Tax season is in full swing at the moment and as with every year I have been getting lots of questions and queries relating to tax matters in France.
Financial update May 2024 – France
By Katriona Murray-Platon
This article is published on: 3rd May 2024
03.05.24
Over the April holidays I did sit down to do our own tax return and therefore was able to see whether there were any new aspects in the online declaration. I’m one of those people who prefers to know rather than waiting for surprises and this particularly applies to tax returns. Either we will have more to pay in which case it would be best to be prepared or we have less to pay in which case I want to know how much the tax refund will be. Because of the increase in the tax bands, if your income was comparatively the same in 2023 and in 2022, then you should have less tax to pay this year. In spite of my many years of experience of doing tax returns, I am not infallible and I did actually have to go back into our tax return to correct it. So based on my own mistakes I thought I would give you some tips about what to do and what not to do!
- COLLECT YOUR FIGURES – Make sure that you know what kinds of income you and your partner received and what the figures are whether they are taken off a bank statement or a certificate. If you have foreign income you will also need to know the exchange rate on the date on which you received the income or the average Bank of France rate for 2023.
- CHECK THE FIGURES ALREADY ENTERED ON THE TAX FORM – if you or someone in your tax household has received income from a French source (pension, salary, French bank income etc) then this should already be entered on the tax form. Nonetheless it is still worth checking that these figures correspond with any certificates issued by the relevant body or the December 2023 payslip. Even though my husband works for a French public body they don’t always communicate the right figures to the French tax office so I have learnt that it is worth checking and querying any differences.
- CHECK THAT ALL THE DIFFERENT TYPES OF INCOME ARE TICKED – Before you get to actually declaring the income you need to tick the boxes of which type of income you will be declaring. Some may already be ticked from previous years but others may not be even though you have been declaring the same type of income for years. If you have received another source of income then you need to tick the box for this new category of income. If you are declaring online not all the pages and the boxes will appear and it is easy to overlook something.
- REMEMBER THE ANNEX FORMS – in particular the 2047 for foreign income and the 3916 for foreign bank accounts. Regarding the latter, your information from the previous year should already be entered so you only have to carry over this information from last year but if you have opened or closed an account in 2023 or one is not mentioned on the form you will have to fill in the details. You will also have to declare the value as at 1st January 2024 of any foreign assurance vies. For the 2047 you may need to swap between this form and the main 2042 form to check that all the income is correctly entered and carried over onto the 2042.
- DON’T FORGET YOUR TAX CREDITS – We have had a piano teacher paid via CESU and the amounts declared were already entered on the tax form however the amounts paid to our cleaning company were not. So if you have had any home help (cleaners; gardeners, lessons etc) they should have sent you a tax certificate for last year so you will need to enter that amount in the tax credit section.
- RETIREMENT CONTRIBUTIONS – more and more of us work in France and contribute to some sort of retirement (PERP or PER). This was where I made a mistake this year because whereas the amount showed on the form, it is not deducted from your tax until you reenter these amounts in the correct box. Given that this is a deductible expense from your income it can amount to a significant tax reduction, so it is important to make sure that it is is correctly entered.
- CHARITABLE DONATIONS – this is another one often overlooked. Normally any charity you donate to should have sent you a tax certificate and you will need this document to claim the tax deduction. If you know you have made a donation make sure that you find the tax certificate or request it from them if they haven’t already sent it.
- NOBODY IS PERFECT – you can start your declaration and go back to it. You can do one version and then go back and change it. Once you get to the signature page which shows the tax due (this won’t appear if you have foreign income that will receive a tax credit) if something seems wrong you can go back and amend it. You can do this as many times as you like until the official deadline without it generating separate tax bills and even after the deadline provided you have submitted something before the deadline. If it gets close to the deadline it is better to declare something and sign the tax return and then correct it at a later date rather than incur a fine for late submission.
The tax filing deadlines are as announced in my previous Ezine however the deadline for filing the paper return is Tuesday 21st May before midnight.
You need to get it into the post box before this time even if it will be collected the next day.
If you haven’t already engaged a tax lawyer or accounting firm to help you out with your tax return then it is too late to do so as they will be too busy at this time of year. Therefore you need to get something onto the tax form and get it submitted by the deadline. It doesn’t matter if it is incorrect you can always amend this year’s tax return at a later date.
If you have any questions on your taxes or finances in France please do send me an email and I would be happy to arrange a time to speak to you.
Educational events in Portugal
By Portugal team
This article is published on: 2nd May 2024
02.05.24
Pension, tax & financial planning seminars for British & Irish nationals in Portugal.
