In previous articles, we explored Qualifying Non-UK Pensions and Portuguese-compliant investment bonds as potential investment strategies. This week, we turn our attention to another important financial planning tool—trusts. In this article, we will discuss the advantages and drawbacks of using trust structures to manage investments.
Are trusts right for you and your family
By Portugal team
This article is published on: 1st October 2024
01.10.24
Please note that the following analysis assumes UK domicile and it is important to understand that you can have a UK domicile as a Portuguese tax resident.
What is a trust?
A trust is a legal arrangement in which ownership of assets—such as cash, property, or investments—is transferred from one individual (the settlor) to trustees. These trustees then become the legal owners of the assets, managing them for the benefit of the settlor’s chosen beneficiaries.
A typical example might involve parents or grandparents aiming to reduce the size of their estate for inheritance tax (IHT) purposes. However, they may not feel comfortable gifting directly at this stage due to, for example, the beneficiaries being minors or not being mature enough to receive gifts direct. So the trust allows them to gift the assets now, but retain control over the timing and distribution of assets to the beneficiaries.
Trusts may also be used to safeguard assets for vulnerable beneficiaries or protect family wealth in the event of divorce.
Trusts can be created during a person’s lifetime or incorporated into a will.
Benefits
One of the key advantages of a trust is the control it offers. The settlor can dictate when and how assets are distributed to beneficiaries, which is particularly useful if the beneficiaries are not ready to manage large sums of money.
In addition to control, trusts offer substantial IHT benefits. Once assets are placed into trust, they are removed from the settlor’s estate, potentially resulting in a 40% tax saving—provided the settlor survives for seven years following the gift. This can significantly reduce the tax burden on beneficiaries when the settlor passes away.
Another practical benefit is that assets held in trust bypass probate, which can speed up the process of settling an estate and distributing assets to beneficiaries.
When is a trust most effective?
A trust is most effective when the settlor does not need access to the assets or income from the trust.
If the settlor or spouse retains any benefit from the assets within the trust, this is treated as a “gift with reservation of benefit” (GWR or GROB) meaning that the value they thought they had given away actually remains in their estate for tax purposes.
We commonly see parents gifting their main home to their children, or to a trust though which their children can benefit, thinking that this gift removes the value of their home from their estate on the basis they are no longer the legal owners. However, by continuing to live in the property they have fallen foul of the GWR rules and have defeated the purpose of the planning.
Tax implications
While trusts can deliver IHT savings and offer control over asset distribution, they can be quite costly from a tax perspective.
Upon creating a trust, the settlor must pay a 20% IHT charge on any amount exceeding the available nil-rate band (£325,000 for the 2024/25 tax year). For example, a £1 million gift into trust would result in a tax bill of £135,000 on the excess £675,000.
If the gift involves non-cash assets, capital gains tax (CGT) may apply, as the transfer is treated as a disposal.
Lastly, trusts are effectively additional rate taxpayers in the UK. They therefore pay income and capital gains tax at the highest rates on any income received and gains made annually. The trust also pays an inheritance tax charge of 6% every 10 years on the trust value.
Trusts and Portuguese Law
As a civil law jurisdiction, Portugal does not recognise trusts legally but it does tax income deriving from trusts and this applies irrespective of whether the trust has increased in value or not i.e. any distributions would be taxed at 28%, or at 35% if coming from a blacklisted jurisdiction, on both capital and gains.
Alternatives to trusts
If trusts are expensive from a tax perspective, not to mention the costs of appointing and running trustees, what at the alternatives?
‘Bare’ trusts
These are simpler than discretionary trusts and do not carry the 20% entry or 6% periodic tax charges. However, bare trusts have a significant limitation: once the beneficiary turns 18, they automatically gain full access to the assets, which may not be suitable for every family.
Contract based solutions
There are financial products that offer similar benefits to trusts—such as “gifting with control”—without the hefty tax costs associated with trusts. These may be worth exploring as an alternative.
Conclusion
There is no “right” or “wrong” in relation to trust planning – the suitability of different trust options will really depend on each family’s position and objectives.
For example, if you need access to either the capital or income from the underlying assets, trusts may not be appropriate. Or if you are uncomfortable gifting directly to your beneficiaries now, then a trust may be a redundant step in the financial planning process, and it may be better to consider various ways and allowances for making direct gits to your beneficiaries.
We would also advise a word of caution against companies cold-calling offering trust solutions to “Labour proof” your finances, and to always ensure you use caution and do your due diligence.
Why have a Financial Adviser?
By Susan Worthington
This article is published on: 21st September 2024
21.09.24
Change is inevitable, for many it can be unsettling. I am fortunate in that the clients and friends I look after have remained happy to stay with me on their financial journeys. Sometimes that journey can be more expensive than looking after your own affairs but at the end of the day it ensures your wishes are carried out to the best of your intentions.
