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Moving to Spain and Wealth Tax

By Charles Hutchinson
This article is published on: 6th October 2022

06.10.22

I was flying back home from London at the weekend and I was sitting beside a fellow Brit who seemed very pleasant. We got chatting and it turned out he is a keen golfer, lover of warm climes and owns a holiday home in Southern Spain. His wife is a keen gardener. We exchanged pleasantries and he felt frustrated he could not move himself and his wife permanently to Spain. I asked why not? He replied the tax situation in Spain is horrendous from every angle and they have something called Wealth Tax which is unheard of in many countries, including the UK. As a wealthy man, this put it out of the question. He said he had missed the boat regarding a Residencia (TIE) and found queuing for miles at Malaga airport with all the other Brits on returning to the UK from Spain was really unacceptable.

We had over an hour more together on the flight and he was my captive audience. So I proceeded to give him the lowdown on the whole tax situation:

1. Wealth Tax (suspended). From last week, there is no more Wealth Tax for residents and non residents of Andalucia where my companion’s house is located. What or where is Andalucia? Andalucia is a semi autonomous region (one of 17 in Spain) which stretches from the Portuguese border in the West to beyond Almeria in the East and up to Cordoba in the North and is bordered to the South by the beautiful Mediterranean Sea. Its capital is the stunning Seville. Wealth Tax was calculated on the total value of your assets on a varying sliding scale according to the amount. At the upper level it was 2.76% on €10.696m and above. Previously as a resident, you had to pay wealth tax on ALL your worldwide assets. As a non resident, it was only on your Spanish assets.
As a result of the suspension, it is expected that many previously resident expatriates will return from those countries with attractive tax regimes to Andalucia as residents and many first time residents will apply to become permanent residents.

Additionally, the case (tax wise) for coming to live here, these other taxes are just SO friendly:

2. Spanish Succession Tax (IHT) (suspended). This was effectively abolished on 1st January 2018 by granting a 100% allowance on the first €1m and thereafter 99% allowance. Assets sheltered in foreign entities (banks, insurance companies, etc.) which are being inherited by foreign residents (e.g. children living outside of Spain) are also exempt from this IHT.

3. Capital Gains Tax (adjusted). Payable at the same rates by everyone except on the sale of your main residence in Andalucia where it is exempt if you are over age 65.

4. Income Tax (decrease). A decrease by at least 4% p.a. has been announced. On investment income derived from approved EU based Spanish Compliant Investment Bonds, this attracts very low income (savings) tax. We are talking about a drop from a standard income tax upper level rate of around 46% down to a level of between 9% and 11% average over a 20 year period, depending on the amount of income taken.

5. Water consumption tax (suspended). This is planned to be abolished from 2023. So my companion with the big garden and pool was pleased.

6. Residencias. If you hold a TIE (Tarjeta Individual Extranjero), you can stay in Spain up to 6 months, if you are a non taxpayer in Spain. As a taxpayer in Spain, you can stay for an unlimited period. One of the benefits is that in both cases you can join the queue for Nationals and EU citizens with your British passport and TIE – no more queuing! You can also roam the EU Schengen area at will and stay as long as you like (the latter if your TIE is a “Permanente”) within the residency rules of those countries.

Although the application window for TIEs for Brits has closed, you can still apply for a Golden Visa (investor’s visa), come and go as you please but become a tax resident of Spain if you stay more than 183 days. Or you can apply for a non lucrative Visa which allows you to stay as long as you want but you cannot be employed and you have to become a tax resident.

7. Tax residency. What exactly does it mean? Simply put, if you spend more than 183 days in 12 months in Spain, then you must file for tax residency. If your “centre of vital interests” is in Spain (wife or partner here, children in school here, etc.), then you would be judged to be fiscally resident.

At the end of my lengthy discourse, he asked what exactly would this mean for him? So on the back of an inflight magazine, I jotted down some information from him and gave him an approximate potential tax position and the savings he would now have, in addition to some existing ones of which he was not aware.

Moving to Spain and Wealth Tax

His total assets in the UK and Spain, including homes, bank accounts, premium bonds, managed investment portfolio and a classic car totalled some €5,526,000. On this as a Spanish resident he would previously have to pay some €98,000 in Wealth Tax. Now it would be zero.

