoin or other cryptocurrencies, would like help declaring these correctly, or would like to take your already gained profit as tax efficiently as possible and have it managed professionally, don’t hesitate to get in touch.