It makes one appreciate that a client’s commitment to their adviser for the duration of their financial arrangements is fundamental to developing a strong relationship and achieving successful outcomes. It’s what an adviser can help them with that matters, and supporting those requirements over the long-term creates a unique bond. Matching the actual advice and arrangements to a client’s needs should be the highest priority for any adviser.
So what can an Adviser provide:
• Helps maintain perspective (and calm or change) during stock market turbulence.
• Able to explain and problem solve when something goes wrong.
• They provide more accurate news and updates from the real experts, steering clear of the media hype and scaremongering that is everywhere.
• Recommend tax efficient arrangements geared to your lifetime and also very importantly, after it, for your family.
• Have access to investment fund experts who often fare better than self-selected choices.
• Keep you on track as your circumstances change. Nothing ever stays the same, part of life’s rich pattern, so having a hand to hold you through that change can be comforting and supportive.
• Liaise with your tax or legal advisers to ensure your overall interests are protected.
As I reach a period in my work that extends to several decades sadly that involves clients leaving this world for the other and that alone can create enormous problems. If the next of kin are not aware of what to do, of what is required from them or where to seek advice it becomes overwhelming.
When you have friends and clients who have connected with you for many years it is often the financial adviser who can assist in this “miserable” but essential exercise. Most often once affairs are put into order during your lifetime, for those left behind, it provides a huge sense of relief.
Even in my own planning I have to consider working with other Advisers so that the increasing number of clients we look after will be managed effectively for the longer term, in case I disappear on my journey one day.
Most people will benefit from the knowledge and experience of a professional financial adviser, especially if they have a variety of assets. When deciding between working with a financial adviser or doing it yourself, you just need to weigh the benefits against what you could be missing out on.
Finance in Italy
By Gareth Horsfall
This article is published on: 16th September 2024
16.09.24
I have been rather absent this summer mainly due to my change of residence from Rome to Umbria. Works are still going on at the house although now in their final stages and should be done by the end of Sept, which I will be very thankful for because quite frankly it’s all driving me a bit mad.
Then of course, the work of getting the house and land in order will start and which will be much longer term. I still haven’t a clue what to do with the olive harvest, although after taking a tour of the trees the other day and given the very long hot dry summer this year plus the fact that the trees themselves have not been trimmed well in many years, it looks like the harvest would not be so great anyway, save a few trees which have produced quite a bit of fruit.
So all in all I am less preoccupied with that now and I may even take a weekend to have a go myself and see what happens… there is always a first time for everything! 😉
Saying all this, the thing that is driving me more mad is the fact that my long term rental car has now been playing up for over a year and I have had it in with the mechanic 6 times (yes, that number is correct !!) and every time within 48 hours the same problem arises. I am now going mad with LeasePlan about getting another car to which I cannot be promised a similar vehicle (which I need given the amount of Kms I do and also the types of ‘strade‘ I have to drive along). I think this fight is actually ageing me a lot more than the house renovations. Being without a car which functions properly is incredibly stressful.
Anyway, enough of my travails. Let’s talk financial stuff.
From €100,000 to €200,000
Firstly, a small mention of something that cropped up during the summer, and is unlikely to affect many of us, but Italy currently has a flat tax regime for high net worth individuals (did you know that by definition high net worth starts at €/$/£ 1 million of assets exc home?). In brief, there is the opportunity for those HNW individuals who wish to transfer their residency to Italy to pay a flat tax of €100,000 a year for a maximum of 10 years without the need to enter into the general tax system. This forfeit regime usually works out best for anyone who is earning a high enough income and would be paying over this amount in income tax. For anyone with invested assets, generally speaking, they could be organised in a way to not get anywhere near €100,000 in taxation, depending on factors such as how much one might need to spend each year etc.
Anyway, my point was that the Italian authorities have chosen to increase this flat tax to €200,000 pa. for new applicants (the effective date is not clear yet).
The interesting point about this was not the increase itself but the wording used by the Minister for Economy and Finance: Giancarlo Giorgetti. He stated:
“We [Italy] are against any type of competition to create the most advantageous fiscal regime for businesses or individuals, because countries, like Italy, that have a limited fiscal capacity would be disadvantaged and destined to lose”
From my point of view these are quite interesting words especially since Italy is now trailing other countries in the EU (Portugal) and the UK in pulling their fiscally advantageous tax regimes for high net worth individuals. So, is it only a matter of time before this flat tax regime is stopped altogether? I suspect it is.
Italy also has a flat tax regime for retirees moving to one of the southern regions in Italy. The possibility to pay a flat tax of 7% pa for a maximum of 10 years (with conditions!) Has this flat tax regime also got a ‘data di scadenza’? Only time will tell but certainly the direction would appear to be that preferential tax regimes are likely to have a limited shelf life, so if you are hoping to apply then it might be best to think about doing so sooner rather than later.