On his pension and investment income of some €166,000, they would pay some €61,000 Spanish Income Tax. But by moving his investment portfolio into a tax efficient Spanish Compliant Bond (based outside of Spain), they could increase the investment part of their income to around a yield of approximately 5% p.a. while lowering their tax bill by some €10,000 p.a. (from €13,900 on their investment income to €3,900).

Of course, he would have to pay Capital Gains Tax on the move from his UK portfolio to the Spanish bond. This would probably be minimal while the markets are currently down. In any event their investment manager had “bed and breakfasted” * their portfolio two years earlier, thus further reducing the potential gain.

And there would be no Inheritance Tax payable by their three children, even if they decided to move to Spain also.

The best part to him seemed to be that his wife could water their garden for as long as she liked!

There was a noticeable spring in his step when my companion left the aircraft in Malaga. I had one too as I felt I had probably gained a new client.

 

* Bed and Breakfast. This is where you take advantage of the annual UK CGT allowance by selling some or all of your holdings and then buying them back, both just before the end of the tax year. This prevents a large Capital Gain build up over the long term.

Somewhere in this article there must be such good news that you want to know more. Why don’t we discuss it over a coffee? And of course, I don’t mind what they say about Italian coffee, I think the coffee in Spain is the best there is anywhere in the world! It’s the way they make it and serve it. Rather like how we look after our clients.

How to build income from your investments

By Barry Davys
This article is published on: 5th October 2022

05.10.22

How do you pay for your Mistress?

An old Chinese proverb advises “Only pay for your mistress from your income, never from your capital” It is not known if it was a wise woman or a wise man who came up with the proverb but it was a person who certainly knew about money.

I admit as a young man, before I heard of the proverb, I got this wrong. I bought a second hand Porsche 911 SC. It was fun, fast and purred fantastically. I had the money to buy the car, especially with the part exchange of my old car.

As a young RAF officer what I did not have was the income to service it. Simple repairs such as when the indicator glass broke stretched my income and I really struggled with the cost of the insurance.

The indicator glass, for example, went in a semi circle around the wing. It cost me £68 for a new glass because of that bend in the glass. I still remember the price some 41 years later as back then £68 was much more significant than it is today.

How do you pay for your Mistress?

For those of us living here in Catalonia our mistress tends to come in the form of, for example,

  • A boat with mooring costs, winter storage etc
  • A car for touring on the continent. Often falls into the category of a big name brand of car or a vintage car with associated costs
  • The temptation to eat and drink out every night, every other other night etc
  • Swimming pool with maintenance
  • A bigger house with associated costs including security systems, insurance, watering of the garden etc

In nearly all cases when you hear couples talking about the purchase, you will hear the question “Can we afford it?”. The thought process to answer that question is do we have enough money in the bank to buy it. If the answer is yes, the item is bought. It is much less usual to hear “can we meet the ongoing costs?”.

Interestingly, even when we have accumulated significant wealth this proverb still stays true. With more capital we buy bigger things; house, super yacht, more expensive cars etc. and end up with bigger expenses.

Book a remote appointment with me now
How to build income from your investments

We need to ensure that we have sufficient net income to meet the running costs of the purchase. If we do we can

  • Enjoy our purchase without worry
  • Not damage our financial position by having to spend capital to pay for running costs
  • Still have capital left for our surviving spouse and/or our family
  • Not suffer from buyer’s regret

How do we get sufficient income to pay for our mistress? We use our existing wealth to build up an income that pays out regularly. Preferably in a tax efficient manner where possible.

Nowadays investing in the latest tech company or perhaps even a crypto currency is deemed to be the way to make money by some people. It may build your capital. However, neither generates much income and in some cases, no income.

If you would like to discuss how to build income from your investments so you can enjoy your purchases without worrying about the ongoing costs please feel welcome to get in touch, in the first instance, by email at barry.davys@spectrum-ifa.com

I cannot guarantee to help you meet all your running costs but as I am passionate about financial planning I anticipate I can improve your situation.