Our local team in Portugal (Mark Quinn BA ATT APFS and Debrah Broadfield LL.B LL.M ATT APFS) recently ran two educational seminars in Lisbon and the Algarve regions.
Together with Susan Brooks from Momentum Pensions and Richard Flood with Lorraine Reddaway from RBC Brewin Dolphin they discussed the 2024 tax landscape, retirement planning options, investment solutions and tax strategies for expatriates living in Portugal.
Over the two days we were delighted to welcome over 75 attendees.
Thanks to the staff at the hotels and to everyone for their engaging participation.
UK Inheritance tax and living in Valencia
By John Hayward
This article is published on: 30th April 2024
30.04.24
Every so often, I write about this cheery subject but it really is worth getting to know the basics if you do not want to suffer from, or leave your beneficiaries exposed to, the slings and arrows of outrageous tax complications. There are proposed changes to UK inheritance tax which I will discuss below.
Inheritance tax in Spain has pretty much disappeared, for some and for the time being. For example, in the Valencian Community, there is an inheritance tax (and gift tax) allowance of €100,000 for spouses, grandparents, parents, children, and grandchildren. For younger beneficiaries, the allowance is higher, as it is for those with qualifying disabilities. Since 28th May 2023, there is also a 99% reduction on the tax bill for spouses, etc. This means that there is little or no tax due for the relevant category. I am not going to write about the different tax bandings but you can contact me if you want to know more.
Taxes in Spain tend not be abolished but rather put on hold or reduced, temporarily. In Valencia, this “new” 99% reduction is the same as the old 99% reduction which was in place up until 2013 when it was reduced to 75% and subsequently 50%. Asset distribution is an important consideration, making certain that, should the thinkable happen, i.e. the reduction is changed again, spreading wealth as tax efficiently as possible is key. (Spending everything is also a way of reducing any inheritance tax liability albeit to the disappointment of those expecting some handy cash.)
When it comes to beneficiaries who do not tick the right boxes, planning is even more important. One of the fairly common situations I have come across is where couples in their second or third marriage have children, from different marriages, who are beneficiaries on the death of their parent and/or step-parent. The inheritance tax allowances above do not apply if the child is not a direct relative.
Allocating assets through a will could alleviate this problem. Spain will apply inheritance tax to an asset in Spain or an individual resident in Spain. A UK asset inherited by a UK resident will not be subject to Spanish tax.
Therefore, planning is necessary to decide which child receives which asset. (See below for proposed UK inheritance tax change).
Although you might read that the double taxation agreement between Spain and the UK does not cover inheritance tax, tax paid on the UK estate can be deducted proportionately from the individual’s tax liability in Spain.
Proposed changes to UK inheritance tax
The UK government is looking to move from a domicile basis to a residence basis. To determine where one is domiciled can be a complicated exercise.
The UK government website states: HMRC will treat you as being domiciled in the UK if you either:
- lived in the UK for 15 of the last 20 years
- had your permanent home in the UK at any time in the last 3 years of your life
The proposed change, effective from 6th April 2025, will be to charge individuals who have been UK resident for 10 years and keep them on the radar for 10 years after leaving the UK. This would mean that after 10 years in, say, Spain, only UK assets would be subject to UK inheritance tax. This leads us back to my point about asset distribution. Where possible and necessary, assets should be allocated to beneficiaries based on their residence to maximise the tax allowances in both the UK and Spain.
We specialise in arranging savings and investments in a tax efficient manner and have saved clients and their families thousands in taxes on the death of a spouse, partner, or parent, or even an unknown uncle in one case. I am certain that we can help you too.
Proposed changes to UK Inheritance tax
By Jeremy Ferguson
This article is published on: 24th April 2024
24.04.24
Are you British and living in Spain?
One of the hardest things I have to explain to a lot of clients who live here is what the difference is between residence and domicile. My objective is always to explain things in a way that makes sense and is understood, so typically endeavouring to simplify things as best I can, very often using analogies or examples that will help me get the relevant point across.
Residence is simply where you reside, typically, where is your ‘main’ home? That answer will then normally determine your residence, so if you live in Spain, you will be a resident here. That will then normally (not always, but in the majority of cases) also determine where you will be paying tax.
Domicile however is something very different, but I always like to say that in most cases your domicile is simply determined by where you were born. So if you were born in the UK, having spent a large part of your life there before moving to Spain, your country of domicile will highly likely be the UK.