Other than this I didn’t really see anything other than the norm this summer. Financial markets have performed quite well this year to date, albeit more volatile in the summer months. I will be reporting more on that in further E-zines, but for now I wanted to share with you something I listened to on a podcast one day when I was ‘working the land’ one happy day in August. This topic rang true as we are now most of the way through a year when nearly 70% of the worlds population will have voted for new political leaders and the most important one is yet to come: the USA.
But I ask you to think about the following discussion I had with my mother in law recently when she explained to me that she had stopped buying goods from Amazon because she felt like she was funding big multinationals in their continued effort to destroy small businesses and making it harder for anyone else to compete in a fair market place. Whilst I admired her conviction, and actually agree with her 100%,I disagreed that Amazon were the actual proponents of this strategy and were in fact just a business trying to maximise profits and would use whatever legal methods (and probably use lobby groups as well) available to them to achieve that aim and if Amazon were in fact paying the same level of taxes and contributions as a small business owner then it would be much more likely that Amazon would have difficulty in continuing in its present form and small business / retail etc would perhaps thrive again. My point being that whilst purchasing less from Amazon will undoubtedly help your local businesses (and I do purchase more from local businesses than Amazon), it is unlikely to solve the wider problem as it is a political one which must be addressed.
So, whilst I was listening to this podcast there was a man called Lloyd Chapman speaking and he is the founder of the American Small Business League and had some pretty interesting things to say about small business in the USA.
I imagine that the facts and figures are roughly the same in the EU as those he quoted for the USA, but they did make me think twice about my own consumer patterns, which also leads us to our own investor behaviour.
So let me give you some of those interesting facts now.
How important are small businesses to the US economy?
* 99% of all US companies have less than 5 employees.
* 98% have less than 100 employees
* The average US company has just 10 employees.
* There are 33 million small businesses in the USA.
* Most of the innovation and R&D breakthroughs in the US come from small business.
These very same companies are responsible for over half the USA annual Gross domestic product, half of the private sector workforce, over 90% of the US exports and hence are responsible for over 98% of all new US jobs.
MOST AMERICANS WORK IN SMALL BUSINESSES
Bias of Government
Lloyd went on to point out that the federal government (and I would argue the European governments too) is all for big business. They introduced the small business act in 1953 which mandated that 23% of all federal contracts should go to small businesses, of which 5% would go to women owned businesses, 13% to businesses run by minority groups, and 5% to small businesses run and owned by Veterans. On this basis the small business act looks like the largest economic stimulus programme ever passed by Congress for the American people.
However, given that the majority of federal contracts are awarded to the Pentagon you would imagine that there would be a lot of auxiliary businesses providing services to the Pentagon itself, however, Lloyd explained that this is not the case and the small business act of 1953 has been largely repealed by the Pentagon over the last 20 years. In fact, the US government has, for the last 30 years, undergone a non-stop effort to close small business administration (local support offices for small businesses) and end all federal programmes for small businesses.
* Only 1% of businesses in the USA have over 500 employees
* But over 97% of federal spending goes to less than 1% of companies in the US.
* That 1% of federal spending has not created 1 NET new job in over 40 years (since the 1980’s) and dozens of these companies are not even paying taxes. The majority are Fortune 500 companies.
This is, in the words of Lloyd, a recipe for economic suicide.
Portuguese compliant investment bonds
By Portugal team
This article is published on: 15th September 2024
15.09.24
A path to lower taxes?
In an increasingly complex financial landscape, Portuguese tax residents are constantly on the lookout for investment strategies that offer both flexibility and tax efficiency. One of the most tax certain options for investors looking to reduce their tax burden is the Portuguese Compliant Investment Bonds (PCIB).
What is a PCIB?
PCIBs are a tax efficient form of investment that work particularly well for residents of Portugal. They also offer enhanced tax advantages for those who may return to the UK in the future.
Despite the somewhat misleading name, these “bonds” are not traditional loans to corporations or governments. Instead, a PCIB operates as a tax-efficient “wrapper,” akin to the UK’s Individual Savings Accounts (ISAs), offering investors a protective layer against immediate tax obligations.
How they function
The actual performance and growth of the PCIB is driven by what you put into the wrapper and in this respect, it is very flexible.
The PCIB allows you to invest in a wide choice of investments without the tax drag of ongoing capital gains or income tax – this is referred to as “gross roll up”. This means that within the PCIB, investments can accumulate wealth more rapidly than if they were subject to annual taxation outside of this structure.
A Strategic Move for Homeowners
One of the standout features of PCIBs is their potential to reduce or eliminate capital gains tax when selling property in Portugal.
Unlike in the UK, where selling a primary residence often incurs no tax, Portugal applies capital gains tax to all property sales. Historically, the only means to avoid this tax was to reinvest in another EU property—a strategy rendered moot for UK properties post-Brexit.
However, in 2019, the Portuguese government introduced a concession allowing individuals to bypass this tax by investing the proceeds from a property sale into an approved investment or pension structure, such as a PCIB. There are however certain qualifying conditions, the main ones being age 65+ or retired, the property being sold must be your main residence, and it has to be held by you personally (not through a company).