Book a remote appointment with me now

Le Tour de Finance arrives in western France

By Spectrum IFA
This article is published on: 4th October 2022

04.10.22

What is Le Tour de Finance?

Interested in finding out how to make the most of your money as an Expatriate?

Do you have questions about Assurance Vie, tax efficient investing, pensions (including QROPS), investment markets, estate planning etc?

Why not visit a local event, bring some friends and make it a great day out.

Le Tour de Finance is the financial forum for expats which will help you with a range of different financial products and services. Just as Le Tour de France takes a route throughout the regions of France, so too does Le Tour de Finance, but we also visit Italy, Spain, Switzerland and Portugal. We want to reach expats where you live so that you can seek advice particular to your local area. Tax advice, pensions / QROPS, mortgages, healthcare, schools, succession planning, business advice and making the most of your assets are just some of the subjects that expats need to know more about.

Le Tour de Finance is the ideal opportunity to find answers to the most pressing questions facing people living as expatriates in Europe.

The forum will bring together key players who assist expats settling or already living in these countries. It will also be an ideal opportunity to socialise by enjoying a free Buffet lunch and meeting people in similar circumstances in your neighbourhood.

Join our events in October
Chateau Sauge

19th October 2022
Chateau Sauge

CLICK HERE TO REGISTER

Fontevraud-abbey

20th October 2022
Royal Fontevraud Abbey

CLICK HERE TO REGISTER

As an expat, do you make the most of your finances?
Join us, and our panel of guest speakers, for informed guidance on expatriate financial planning opportunities, commentary on investment markets and to meet like-minded people in your local area. The event starts at 10.00am with a welcome coffee, followed by brief presentations from international experts on a range of topics that could affect you now, or in the future. The morning ends with a complimentary buffet lunch and a chance to meet the experts and hopefully make some new friends.

Register for this free event or for further information, by sending an email with your full contact details to: seminars@ltdf.eu, register online on www.ltdf.eu or call 06 73 27 25 43.

Join our events in October

Can I keep my UK pension as a Portuguese resident?

By Mark Quinn
This article is published on: 26th September 2022

26.09.22

I’m asked the above question by many clients, and the short answer is – yes. Whether it is the best thing to do however is something that should be looked into on a case-by-case basis with a qualified pension specialist.
Here, we will look at the general tax position of UK personal pensions, Self-Invested Personal Pensions (SIPP), defined benefit schemes and qualifying recognised overseas pension schemes (QROPS) for Portuguese tax residents and the restructuring options available.

Income tax
For Portuguese tax residents, the income tax position of having a UK pension scheme and a QROPS is the same. During NHR, pension income will be taxed at 10% or 0%, depending on your NHR status. Post-NHR, generally the income will be subject to scale rates of tax.

From a UK perspective, generally, UK pension income will not be taxable in the UK and you can request to have it paid out to you in Portugal gross. This will avoid the onerous process of claiming back tax at source from HMRC. I say generally because if you have a UK-based government scheme e.g. civil service, military or certain NHS schemes, the UK retains the taxing right and the income will always remain taxable in the UK.

All pension income, irrespective of which country has the taxing right, must be declared in Portugal if you are a resident there. You will receive a tax credit for any tax paid to HMRC, so you will not have to pay tax twice on the same income.

There is no UK taxation on overseas pensions held by Portuguese tax residents as there is no UK dimension to consider.

Inheritance tax
The death tax position between having a UK-based pension and a QROPS is also the same i.e. both will be outside of your estate for UK Inheritance Tax purposes.

From a Portuguese perspective, as long as the scheme is not Portuguese based, it will not attract Stamp Duty (10%) on death.

UK Pensions in Portugal

What are the options?
Your options will depend on the type of pension you have, the scheme rules and whether you have already taken income or not, but generally, your options will be:

  • Keep your UK pension as it is
  • Transfer to alternative UK personal pension or SIPP
  • Move to a QROPS (Qualifying Recognised Overseas Pension Scheme)

Choosing to do nothing can be just as detrimental to your pension value as being misadvised, particularly in the long term. You should conduct regular reviews (at least annually) and address aspects such as your risk profile, capacity for loss, income requirements, rebalancing or switching underlying investments, and changes to your objectives and family circumstances.

