Living in Spain after BREXIT

By Chris Burke
This article is published on: 26th July 2022

26.07.22

In this months regular article I’ll be discussing three main concerns I’ve heard from clients recently:

Changes to UK driving licenses in Spain
Living in Spain after Brexit, managing your personal finances
18 months on from Brexit in Spain – What has changed / what do you need to do to move here?

Changes to UK Driving Licenses (When Living in Spain)
Up until the end of 2020, British driving licenses were valid in Spain. Furthermore, Brits were able to exchange their British Driving License for a Spanish one up until 31/12/20. From this date onwards, Brits residing in Spain prior to this have not been able to exchange their British driving licenses for a Spanish one.

For those residents who failed to meet the Spanish deadline to exchange their licences for a Spanish one, they currently (as of 08/07/22) cannot drive on their UK licence – this does not apply to holidaymakers hiring a car. The Spanish Government has already issued four extensions to the ‘grace period’, allowing Brits to still drive using their UK license. The grace period ended on 30/04/22.

Hugh Elliot, the British Ambassador to Spain and Andorra, issued an update on Twitter stating that they were working on a resolution to this. The belief is that they are hoping to secure a deal, similar to the UK’s deal with France, Sweden and many other European countries, in which UK Driving Licenses can be swapped for the license of that country (providing that the individual is resident).

According to SpanishNewsToday, the proposed deal would allow Brits living in Spain to swap their UK driving licenses for a Spanish one for an additional period of six months. The deal would also see UK Driving Licenses valid for a further six months. If this proves to be the case and you have not yet exchanged your license, I would recommend that you seize this opportunity.

Spain and Italy are the only EU countries in which Driving License exchange conversations are ongoing.

Financial Matters for Brits living in Spain after Brexit
From a tax perspective, for Brits living in Spain before Brexit there should not be a change as it is highly likely that you were a tax resident prior. Being a tax resident in Spain means that ‘your centre of economic or vital interests is in Spain’. As a result, if this is the case you must declare your wealth and worldwide income accordingly.

However, what has changed is the Private Pension agreement in relation to the Wealth Tax. In 2019, a ruling by Spain’s Directorate-General for Tax declared that Private Pensions from non-EU states are now eligible for Wealth Tax. Please read this article on Wealth Tax to find out more about it.

Furthermore, it is now more important than ever that Brits ensure that their finances are managed correctly. From 2021 onwards, Financial Advisers based in the UK are no longer permitted to advise clients based within the EU. The same situation applies to UK based banks, investment and insurance companies and stockbrokers.

If you are still using a UK-based financial adviser or service whilst a resident of Spain, they may well be breaking the law whilst servicing you. This could still be the case even if you only engage with them when returning to the UK to visit, providing that you are a resident of Spain. Furthermore, their professional indemnity insurance may not cover you. This may leave you vulnerable if you were to receive poor advice.

Book a telephone call or zoom chat with Chris now

18 months on from Brexit in Spain – What has changed?
We are now over a year on from the end of the Brexit Transition Period (31/12/2020). Whilst British Expats in Spain continue to enjoy their life as it was before the Brexit, overall things are a little more complex than they once were. It’s important to understand these changes – some are more complex than others.

For Brits wanting to move to Spain in 2022, although it is far from impossible, the changes imposed have made this more complex. The door has not closed, however, it is important to seek clarification from experts who are aware of the legislation and will be best suited to providing you with available options.

Many Brits in Spain have experienced frequent ‘run of the mill’ changes to their lives in Spain compared to before Brexit. Whether this be extended queues when going through passport control, taxes on imports or companies no longer shipping to EU customers, most British people in Spain will have been effected at least in a minor way. However, there are bigger issues which people need to be aware of.

Book a telephone call or zoom chat with Chris now

90 Day Travel Rule
To summarise, unless you are a Spanish resident or have a visa you can no longer spend more than 90 days in Spain in a rolling 180-day period. This rule has particularly affected Brits who have holiday homes in Spain and used to come and go as they please. Now, it is important to plan your trips to Spain throughout the year to ensure that this 90 in 180-day rule is not broken. Furthermore, this rule does not only apply to Spain. It applies to everyone country in the Schengen Zone.

Brits who are non-residents must also now get their passports stamped as they enter and exit Spain. However, this is a temporary procedure. The EU are working on the European Travel Information and Authorization System (ETIAS), which is set to come in to force towards the end of 2022. This system will allow for the electronic tracking or arrivals and departures.

Spanish Residency Permits – Green Card and TIE
Those who were resident in Spain before the Brexit will keep their Spanish citizens’ rights. They should have the old green NIE card or a new TIE. The TIE, also known as the ‘Tarjeta de Identidad de Extranjero’ in Spanish, should state on it ‘Articulo 50’, meaning that it was issued as part of the Brexit Withdrawal agreement.