Other benefits
PCIBs offer a range of benefits beyond property-related tax relief:
- Lower Effective Tax Rates: When funds are withdrawn, only the growth portion is subject to tax. Additional tax reductions apply after five and eight years.
- Post-NHR Flexibility: The favourable tax treatment of PCIBs is available to both Non-Habitual Residents (NHR) and regular Portuguese taxpayers, making them a versatile tool for long-term financial planning.
- Control Over Tax Timing: PCIB holders can choose when to withdraw funds, enabling them to synchronize taxable events with periods of lower income.
- Avoid the 53%+ capital gains tax trap – investments held for less than 12 months typically attract income tax rates of up to 53%. However, within a PCIB, buying and selling can occur without triggering immediate tax liabilities.
- Investment flexibility and diversification – PCIBs accommodate a variety of currencies, asset classes, and investment strategies, offering a broad scope for portfolio diversification.
- Simplified Tax Reporting: Tax and reporting obligations are only triggered when a withdrawal is made therefore simplifying the reporting process for bond holders.
- International Portability: Recognised in many jurisdictions, PCIBs offer flexibility for those who may relocate, potentially eliminating the need to liquidate investments to start planning again. They are particularly tax efficient for UK residents allowing investors to potentially washout gains made whilst overseas.
- Succession planning – investment bonds allow flexible and certain transfer of wealth to beneficiaries. This may not be possible with other investment types and the default “forced heirship” provisions under Portuguese law.
- Inheritance tax savings – with the correct planning, holding wealth in an investment bond could mitigate UK inheritance for British domiciles and strengthen a non-UK domicile claim.
- Estate administration – In the event of the bondholder’s death, the distribution of assets to beneficiaries can occur without the need for a lengthy probate process.
The Importance of Professional Guidance
Given the intricacies involved in setting up a PCIB, it is essential to seek expert advice. Properly structuring the investment to align with individual and family needs is crucial to maximising its benefits and ensuring compliance with applicable laws.
How to Labour proof your finances
By Portugal team
This article is published on: 14th September 2024
14.09.24
No matter where you stand on the political spectrum, it seems there may be difficult times ahead regarding the UK’s finances.
With the upcoming budget on 30th October, tax increases seem all but certain.
The dilemma for the government is that, with Labour’s pledge not to raise income tax, national insurance, VAT or corporation tax, how will they look to ‘plug the hole’?The dilemma for the government is that, with Labour’s pledge not to raise income tax, national insurance, VAT or corporation tax, how will they look to ‘plug the hole’?
Here are some key areas to consider, the implications of which will be determined by your tax residency status, UK or Portugal.
Capital Gains Tax (CGT)
Currently, non-property gains are taxed at 10% for basic-rate taxpayers and 20% for higher/additional rate taxpayers, and property gains are taxed at 18% or 28%. One potential change could see CGT rates aligned with UK income tax rates i.e. 20%, 40% or 45%.
Whilst this will not have an impact to gains made by expatriates on non-property related investments, as the gain is only taxable in the country of resident (28% in Portugal), it would impact gains made on property held by non-UK residents.
UK property is always primarily taxable in the UK, irrespective of where the owner is resident. For Portuguese tax resident selling UK property, tax is also due in Portugal on the gain with a credit for any tax paid in the UK (unless a Non-Habitual Resident, where the gain is taxed at 0% in Portugal).
Pension Schemes
Changes to pensions would impact both UK and Portuguese tax residents. Currently, pension schemes are exempt from inheritance tax (IHT), but this benefit could be reduced or eliminated. Additionally, there may be changes to tax relief on pension contributions, so now could be a good time to maximise contributions and unused allowances while full relief is still available.
Keir Starmer has confirmed that there are no plans to reintroduce the lifetime allowance (LTA), but he has pledged a pension review.
This could see the tax-free Lump Sum Allowance (LSA) reduced or removed, so those needing this cash could benefit from withdrawing it sooner rather than later.
There may also be a reduction in the tax relief on pension contributions for high earners, reducing the relief from 45% to 20%/25%.
Whilst currently, pensions are outside the scope of UK inheritance tax, there has also been talk of removing this benefit. So those with large pension pots should keep an eye on these changes.
Inheritance Tax (IHT)
IHT changes are likely to impact UK nationals, regardless of residency, since IHT liability is determined by domicile status, not residency. Therefore, even if you have lived in Portugal for many years, you may still face UK IHT if you have not taken the necessary steps to shed a UK domicile of origin.
It is likely that any foreign assets held in offshore trusts will be liable to IHT.
Possible further changes include reducing the generosity of agricultural and business property reliefs, as well as extending IHT to pension schemes.
Early planning is crucial with IHT, such as starting the seven-year gifting period and taking advantage of the annual available reliefs.
For those looking to adopt a domicile of choice in Portugal, it would be beneficial to reduce your UK-based assets, as they remain subject to UK IHT, even if you are domiciled abroad.