Why would you consider a transfer QROPS?
QROPS is something that is pushed on expatriates by many offshore advisers as this is how fees are generated, and although the advice itself may not be ‘bad’, it might not be the ‘most appropriate’. So, if you are considering transferring to a QROPS we recommend that you get several opinions and ensure you only take advice from appropriately qualified advisers and reputable firms.

QROPS tends to be more expensive than UK based pension schemes because of the international dimension. For some individuals, a QROPS is the right thing but for others it is an unnecessary expense.

Some instances where a transfer to a QROPS could be beneficial are:

To reduce currency risk: a UK pension scheme will inevitably be denominated in Sterling, and this will involve regular currency conversions to meet spending needs in Euros. If the Sterling/Euro rate is low then your purchasing power diminishes. This leads some to look at overseas pensions which can be denominated in Euros or a mixture of most major currencies.

If you are in excess, or close to, the UK Lifetime Allowance (LTA): for 2022 the UK LTA is £1,073,100. The trend over the last couple of decades has seen the LTA continually reduce.

Once you exceed the LTA, the excess is taxed at either 25% or 55% depending on how the income is taken. You cannot avoid this tax, as even if you do not access your pension, you will be tested against the LTA at age 75. Likewise, if you do access your pension before age 75, your benefits will be tested again at age 75 effectively taxing any growth since you first accessed your pension benefits.

The UK LTA cap does not apply to overseas schemes, so a transfer out can be beneficial for those close to, or over the LTA.

Qualified professional advice
You have worked your whole life to fund your retirement savings, and many are reliant on this to provide an income into old age or to provide a legacy to loved ones. Ensure you speak to the right people to protect your wealth. Spectrum has in-house pension specialists and can offer a complimentary and impartial analysis of your pension schemes.

We are Chartered Financial Planners (CII, UK) and Tax Advisers (ATT, UK) with a wealth of experience in both the UK and Portugal providing cross-border advice. You can contact us through the form below or by phone on +351 289 355 316 or by email at mark.quinn@spectrum-ifa.com / debrah.broadfield@spectrum-ifa.com.

Living in Italy

By Spectrum IFA
This article is published on: 24th September 2022

24.09.22

Italy’s parliamentary election 2022

I thought I would start this newsletter with a story of a recent trip to the market in Rome. As you will know, if you read this E-zine regularly, I go to the Mercato Trionfale for the weekly food shop. I like the experience, colours, sounds and chats in the market. I find that you also get a good idea of what is on people’s minds and how people are thinking in any moment. Obviously, the talk of the moment is not the Queen’s death (you may or may not be surprised to hear this) but of the upcoming elections in Italy. Both events are significant for women. Obviously, the Queen’s funeral is important because she seemed to be the glue that held the royal family and the Commonwealth together and we shall see how King Charles III gets on with that responsibility. Also, an equally important event is likely to be the election of Giorgia Meloni as first female prime minister of Italy.

Giorgia Meloni, for those of you in the know, is the leader of the Fratelli d’Italia party and is considered right wing. She is leading the polls with about 25% of the vote. Closely followed by the Partito Democratico (leftwing) with approx 21% of the vote. However, as is always the case in Italy, the parties need to form a coalition with smaller parties to gain a voting majority. Fratelli d’Italia have already announced their right-wing coalition with both la Lega (Salvini) and Forza Italia (Berlusconi). Together it is expected that they will garner about approx 45% of the vote. That is essentially a landslide in Italian politics and it is almost certain at this point that the ‘centrodestra’ coalition will be taking power shortly after the vote on 25th September.