Although according to Spanish Law the green card remains valid, Brits have been encouraged to change it. Certain authorities have been said to no longer accept this card as suitable verification. Furthermore, the TIE is far more durable, can simplify administrative processes and acts as a valid form of ID as it contains a photo. In Spain, the law is that you must carry a form of ID when outside of your home. The TIE is allowable whereas the NIE ‘green card’ is not.

Spanish Residency Permits – Post-Brexit Arrivals
There are several ways in which you could apply for a residency permit post Brexit. However, although far from impossible, it must be said that this process is significantly more complicated than if you had arrived pre-Brexit. Working visas have proved challenging to obtain and, depending on your individual circumstance, sponsorship may be required.

If you are retired, you may be able to apply for a Non-Lucrative Visa and Residency Permit. To qualify, you must prove that you are financially stable (with sufficient resources to support yourself moving forward) and have suitable medical insurance along with a clean police record. It is also imperative that you go through the application process in the UK, before arriving in Spain.

Another option is the Golden Visa. You must invest a minimum of €500,000 into a qualifying investment scheme or property. If you were the obtain the Golden Visa, you would not need to abide by the 90 in 180-day rule and you could enter and exit Spain as you please. Please note that this does not give you freedom of movement around Europe, but only in Spain.

If you would like to speak with a Financial Adviser in Spain, Chris Burke is experienced, qualified and legally able to discuss your financial matters. Chris is also able to review your current pensions, investments and other assets, with the potential to make them more effective and tax efficient moving forward.

If you would like to find out more or to talk through your situation and receive expert, factual advice about living in Spain after Brexit, don’t hesitate to get in touch with Chris via the form below – or click the button below to make a direct virtual appointment here.

Book a telephone call or zoom chat with Chris now

Succession planning in Portugal

By Mark Quinn
This article is published on: 22nd July 2022

22.07.22

How to protect your loved ones

Death and taxes are the two certainties, but it is surprising how many of us fail to properly plan during our lifetimes.

The key considerations for most of us in this area of planning are ‘control’ and ‘taxation’. This is ensuring that assets are passed to the right individuals, in the right proportions, at the right time with minimal taxation. But as expats, in order to ensure this happens, you must carefully consider the succession rules of Portugal, your originating country, and any interaction between the two.

Understanding the Portuguese rules
Unlike the UK, where you can generally leave your assets however you wish, Portugal has ‘forced heirship’ rules. These force you to leave certain proportions of your assets to specific family members and applies to your worldwide estate (except for non-Portuguese real estate).

For expats, the ‘Brussels IV’ regulation means that the rules of your country of habitual residence will apply, so forced heirship could apply to you unless you specifically elect for the succession law of your country of nationality to apply via your Will, or other appropriate legal documents. This must be done during your lifetime and cannot be changed after your death. But it is important to note that this does not affect the tax rules that apply, only the rules around succession, and these two issues should be looked at independently.

There is no inheritance tax in Portugal. Instead, Stamp Duty is due at 10% on assets located in Portugal that pass to someone other than a spouse or direct line ascendants or descendants. This tax is paid by the recipient irrespective of where they live and must be paid before receiving the asset. It is due within 6 months of the death, so for large gifts and inheritances, this could be a problem for your loved ones.

Impact of your nationality
A particular issue for British expats is that their liability to UK inheritance tax (IHT) is not determined by where they live (as with Brussels IV), but by their domicile. This means that even if you live in Portugal, and have done so for many years, you can still be subject to UK IHT as well as Portuguese taxes. There are rules in place to avoid double taxation, but again this will have to be sorted out by the recipients and your executors which might be complex and costly.

It is possible to shed your UK domicile however this is very complex, so specific advice should be sought.

Tax mitigation
IHT is sometimes considered a voluntary tax as with the right planning, there are many steps you can take to reduce the tax liability on your estate and gifts. From a Portuguese perspective, this can be as simple as holding your assets outside of Portugal. For UK nationals, the planning is likely to be a little more complex such as utilising all allowances and the gifting rules, trusts or trust-like structures, or domicile changes.

What about Wills?
UK Wills are valid under Portuguese law but practically, it is likely to be more difficult, costly, and time-consuming for your executor or heirs to go through the bureaucracy in Portugal. We suggest that you have a separate Will for each country in which you hold assets. They should acknowledge the other Wills, however, they must not override or conflict with each other.

Even if you already have a plan in place, it is important to review this periodically, or if your family or financial circumstances change.

With careful planning and our specialist cross-border advice, we can help you create the right estate plan for you and your family.

Are you paying too much on your investments?

By Jeremy Ferguson
This article is published on: 19th July 2022

19.07.22

Paying too much for something is never a good idea!

Unless you have been spending all your time either on the beach or playing golf, it would be almost impossible not to have seen what´s been happening in the financial world at the moment.

Stock markets have had their worst start to a year in 50 years. Almost every day all you see and hear is doom and gloom about rising inflation, rising food prices, rising fuel prices, rising interest rates, supply chain issues, falling consumer confidence. And on and on it goes.