Over the years I have seen many articles published here about how you can do certain things to change your UK domicile, and they were always full of so many ifs and buts. Without going into detail, the reality is, it is really quite difficult to lose your UK domicile. However, the reason people would try and do this is usually focused on UK Inheritance Tax (IHT) planning. This is the bit people have sometimes struggled to comprehend. If you are UK domiciled, you will pay IHT on your assets outside the UK, regardless of where you live. So ‘clever’ people would try and help you lose your UK domicile so you could avoid UK IHT in the event of your demise.
That could now all be a thing of the past, as the UK Government has recently proposed changes to how IHT is calculated. Essentially, what they are proposing is that IHT in the UK is moved to a basis where residency, and not domicile, determine whether the estate on death is subject to tax in the UK or not.
Under these proposals to move to a ‘residence based regime’ from 2025, the estates of Britons living abroad will no longer be charged UK IHT on their estates globally, as long as they have lived outside of the UK for more than the last ten years.
This could have significant and valuable implications for the amount of tax levied on death on the estates of Britons who have lived here for more than ten years. For many people, this could be very positive and welcome news.
Being the cynic I am, the question has to be asked, why would they do this? Well, as an example, currently the UK is a very attractive place to own property and be resident as a non-UK domicile. This creates many favourable tax breaks for these people. This is one of the reasons we hear of the huge swathes of property in London being in the hands of foreign owners.
Chancellor Jeremy Hunt announced in his most recent Budget that generous tax breaks for non-domiciled individuals will be replaced with a“fairer system” from April 2025, with new arrivals to the UK paying the same tax as everyone else after four years. This of course means that if you are changing to a residence based test in the UK, then people who no longer live there would, or should, be treated with similar fairness.
So, retirement abroad could suddenly become a much more attractive prospect for many people as a result of this change, so fingers crossed it actually happens.
If you have any questions about being a Spanish resident and Inheritance Tax, please feel free to get in touch to see if I can help answer things in a clear and concise manner.
Property is not the only option
By Jozef Spiteri
This article is published on: 20th April 2024
20.04.24
The information within this article is for information purposes and is not to be construed as investment advice or recommendation. Please consult with your investment advisor before making any type of investment.
I have been working as a financial adviser for over two years, during which time I have had many meetings and discussions with clients and investment professionals. Views of course vary on how best to achieve investment success without taking unnecessary risk.
One topic which often comes up in discussion is whether owning a rental property is likely to produce higher returns than a conventional multi-asset investment portfolio (with exposure to global stock markets, bonds, commodities, commercial property and cash).
When faced with this question, my answer is always simple – if your finances allow, why not invest in both, over time? For most of us, particularly when younger, we don’t have the resources (or expertise) to invest extensively (or successfully) in rental property and conventional multi-asset portfolios. However, if and when circumstances allow, having exposure to both can provide valuable diversification and reliable income streams from unrelated sources. Conversely, over-exposure to a single type of investment creates excessive risk and vulnerability in our finances.
Let’s say you have a pot of €500,000 to invest which you might have accumulated over time, or perhaps inherited. Investing exclusively in rental property might seem sensible, and safe, but such a decision should always recognise the longer-term expenses associated with property ownership. In calculating a realistic rental yield, as a landlord it is essential to take into account maintenance bills, occupation/vacancy rates (seldom is a property occupied for the duration of ownership), refurbishment costs, possibly letting agent fees and insurance premiums, tax liabilities and other expenses, all of which of course dilutes the eventual return, often significantly.
Now you might consider putting your money into technology stocks (the NASDAQ index has averaged around 15% pa over the past 10 years), or crypto currency. The potential returns are highly appealing indeed, but perhaps you would be underestimating the levels of volatility, and the risks of dramatic losses, that come with such speculative investing. Is that something you can afford, financially and psychologically?
Big bets can be rewarding, or ruinous.
Alternatively, you could spread your investment across a diverse range of holdings – from international equities (shares) to fixed interest (corporate and government bonds), to commercial real estate, to infrastructure projects, commodities, and cash – through a professionally managed multi-asset portfolio. A well-run strategy will balance capital growth with capital protection and be fully aligned with your personal risk profile. With appropriate advice, and a disciplined, long-term approach, it is entirely possible to achieve investment success without taking undue risk.
Forget get-rich-quick. Patience pays.
And consider too that bricks and mortar alone are not necessarily the foundation for achieving financial security. To accumulate wealth through investment, it is often diversification that produces the greatest rewards.
Our recommendations to clients vary on a case-to-case basis.
To discuss your circumstances and investment planning options, please get in touch. Our initial consultations are free of charge and entirely without obligation.
The Spectrum IFA Group Limited is licensed to provide investment services, under the Investment Services Act, by the Malta Financial Services Authority.