The big worry for many is that Giorgia Meloni and Fratelli d’Italia have their roots planted in a fascist past and the feeling is that their policies will start to unravel years of democratic advancement in the name of equal rights and protection for women (which in Italy are still lacking in some many areas), gay rights, abortion rights etc. It was with all this in mind that I decided to follow Giorgia Meloni and Matteo Salvini on facebook this summer. To be honest, what I read wasn’t significantly alarming and to be fair to Giorgia Meloni she has dealt with all criticisms head on and opening encouraged discussion with her opposition, rather than just slurring them for being different. One particular instance was where someone got onto a stage when she was holding a rally and started a protest against her views on gay rights. She kindly invited the person to take the stage with her and explain their position so she could defend her own. Now, don’t get me wrong, I am no fan of Giorgia Meloni or any other right wing party in Italy but I would like to see more of this type of open discussion of differences of opinion and critical thinking rather than one side just spewing venom at the other because they have opposing views. Anyway, for someone who is a first-time voter in Italy (I gained citizenship in 2019 and so this is my first opportunity to vote in Italy) it has been an interesting journey so far. However, one other thing that piqued my interest, and I thought I would share with you here, is the centrodestra proposals to introduce a flat tax.

But, before I go into that, I will take you back to Mercato Trionfale for a moment. I wanted to tell you about the fact that I buy my eggs from the same stall, where oddly enough, he ONLY sells eggs! For as long as I have been going there (6 years) the eggs have been 35c for a ‘bio’ egg. After I arrived back from the summer break he apologised and explained that he needed to raise his prices. Now they are 40c a ‘bio’ egg. My initial reaction was whoooahh, an almost 15% increase in the price. But then I started to reflect on this whole inflation debate we have at the moment.

inflation in Italy

Quick thoughts on inflation
Obviously, prices’ rises are having a pretty big impact on our lives right now, and I don’t know about you, but I am anxiously awaiting my winter fuel bills this year. That aside, I was thinking that in the 6 years I have been buying eggs, this vendor has not increased his prices, not one cent.

In the financial planning world when I am looking at clients’ long term planning we always use a general rule of thumb of 3% inflation each year. Where do we get this figure from? Long term studies of inflation! Economists have looked at inflation over very long periods of time and established that bouts of inflation arrive in short periods, followed by periods of stable prices. If we think about the egg vendor and that he hasn’t increased his prices in 6 years, if he had done so using the 3% rule, then the price of his eggs should be more like 18% higher today than they were 6 years ago. This puts his 15% into context. Maybe we are not all that far off where we should be anyway. It’s just that when it arrives as a tsunami rather than a serious of small waves it tends to hurt a lot more.

My point is that prices’ rises are normal, and we have lived through an extended period of stability and low prices. With the significant debt creation events of the last 15 years (financial crisis 2008/2009 and more recently Covid), it is to be expected that inflation would return at least for a period of time, and even maybe rebalance to its long-term historic norm.

income tax Italy

Flat Tax
OK, enough about inflation because I am sure that you are about as bored of hearing about it as I am. Important as it is, it doesn’t need ramming down our throats at every turn.

The talk of a flat tax rate of 15% has mainly been lauded by La Lega and Matteo Salvini; whilst the other parties have similar talk of flat taxes, there are some differences in the parties’ proposals. Let’s have a quick look at them here:

LA LEGA: A simple flat tax of 15% on all incomes. It has been calculated that this would blow a hole of approximately €50 billion euros in Italy’s public finances. Also, it is a highly unfair way of taxing people. Someone earning millions could get a 15% tax rate, in addition to someone earning €15000 a year. Clearly unequitable and favourable to the wealthier elements of society, not something I ever see coming to fruition.

FORZA ITALIA: A simple flat tax of 23% (equal to the lowest current band of income tax rates). It’s pretty much the same story as above, but instead would only blow a hole of €30 billion in the public purse!!

FRATELLI D’ITALIA: Their proposals, in my opinion, seem more do-able. Firstly, there is talk of introducing a ‘no-tax area’, which in other words would be a tax allowance on the first €120000 on income, extended to everyone. This would essentially model the UK style of taxation and is a model that I prefer. It favours the poorest in society and is a fair approach, in my opinion. However, that would come with a potential cleaning of the current system of detractions and deductions for medical expenses, vet’s bills etc. Who knows if the current system of bonuses for various home improvements will also be stripped back?

In addition, the idea is to a) (try not to laugh at this please) introduce an incremental flat tax system which will start at 15% (I have no idea what the difference is between progressive tax rates and incremental flat tax rates, but it sounds good) and then over time work towards a suitable flat tax rate, and b) tax income from properties and other financial assets at that flat tax rate of income tax .