Other changes
Possible further changes include reducing the generosity of agricultural and business property reliefs, and “wealth tax” targeting high-net-worth individuals e.g. through increased taxes on property holding, shares, dividends and luxury goods.
Final word
It is expected that any announced changes will come into effect from 6th April 2025, so whilst this may seem like a long planning window, planning early will be very important to ensure you take advantage of any remining opportunities and restructure in time.
With over 35 years’ experience, Debrah Broadfield and Mark Quinn are Tax Advisers & Chartered Financial Planners specialising in cross-border advice for expatriates. Contact us at: +351 289 355 316 or portugal@spectrum-ifa.com
Claiming State Pensions in Spain and the UK
By John Hayward
This article is published on: 13th September 2024
13.09.24
How to benefit from a little extra knowledge
What do the following statements have in common?
1. Fish have no memory.
2. You consume on average 8 spiders in your sleep.
3. Cracking your knuckles causes arthritis.
4. We only use 10% of our brains.
5. You have to pay into the Spanish social security system for 15 years to be eligible for a Spanish state pension.
The answer?
None of them are strictly speaking true. As I am close to clueless when it comes to biology, I will focus on the final point, state pension eligibility.
You will read on numerous websites that, in order to qualify for a Spanish state pension, you have to have paid into the Spanish system for at least 15 years and that two of these years must be within the 15-year period immediately preceding the pension claim. However, what is generally omitted from the text is the fact that years of contributions in other countries, including the UK (despite Brexit), can be added to the years in Spain. In order to pounce on any uncertainty which might be created by my statement, I will illustrate my point with an example:
– Years in the UK system – 22
– Years in the Spanish system – 10
Although 10 is less than 15, the 22 years of UK contributions takes the total number of years over 15, i.e. 32 (10 + 22). This does not mean that one claims 32 years from the UK, or even Spain, but, in this example, there will be an entitlement of 22 years’ worth of state pension from the UK and 10 years of Spanish state pension (as long as contributions were made to the Spanish system in 2 of the 15 years prior to claiming the pension).
As per the statement from La Moncloa, the office of the President of the Government of Spain, “As from 1 January 2021, the UK and Spain will retain their jurisdiction to manage Social Security benefits based on contributions made in their respective territories, under conditions of equality and non-discrimination.”
Furthermore, “The Protocol on Social Security Coordination sets forth the totalisation of contribution periods completed in the other Party for the recognition of retirement pensions”. This is not particularly friendly English but the point is there.
In order to find out more about pension entitlement, it is extremely helpful to be registered on Gateway for UK pensions and have a digital certificate to access information about the Spanish system. The digital certificate is also useful for other legal and tax enquiries, including SUMA and cadastral enquiries. It sits on your computer and allows immediate access to your information.
Although you can access projections as to your future pension entitlement, the story does not end there. Certain assumptions are made with these online facilities and you may not be provided with a completely accurate assessment of your entitlement. In the same way that accumulating years of contributions from different jurisdictions can solve the 15-year minimum term problem in Spain, it might also be the case that you can receive your Spanish state pension earlier than expected. The state retirement age in Spain in 2024 is 66 years and 6 months. This will gradually increase to 67 by 2027. However, if someone is able to show (in 2024) 38 years and 3 months of contributions, the retirement age is 65. This limit is increasing to 38 years and 6 months by 2027 and, presumably, there will be changes after that.
So let us take an example of the person who also paid for 22 years in the UK but, this time, an additional 17 years in Spain. Their default projected state retirement age is 67 in both the UK in Spain. Although the number of years paid overall will have no effect on the UK state pension age, it will do in Spain. As 22 plus 17 is 39, the person expecting to retire at 67 could actually receive their Spanish state pension at 65.
There are other rules and options with this i.e. deferring the receipt of the pension, continuing to work and receive 50% of the pension, etc., and from an income planning perspective, this could be beneficial.
We do not work for the tax office or a social security department but all of this is really important when planning ahead to determine cashflow, income, and even employment, requirements. Using tax efficient investment vehicles, and assessing existing pension arrangements, we can help you work out how much you need in retirement and how you can achieve your long-term financial and life goals.
There is so much information on the internet but not all of it is accurate. We make every effort to filter out the wheat from the chaff as we know how important it is to know the facts before committing to something. People have made bad choices in the past because they did not have all of the relevant information. The decision by the Scots to invade England during the Black Death was not one of the best.
Moving from the UAE to Spain
By Charles Hutchinson
This article is published on: 12th September 2024
12.09.24
I was on one of Spain’s magnificent high-speed trains the other day, coming home from Madrid. We were travelling at over 300 kph across the spectacular wild scenery, a complimentary glass of white wine on my table with not a ripple on its surface.
I was lucky enough to be travelling Preferential (1st class) as Economy was full up. But the price didn’t matter because I have attained the age where I am entitled to a Gold Card which reduces train tickets by as much as 40% – I was travelling First for the price of Second!