Are high fees affecting performance?
By Jozef Spiteri
This article is published on: 18th April 2024
18.04.24
The information within this article is for information purposes and is not to be construed as investment advice or recommendation. Please consult with your investment advisor before making any type of investment.
The investment industry has always been highly competitive. Financial advisers globally are continually seeking solutions which are both attractive and able to fully meet their clients’ expectations – not always an easy task.
When selecting investment solutions for clients, it is essential to propose a strategy capable of delivering meaningful returns.
Controlling cost is also important.
When looking to invest with the help of an adviser, or on your own, you may be faced with different layers of fees, and it is critical that you understand each specific charge and the all-inclusive cost. You will for example need to consider adviser servicing fees, platform fees and fund fees. You should be fully aware of all costs before investing. Excessive expense will dilute investment performance, so care is needed to optimise prospects for growth, immediately and longer term.
At Spectrum we discuss fees with prospective clients in the first meeting as we feel this is the best way to start off a relationship. Transparency is key and this helps clients feel more comfortable and well-informed. The fees for our service are highly competitive as we have access to the most cost effective funds and products, with no ties to any particular product provider or fund manager. By ensuring the fees are at the lowest level possible we will be helping clients as they will not be unnecessarily penalised, resulting in better returns.
If you are unsure of whether you are currently invested in products paying high fees or are comparing options and do not know what to do, feel free to reach out to us. We would be glad to explain everything in simple and transparent terms. We do not charge for our initial meeting, and you are not obliged to become a client.
The Spectrum IFA Group Limited is licensed to provide investment services, under the Investment Services Act, by the Malta Financial Services Authority.
Financial open forum, Mallorca
By Susan Worthington
This article is published on: 17th April 2024
17.04.24
A big thank you to all our partners and to those that attended the recent open forum in the Hotel Linder Gold, Bendinat, Mallorca.
The Spectrum Group – Susan Worthington, Jonathan Goodman and Patricia Nadal
Prudential International – Edny van den Broek
Currencies Direct – Aldine Tomlinson, Alfonso Rey & Charlotte Park
Our open forum was the perfect format, that produced plenty of attendee interaction which lots of interesting and thought provoking questions from the audience.
We look forward to our next open forum during the coming months focusing on the financial life of an expat living in Spain.
If you would like to be notified about our next event, please contact me at susan.worthington@spectrum-ifa.com
Spectrum’s Investment License in Malta
By Jozef Spiteri
This article is published on: 16th April 2024
16.04.24
The information within this article is for information purposes and is not to be construed as investment advice or recommendation. Please consult with your investment advisor before making any type of investment.
At Spectrum we always keep up with the constantly evolving regulatory dynamic which has become a dominant feature of the financial services industry over recent years (decades in fact). This is of vital importance to give our clients peace of mind and to allow us to continue delivering comprehensive and fully compliant investment solutions in Malta and across Europe.
The latest measure taken to bolster our range of services was obtaining a MiFID investment license from the Malta Financial Services Authority. This was a lengthy but worthwhile exercise to ensure that our clients, throughout the EU, continue to benefit from our extensive investment experience, from initial advice recommendations through to ongoing monitoring and support.
The use of this license has not only been limited to the countries where Spectrum is physically present (Spain, France, Italy, Luxembourg, Switzerland, Portugal and Malta) but also to other European jurisdictions, meaning Spectrum is now able to reach and service a much wider audience than before.
From lump sum investments to regular savings, pensions (QROPS and SIPPs), portfolio reviews and investment management guidance, we can engage with clients and identify the most appropriate solutions for their circumstances. In fact, many expats across the EU with QROPS pensions have been left without an adviser due to recent regulatory changes requiring that a MiFID-licensed adviser is appointed. Helping people manage their QROPS is a key part of our business, so we wanted to ensure that we could continue to assist these clients, both existing clients and those who be looking for an adviser. Therefore, being MiFID compliant is not only good news for us but will also give our clientele peace of mind that we will be here for them for the long haul.
If you would like to discuss your own situation and explore options for protecting your long-term financial security, feel free to reach out to us. All initial meetings are free of charge and do not hold any obligation to proceed.
The Spectrum IFA Group Limited is licensed to provide investment services, under the Investment Services Act, by the Malta Financial Services Authority.
Financial workshops in Portugal
By Portugal team
This article is published on: 14th April 2024
14.04.24
Living in Portugal as an expat?
Looking for some direction in your financial and tax planning?
Join us for an educational session as we navigate the complexities of living in Portugal.