Lastly, anyone who is currently working through a partita IVA ‘regime forfettario’ and is currently taxed at 15% up to income of €60000 pa, will have that ceiling raised to €100,000 pa.

declaring your assets

There’s more!
Things do not stop there! One other interesting development is that according to an estimate in an article by Il Sole24Ore, Italians and Italian resident individuals have approx. €100 billion in assets and cash hidden in security boxes, either in Italy or abroad. I am not sure exactly how they come to this estimate and it certainly seems a large figure. The ‘centrodestra’ also sees this as another opportunity to try and bring these assets/cash home.

The proposal here is not a ‘condono’ (a kind of write off of any previous tax liabilities for a one-off tax payment, as it has been used frequently in the past), but to reduce the taxes on assets/cash by 50% for a fixed time period, to allow people to repatriate their funds and in addition apply a sanction of just 5% on the amount. This could be quite an interesting idea and for a number of foreigners living in Italy who have still not regularised their financial affairs, it could be an opportunity to do so rather than using the current system of fines and penalties that are significantly higher. The prevailing argument from the other side is that if someone is not ‘in regola’ with their financial affairs in Italy, then no financial benefit should be offered. However, rather than spending years of taxpayers’ money trying to find these hidden assets and cash, is it better to offer an opportunity to regularise them for a one-off payment? Who knows? The important thing is to get the money under the watchful eye of the Agenzia delle Entrate, no matter how you go about it, or at least goes the logic.

Let’s just start admitting the reality
I think it’s OK to start talking about the fact that the ‘centrodestra’ coalition are going to be governing Italy very shortly, so we can watch and wait to see what happens. Firstly, we can wait and see whether the International financial markets will approve of this government, (I suspect they will not blink an eye in the face of bigger issues around the world). Secondly, whether the EU will start their hardball tactics with a coalition that are inherently EU sceptic and teetering on the edge of advocating an Italexit (even if that is unlikely due to the constitutional requirements of just arriving at a Referendum).

Whatever happens next, there are going to be changes afoot in Italy, and you never know, some might even be for the better. Only time will tell.

Gareth Horsfall

Buying a property in Portugal to acquire a Golden Visa?

By Mark Quinn
This article is published on: 23rd September 2022

23.09.22

Watch our recording of the recent ‘live’ seminar about investing in property in Portugal to aquire a Golden Visa;

Our panel of experts discussed the parametres around applying for the Portuguese Golden Visa scheme.

Plus, the health care system, taxes, renting out your holiday home, insurance and currency exchange in addition to explaining the buying and selling process in Portugal.

Our knowledge and expertise in the marketplace will allow us to assist you with the application professionally from start to finish.

The panel:

🇵🇹Joe Pyke – Berkshire Hathaway Home Services for your property questions
🇵🇹Steve Eakins – Lumon for all your currency management questions
🇵🇹Mark Quinn BA ATT APFS – The Spectrum IFA Group for tax and investment questions
🇵🇹André Nunes Melo – Nunes Melo Advogados Law Firm for your legal questions including the golden visa
🇵🇹Claudia Schuets – Quinta Finance for all your Portugal mortgage questions

Contact the office here in Portugal to find out more

No more wealth tax in Andalucia

By Charles Hutchinson
This article is published on: 21st September 2022

21.09.22

THIS NEWS IS SO GOOD, WE’RE TELLING YOU
ABOUT IT FOR A SECOND TIME!

Yes, you heard us right, Wealth Tax in Andalucia has been abolished.

The Government in Andalucía is in the process of approving today a 100% allowance for the Wealth Tax liability, as announced by Juanma Moreno, the President of the Junta yesterday, which means in practice the elimination of this tax in the region.

The measure will be effective from Wednesday 21st September 2022 , applicable to Residents in Andalucía and Non-Residents who are liable to Wealth Tax for assets located in this region.

Ten of the top 20 wealth tax payers in 2019 left Andalucia in 2020, resulting in a loss of income for the region of nearly 18 million Euros (3.5 m in wealth tax and 14m in personal income tax). Moreno said he wants people who spend long periods here to make it their permanent home and pay tax here. He estimates it will attract 7,000 new residents which will more than make up the loss of previous revenues.