Opposite me sat a kindly looking fellow and soon we began to chat. He was a senior airline executive with one of the Arabian Gulf airlines and was soon to retire. He was on a looksee mission as he and his wife had decided to move to Southern Spain where the climate is similar to Dubai’s, their home for over 15 years.
The thought of moving back to their native damp grey Britain was daunting.
It was a fortunate meeting as I was soon able to help him cut some corners and avoid some pitfalls which had been laid in his path by so called knowledgeable advisers in the UAE.
Relocating from Dubai to Spain can be an exciting move, but it also involves several important steps to ensure a smooth transition.
Here’s a breakdown of the key aspects you may need to consider:
Personal Finances
Taxation: I was able to present him with a copy of our Spanish Tax Guide which shows the different tax obligations and, once you become a tax resident (living here for more than 183 days), that you’ll need to pay taxes on your global income. I also advised him to check the details of the double taxation agreements between Spain and the UAE. It is very important to engage a licensed and regulated (in Spain) financial adviser to assist you with all these matters.
Spanish Bank Account: You’ll need a Spanish bank account to pay rent, utilities, and other expenses. It is also advisable to have an offshore bank account where the bulk of any cash should be kept as some Spanish institutions have the habit of raiding one’s account without permission!
Visas and Residencias
It seemed he wasn’t fully aware of the options available to him in legally securing his residency here. As a UAE resident, you’ll need to apply for a Spanish visa unless you hold citizenship of an EU country. There are several types of visas. Non-Lucrative Visa: if you plan to retire or live off savings, this visa allows you to stay without working. Golden Visa for individuals investing in property or businesses in Spain (minimum investment of €500,000). Work Visa: If you have secured a job in Spain. Student Visa if you are moving for educational purposes. Residency Permit: once you have arrived in Spain, you’ll need to apply for a residence permit, if none of the above apply.
Driving
It is important to check if you can exchange your UAE driving licence for a Spanish one, or if you’ll need to undergo a test. You have six months to drive on your foreign license once you’re a resident here.
Accommodation
Many people moving here begin by renting to see where they would like to live within a certain area. An alternative to this is to retain a Relocation Agent who will line up properties to your specification before you come over. This saves time and money and can be very rewarding. You can also use this service if you wish to rent instead.
Lawyers and Gestors (Para Legals)
It is important to retain a lawyer or Gestor who specialises in immigration or real estate to help you navigate legal requirements such as contracts, taxes, and residency permits. A good reputable relocation agent can also provide this service.
Healthcare
Spain has an excellent public healthcare system and is available once you obtain your residency permit (Residencia). Many expats opt for private health insurance and there is a wide choice here. In some cases, it is mandatory for gaining residency.
General Insurance
If your UAE general insurance company does not have an EU entity, then you will need to reinsure here. This is required for your car(s) and highly desirable for your purchased property and its contents. The easiest route is a general insurance broker (of which there are many here) and who will also organise your medical insurance, if needed.
Shipping and Moving Services
If you have furniture, cars, or other personal belongings to move, the relocation agent can arrange this as there are many excellent international removals companies with branches here. They will be familiar with customs formalities and on used personal belongings, note there is no import duty. However, on a personal vehicle, you will have to pay IVA (VAT) if you decide to keep hold of it after 6 months.
Schooling
If you have children of that age, Spain offers free public schooling but classes are conducted in Spanish. There is a wide choice of Private/International Schools which offer international or UK curriculums.
Lifestyle
The lifestyle in Spain can be quite different from Dubai’s. The pace of life tends to be more relaxed here, with emphasis on family time, meals, and socialising.
The Spanish are a very hospitable people and many speak sufficient English to make themselves clearly understood. But to make life easier and to fully appreciate the wonders of Spain, it is advisable to learn Spanish as early as possible after arrival.
On arrival in Malaga, we parted company full of bonhomie and he was now armed with sufficient information to get started quickly and effectively with his search. He also has my contact details and so he might even become a client! He certainly indicated he wanted to meet again.
If you are contemplating such a move from the Gulf or from any other jurisdiction, do please contact me for a no obligation and complimentary chat on my below details:
Sources: Integrated Relocation Services, Keystone Propery Finders
Getting financially fit
By Chris Burke
This article is published on: 11th September 2024
11.09.24
As always, I am here to help ensure that the last phrase above stays with you for life, by helping you manage your assets using highly tax efficient, well-invested methods, and offering you sound advice as the years go by.
This month I thought I would really get you thinking and organised by providing, from my experience and professional opinion, in the order of importance, a list to get you financially efficient and enable you to change your wealth and financial outcome in life. Pick out those areas that apply to you and get working on that personal financial health-check now, so that over the years you maximise your assets and wealth:
1 – Taxes
Review your tax situation, making sure all your assets are as tax efficient as possible and that any monies you have are not subject to unnecessary tax, both now and later in life. For me, this is the FIRST task to tackle with your finances, and working with a good tax adviser here in Spain is rule number one. Having a ‘leaky bucket’ where any gains you make are ‘dripping’ away to hacienda is not managing your money effectively.