Our speakers, including chartered financial Planners, UK & Irish tax advisers and fund managers will be discussing the 2024 tax landscape, retirement planning options, investment solutions and tax strategies for expatriates living in Portugal.
Lisbon area: 24th April 10am to 1pm
Palacio Hotel, Estoril
Algarve: 25th April 10am to 1pm
Magnolia Hotel, Quinta do Lago
Sign up for the workshops below
What does a stockmarket fall of 36% mean?
By Barry Davys
This article is published on: 11th April 2024
11.04.24
It means your savings need to be organised before it happens
On 16th October 1987, the stock market in the UK fell 14%. By mid-November it was down 36%. It is for this reason you should keep reading.
The share price falls were across the board and good companies fell with the less successful. It was an arbitrary general fall in the FTSE 100 index. It seemed like a very risky time to be investing.
One of these falling shares was M & S. Yet to me it was ridiculous that M & S had been devalued by 36% when the business was in good shape and with prospects for ongoing growth.
I saw an opportunity to invest in the FTSE 100 index as I felt sure the better companies would be re-valued to reflect their sales and prospects. I knew that this was an opportunity to invest in my future, (not to try to make a quick buck).
Some of my clients also put part of their savings in the FTSE 100 index. Many did not. By August 1989 the index had recovered all of its lost ground. By 17th November 1997, it had gone up by 100% and is now 378% higher than it was in October 1987.
“Investing is the intersection of economics and psychology”
Seth Klarman – portfolio manager and billionaire
This is what I learned from those people who did not invest and which I now use to help people look after their savings. I now understand why those other people did not invest. The reason they didn’t is that I had not discussed, in detail, on a one to one basis, the following –
- Their Attitude to Risk
- The timeframe of their investments
- Their capacity for loss
I arguably let those people down as their savings did less well than the people who did invest.
Having learned a lesson from the experience my clients now benefit from this insight.
It is important not to take too much risk, which I understand. But it is also important to take at least some risk, if your circumstances allow it.
It is important to avoid taking no risks. Indeed, I often hear people say “I want to be Cautious” or “It needs to be safe” and they have left money in the bank earning very little and certainly not keeping up with inflation.
If you think putting money in the bank is low risk, you could be right.
However, taking no risk/low risk can be the biggest risk of all and in the worst case an absolute certainty that your money will not keep up with inflation in the long term and you might not enjoy the retirement you had planned.
The risk of not keeping up with inflation, with not building up your savings, is you end up with a pot too small to provide a sustainable income in retirement. But with the right advice and the correct level of risk for you and your circumstances your sustainable income in retirement is much more likely.
Here are the things I consider when helping you judge the balance of risk versus the growth of your savings. A simple online questionnaire allows you to answer questionnaires to give you a suggested risk profile.
However, we do not leave it entirely to a computer to decide your future. I then discuss the suggested profile, answer your questions, double-check the suggested profile with you, and make any recommendations for improvement based on my 36 years of experience. A good blend of AI (artificial intelligence) and EI (experience intelligence).
What does this mean in practice and why trust me? Here is the outcome that clients get from the correct risk profile:
- Bank accounts – needed to manage day-by-day spending and, separately, for an emergency fund for those unexpected bills
- Always manage the tax aspect of your savings
- Balancing flexibility with longer-term savings
- Separate savings pot for different purposes. Why? If you wish to assist children with buying their house(s) and also want to manage your savings to provide an income in retirement, these aims are different and can therefore benefit from different risk approaches. Helping the children is a one-off event (per child) and is likely to come before your need for retirement income. The need for income in retirement can span 30 or 40 years, from when you stop work to when you pass away
- In each saving pot, we make sure you have a globally diversified portfolio set of assets
- Sometimes premium bonds are used for an emergency fund
- Update your risk profile annually because your circumstances and requirements may change. If so, this may suggest an update to your savings pots which can keep you on track
Here’s why you should trust yourself. Inflation will go up and down but the world’s demographic is changing. Fewer workers mean higher wages and lower state pensions. These things point to higher inflation in the future. Getting the risk balance right on your savings is not a “nice to do”, it is essential. You need to trust that, with the right support, you can improve the likelihood of healthy savings.
Do any of the following apply to your situation ?
-
- Have too much money in bank accounts
- Have recently received an inheritance
- Are selling a business or have share options about to vest
- Have losses on your current portfolio
- Do not review your risk profile annually
If yes, arrange a call with me using my online system to book a time that is convenient for you.
It is an opportunity to get a better outcome from your savings, provide for your family, and help give yourself a sustainable income in retirement. Undoubtedly, you will be more relaxed too knowing that you have the right risk profile for your savings and that it is updated annually.