The Conservative Party, following the tax policy of Madrid where the Wealth Tax was eliminated years ago, has put Andalucía on top of the list of the most attractive locations to live or invest in Spain in terms of taxes, along with other previous decisions taken to practically eliminate the inheritance and gift tax for close relatives, or the reduced transfer tax flat rate of 7% approved in 2021. He also announced a reduction in Income Tax by at least 4%.

Moreno also announced that water consumption tax in the autonomous region will be suspended in 2023.

This measure will boost the Region by removing one of the main barriers for foreigners moving to Spain permanently, or just to buy luxury properties in their personal name, but also attracting those living in other less favourable regions in Spain.

A very welcome and largely demanded decision. If you are planning to move to Andalucia or have delayed doing so until now, please contact me to discuss this important step taken by the regional government and how it could change your and your family’s life style for the better into the future.

Top Tips for expat finances in Spain

By Chris Burke
This article is published on: 21st September 2022

21.09.22

I hope you are well and had an enjoyable summer. This month we cover the following topics (if there is anything you would like to understand more or wish to see covered in these Newsletters, don’t hesitate to ask):

  • Early Retirement State Pensions in Spain
  • New Cryptocurrency reporting regulations in Spain
  • Free Train Tickets in Spain

Early Retirement Pensions in Spain
Did you know that in Spain, under certain circumstances, you can take early retirement before the legal retirement age? But what are these circumstances and what requirements must you meet?

retire early in spain

What are you entitled to and how can you apply for it?

This can be quite complicated depending on your situation, and we would recommend taking professional advice so that you can be sure of exactly what you are entitled to.

Book a telephone call or zoom chat with Chris now
New Cryptocurrency Regulations in Spain

New Cryptocurrency Regulations in Spain
From 2023 onwards, Spanish residents will have to declare cryptocurrency holdings in their tax returns. Currently, cryptocurrency holders are only obliged to declare any profits or losses in their income tax returns. The 2022 tax return has a special section for these assets. However, from 1st January 2023, a new regulation will be implemented meaning that all Cryptocurrency transactions must be declared. This has been regulated by Spain’s new anti-fraud law, which is currently at the public hearing stage. It has been set out in a draft bill incorporating several anti-fraud amendments.

The new tax declaration will have to be submitted using the form Modelo 721. Information will have to be included on those who have held cryptocurrency or have been authorised beneficiaries of cryptocurrency at some point during the year (from 2023 onwards). Furthermore, cryptocurrency holders will have to include information on what their final balances are at the end of the year, as well as information on the types of cryptocurrency and the amount of units that they hold, along with the equivalent amount in Euros. This new regulation further reinforces the need to seek professional tax advice if you are a cryptocurrency holder or thinking of becoming one.

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. You can book an initial consultation via my calendar link below or email/send me a message.

Book a telephone call or zoom chat with Chris now

At Last, Wealth Tax is abolished in Andalucia

By Jeremy Ferguson
This article is published on: 21st September 2022

21.09.22

Monday the 19th of September 2022 will be in the history books forever. Having watched the coverage of the Queens funeral on TV, it made me think there is no other country on earth who could have put on such an impressive show for the world to see. It made me feel very proud to be British.

Moving overseas is an exciting and daunting thing to do but if you, like me, have lived overseas for many years, that homesick feeling does hit home sometimes, and the Queens funeral was certainly one such example.

It has been a tough year in many ways. Everything it seems is changing. The reopening from the pandemic has changed the way many people work. Russia’s Invasion of the Ukraine changed the idea of a peaceful Europe. The cost of living has increased due to rising inflation, and now rising interest rates are back with us. All of this has happened after years of peace, cheap energy, low interest rates and non-existent inflation. It seems the longer we live with something, the more powerful it’s passing, something that no doubt made the Queens funeral very emotional for many people.

We now have a King, and the world in which we live is without doubt going to continue to change. Any of you filling up your car will have noticed the cost has come down from the previous highs in the summer, and the general consensus is that inflation will start to slowly come down between now and the end of the year. It isn’t however expected to hit the floor, but rather fall to a much more acceptable level.