2 – Debt – Review and Reduce
Pay off high-interest debt as quickly as possible, starting with credit cards and other loans with high rates. Consider refinancing options if rates drop or consolidating debts for lower rates.
3 – Prioritise Building an Emergency Fund
Aim to have at least 3 to 6 months of living expenses in a high-yield (good luck with that in euros!) savings account. With economic uncertainty, having a buffer can provide peace of mind and protect against unexpected expenses.
4 – Have short, medium and long-Term financial plans
Set clear, realistic financial goals (short, medium and long-term) to develop a comprehensive plan and achieve them. Regularly review and adjust your plan to adapt to life changes and financial circumstances.
5 – Consider Inflation
With inflation remaining a concern, explore investment options that can hedge/work against inflation, such as inflation-linked government bonds, commodities, real estate or well-designed investment portfolios.
6 – Invest your savings/spare cash consistently
To grow and increase wealth, one must invest. Nothing is guaranteed in life, however over the long term a good investment plan will work to grow your monies as opposed to a guaranteed reduction in real value with low/non-interest-bearing bank accounts.
Continue investing regularly, regardless of market fluctuations, through strategies like pound/euro cost averaging. Diversify your portfolio across different asset classes (stocks, bonds, real estate, etc.) to minimise risk.
7 – Automate your savings and investments
Set up automatic transfers to savings and investment accounts. This helps ensure you save regularly and take advantage of compounding growth without needing to remember each month.
8 – Re-evaluate insurance coverage
Review your insurance policies, including health, home, auto, and life insurance, to ensure you have adequate cover without overpaying. Consider policies like umbrella insurance if your assets have grown significantly.
9 – Maximise retirement contributions
Contribute as much as possible to a retirement plan, especially if your employer offers a matching contribution. With inflation and increasing life expectancy, building a larger nest egg is crucial.
10 – Stay informed about tax changes
Keep up with any new tax laws or changes that could affect your personal finances. Look into opportunities for tax deductions or credits, like contributing to tax relief investments or making charitable donations.
11 – Rebalance your investment/asset portfolio regularly
Review your investment portfolio at least annually to ensure it aligns with your risk tolerance, financial goals, and market conditions. Rebalancing can help maintain the desired asset allocation and also changes in your life as the years go by.
12 – Plan for major expenses in advance
If you anticipate major expenses (like buying a home, car, or funding education), start planning and saving early. This can help you avoid high-interest debt or dipping into long-term savings.
13 – leverage technology and financial tools
Use budgeting apps and financial management software to help track expenses, plan investments, and manage your portfolio efficiently.
14 – Invest in yourself
Allocate time and resources to enhance your skills and knowledge in personal finances, as this can lead to higher income potential or career advancement.
Nothing changes if nothing changes……
If you would like to discuss any of the above topics in more detail, or you would like to have an initial consultation with Chris to explore your personal situation, you can do so here.
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If you would like any more information regarding any of the above, or to talk through your situation initially and receive expert, factual based advice, don’t hesitate to get in touch with Chris.
Is there life after BRICs and what has happened to China?
By Charles Hutchinson
This article is published on: 7th September 2024
07.09.24
There was a time not so long ago when the BRIC markets were the darlings of the investment world. Certainly many of our Balanced risk and Adventurous risk clients were recommended to hold funds of such renowned investment houses as HSBC and Jardine Fleming. So what has happened since?
The Brazil economy has been destroyed by poor leadership and corruption; Russia has been banished to the outer fringes of the civilised world; democratic India is developing into a first world giant economy which is forecast to match China by the mid 30’s; and China? The communist Chinese economy has certainly had its share of problems since the beginning of the ‘20s, which persistently drag its markets down. They have continued to underperform due to a combination of economic, regulatory, and geopolitical factors.
Here are some key reasons:
China’s economic recovery post-COVID-19 has been slower than expected. Domestic consumption remains sluggish, and growth in key sectors like real estate has faltered. This has weighed heavily on investor confidence.
The manufacturing sector, traditionally a pillar of China’s economy, has faced challenges due to weakened global demand and supply chain disruptions. This has further dampened economic growth, impacting market performance.
The ongoing crisis in China’s property sector, exemplified by the struggles of major developers like Evergrande, has led to significant financial instability. The property market, which constitutes a large part of China’s economy, has seen declining prices and sales, eroding wealth and further depressing consumer spending. Many property developers are heavily indebted, and their financial troubles have rippled through the economy, affecting banks and other sectors linked to real estate.
The Chinese government’s regulatory crackdown on the technology sector has created significant uncertainty.
Major tech companies have faced fines, restructuring orders and other regulatory actions which have spooked investors and led to a sell-off in these stocks. Beyond tech, the government’s broader regulatory agenda, targeting education, gaming, and other industries, has increased investor caution. The unpredictability of regulatory interventions has made both domestic and foreign investors wary.