When you are retired and keeping a close eye on your savings, investments and pensions, inflation and interest rates are two critical factors to take into account when trying to work out the future. If you have a fixed pension income, it is commonplace to then substitute this with ‘income’ from investments, the spending power of which is affected by inflation. If the investment returns are all over the place, and inflation is doing the same, it’s really important to monitor things closely and on a regular basis. As an example, if things carry on as they are, we may see a return of interest on bank deposits, which has been a factor not taken into account for a long time when making plans for your money.

Contact me now if you would like to discuss your Wealth Tax situation
Wealth Tax is abolished in Andalucia

Tax is something I’ve not really mentioned before, but this of course has an effect on your disposable income. Pension and Investment income can be very tax efficient here if the right planning is taken, but something that has always been a difficult one to deal with is the annual Wealth Tax.

In the past many Wealthy individuals have decided against moving to Andalucia because of the punitive Wealth tax, which in real terms doesn’t actually generate that much revenue each year (estimated at €95m per annum for the Region). It is felt that by attracting more Wealthy Individuals, the increased expenditure and resultant revenues will far exceed that amount, so it does seem to make perfect sense.

Financial planning in retirement isn’t rocket science, but with so many variables effecting how things may look financially going forward, it’s never been more important to make sure your previous plans aren’t sitting gathering dust. Maybe they are not being best suited for the new environment we find ourselves in.
The news has been very negative so far this year, and although the passing of the Queen was a very sad event, it marks a line in history and just goes to show nothing lasts forever. It will be interesting to see how the new King makes his mark in history.

If you would like to find out more about how we help our clients here in Spain, please feel free to get in touch.

The challenges faced when Downsizing

By David Hattersley
This article is published on: 20th September 2022

20.09.22

For many of those that are considering downsizing numerous factors influence this decision. Offspring have grown up and follow their own paths, the need for a family home is surplus to requirements. The death of a partner, or their worsening ill health is also a major factor in making changes. The ageing process makes it harder to “self maintain”, therefore external contractors are required. Recent extreme weather conditions have contributed to additional maintenance requirements around the home. High demand has also reduced the availability of professional contractors and trying to find them can be frustrating and expensive.

Having made the emotional decision , to downsize does it get any easier ? Moving to a smaller property might seem easy, but one has to decide which accumulated treasured possessions and artefacts will be disposed of or left behind.

The next question is where are you going to live? Trying to predict the future is difficult, trusted close friends have died or moved away. Potential reduced mobility, death of a partner,lack of easy access to healthcare and amenities and public transport facilities must be considered .No longer can one live up the side of a mountain, in the country or away from a central urban hub when one will depend on the aforementioned facilities. Very few residential “warden assisted community retirement” homes exist in Spain, unlike the UK.

The challenges faced when Downsizing

The next consideration once the property is sold, is what to do with the capital. Does it make economic sense to buy yet another albeit smaller property, or rent ? With the average life expectancy being in the mid 80’s, for those in their late 60’s does it make sense to buy ? With the cost of purchase estimated at between 13% -14% *, and subsequent disposal costs of 7% due to a future change of circumstances does it make sense to “waste” this residual capital when it could be invested to provide an income ? Bear in mind many smaller properties here still require maintenance. If it is a proprty that has a communal pool and gardens, there are annual maintenance fees and in the summer when hordes of holiday makers “invade” what was peaceful and tranquil for 10 months of the year can suddenly become stressful. Having experienced both owning and renting I understand the upside and downside of both scenarios.

Finally the last and most important element is the investment of the capital. There are a viable sensible solutions instead of Spanish banks. With rising inflation sensible capital growth and income are vital as is the relative ease that after the death of a partner the investment can be passed to the survivor without unnecessary complications. The same can be applied to leaving this to one’s heirs. It is both tax efficient and compliant and is accepted by the Spanish regulators. Finally should one eventually move back to the UK, it can be taken with you. It is essential the that your investment has been set up correctly as it is currently not treated as a capital asset when calculating the costs of living in a care home. This means that it stays intact to pass onto one’s nominated heirs. My own experience with my in-laws proved this was the case.

So if you have any concerns, doubts or interest please contact me to arrange a no-obligation initial meeting over a cup of coffee.