Foreign investors have been pulling capital out of China due to concerns over economic prospects, regulatory risks, and geopolitical uncertainties. This capital flight has further weakened stock prices. Domestic investors are also hesitant, with many preferring safer assets due to uncertainty about the direction of the economy and government policies.
Lastly, ongoing geopolitical tensions, particularly with the United States, have created an overhang on the market. Issues such as trade disputes, technology bans and the delisting of Chinese companies from U.S. exchanges have all contributed to negative sentiment.
The risk of decoupling between China and the West, especially in critical sectors like technology, has raised concerns about the future growth prospects of Chinese companies, further depressing stock prices.
There seems to be little immediate relief in sight unless there are significant improvements in economic conditions, regulatory clarity and geopolitical stability. The Spectrum IFA Group, along with many other advisers, are wary of our clients holding positions in the Chinese market through collective funds. But if you are a fan of Asia and other Emerging markets or just simply want to diversify your portfolio further, then one should perhaps look at India rather more closely.
For more information on this and keeping your portfolio safe within efficient and effective tax structures, please contact me, Charles Hutchinson, via the form below.
Sources. Morgan Stanley, Wall St. Journal
Financial update September 2024 – France
By Katriona Murray-Platon
This article is published on: 5th September 2024
05.09.24
I hope you all had a good summer. I very much appreciated the fact that it wasn’t too hot over the summer. My garden is certainly in a better shape thanks to the better weather. Now it is back to school and back to work and I am looking forward to setting up appointments and meeting people again.
For those who are eligible for the energy cheque but did not receive it this spring or if you did receive it but would like to review the amount received, you can now make a claim on the website chequeenergie.gouv.fr but you must make sure you do this before 31st December 2025.
On 1st August the interest rate of the LEP savings account reduced to 4%. To be able to open one of these accounts your taxable income needs to be below €22 419 (single person) or €34 393 for a couple. This rate reduction puts the LEP at only 1% higher than the other savings accounts such as the Livret A, the LDDS and the Livret Jeune which have an interest rate of 3%, set rate until February 2025.
If you are looking to save for your children there is a new savings plan called the Plan Epargne Avenue Climate (PEAC) which is available from 1st July 2024. It is a hybrid of the Livret A and the PER retirement scheme and allows you to save up to €22,950 with any gains being free of tax and social charges. There is no fixed interest rate, any gains will depend on the investment strategy but the investments are ESG and in “green” bonds. However not many banks or insurance companies offer this savings plan as yet preferring their own versions of assurance vies.
Since 31st July and until 4th December, those taxpayers who declared their income online can correct their declaration or amend any omissions by going onto their personal account on the impots.gouv.fr website under “accéder à la correction en ligne”. However, bear in mind that if the amendment results in less tax being paid or a higher tax credit, the tax office will probably contact you for more information or documents and can refuse to amend the tax return. If they do this, you need to make a complaint via the messenger service and, if this is refused, court action will be necessary. This comes from a decision of Paris administrative court of appeal of 28th June 2024 (no 22PA04610) whereby the the Court ordered the tax office to reissue the tax statement will the requested amendments. The online correction system does not let people know that their amendments can be refused.
As from September, if the amount of tax you pay is greater or less than the previous year, your monthly payments will change from 15th September. If you owe less or the equivalent to €300, the remainder will be taken on that date. If you owe more than €300, the payment will be spread out over four payments taken on 26th September, 25th October, 25th November and 27th December.
For those with Pru assurance vies or those thinking of investing in a Pru Assurance Vie, on Tuesday 27th August 2024 the Prudential Assurance Company (PAC) board reviewed the Prufund Expected Growth Rates (EGR) as part of the quarterly review process. Prufund aims to help customers grow money over the medium to long term ( 5 to 10 years) and it protects customers from some of the short-term ups and downs of the markets by using the unique established smoothing process. The Expected Growth Rate (EGR) is the forward looking element of the Prufund smoothing process. For this quarter the EGRs of the Prufunds in our assurance vie products remained unchanged for the € and $ but the Prufund Growth GBP dropped slightly from 7.7% to 7.3% and the PruFund Cautious GBP dropped from 7% to 6.6%. The Unit Price Adjustment (UPA) part of the smoothing process, which is a backward looking element, and which is formulaic and non-discretionary are also reviewed quarterly. This quarter there was an upward UPA for the Prufund Growth USD fund of +2.19%.
September is really the beginning of the year in France, more so than January, after the long summer holidays. Referrals are very important in our business and so is our reputation with clients. Therefore we are asking clients to kindly give a review of our advisers and our business on Trustpilot. I would be very grateful if you would kindly take the time to leave a comment using the link below: https://uk.trustpilot.com/review/spectrum-ifa.com
Please do get in touch to arrange a free, no obligation phone call or video meeting to discuss any financial or tax matters that you may need advice on. I look forward to hearing from you.