As usual with such issues, it can affect retirees who live here the most, as their Pensions and Investments are normally exposed to the stock markets and various other investment instruments, pretty much all of which are falling at the moment. How much worse can it get? Who knows.. When will it recover? Who Knows.. How long will it take to make up for all of my losses this year? Who knows…!

Nobody does, and looking at history can give a good indication as to the likely answers, but as I keep saying, this could well be history in the making, as opposed to history repeating itself.

Looking at history can help calm the nerves and add perspective. Over the last 150 years there have been 13 major stock market crashes. In 1877 markets fell by 33%, in 1970 they fell by 25% and again in 1974 by 39%. The latest memorable events were the financial crisis of 2008 which resulted in losses of 49% and the Covid lockdown period, which again resulted in heavy losses.

Taking the median of all of these 15 events, an average fall of 33% has taken on average of around 2 years to recover. So, although I have said this may well be history in the making, what we can all be sure of is that things will eventually get better. It’s just a question of how quickly, and that again is an unknown. The speed of recoveries is always quite impressive. Many people miss the fact that if you lose 50% on something, that something has to double in value to return to where you were.

Paying too much for something is never a good idea!

One thing I do know though, is that if you have Pensions and Investments which are expensive, trying to reduce the costs incurred is one thing that will have an immediate positive effect on your returns, and can have an incredibly positive effect on the long-term returns.

Something else that is also relevant to costs, is the type of investments retirees are in. One of the first things to assess when I meet a client is what risk they are prepared to take with their investments. Typically, (as most are retired), I think being driven by caution (or fear) rather than greed is paramount, meaning a client should typically be very concerned about protecting their capital, and therefore their investments should be at the lower end of the risk scale.

Therefore, it makes perfect sense if you are looking to achieve a certain annual return that reducing the annual costs as best you can will mean you can take less risk to achieve your objectives, and therefore see better capital protection.

Many people are coming to me asking if we can take a look at their existing arrangements, and very often we are able to offer a solution to reduce the costs and achieve a more suitable strategy in view of where we find ourselves.

In these times of rising costs, every penny helps, and very often just talking through situations like this and having someone to listen to your worries can be a great help, so if you would like a quick chat in confidence about your financial situation, please get in touch.

Buying a property in Portugal seminar

By Mark Quinn
This article is published on: 18th July 2022

18.07.22

Are you thinking about buying a property in Portugal?

Do you have questions about tax, currency, mortgages, the visa options available or financial planning in Portugal?

Join us on Thursday 28th July at 6pm for this live and free event to learn about everything involved in buying a property in Portugal and talk direct to our panel of experts.

Mark Quinn, our Portugal office Manager will be joining the esteemed panel including:

Joe Pyke from Berkshire Hathaway Home Services Portugal Property
André Nunes Melo from NMA – Nunes Melo Advogados
Steve Eakins from Lumon Currency specialists
Claudia Schuets from Quinta Finance

Responsible investing and ESG

By Andrew Lawford
This article is published on: 12th July 2022

12.07.22

Why things really aren’t that bad

It might seem rather strange for me to be writing an article with this title given everything that is currently going on in the world. In truth, however, I have been vaguely working on this for some months, and whilst in no way am I trying to downplay the difficult situation in Eastern Europe, I have no particular insights to share on the topic (apart from wishing that calmer heads will soon prevail), and I am quite sure everyone is receiving enough information about it already.

We have a natural tendency to focus on bad news for the simple reason that no newspaper ever appeared with the title: “Everything’s going well – not so much to report today”. This is not strictly true – the website Future Crunch offers a periodic newsletter dedicated to good news. It is the perfect complement to the diet of negativity that we receive from traditional news outlets.

I had assumed that I was fairly knowledgeable about the world around me and had an objective view of humanity’s current state of affairs. I was thoroughly disabused of this notion by Factfulness by Hans Rosling, one of the most eye-opening books I have ever read and which I thoroughly recommend to everyone.

However, if you have little time or inclination for reading, you can take the Gap Minder test here, which is based on the work done by Rosling. It won’t take long and I suggest you do it before reading the rest of this article.

So what is my point? We tend not to realise that improvements are so gradual as to be imperceptible to us, and this, combined with the fact that we don’t often receive information that challenges our negative stereotypes, leads to a bias towards negativity. It is interesting how much bad news is anecdotal and how much good news is statistical – but of course you wouldn’t want it to be the other way around!

Is a negative bias worthwhile as we consider challenges such as climate change? I don’t know, but I would say this: panic is not a strategy, and going from bad to slightly better (whilst creating incentives to improve continually) is something we should celebrate. This reflection is also relevant to the field of investments: almost all investment houses now make ESG (Environment, Social & Governance) considerations part of their “process”. Are these processes perfect? Certainly not, but it is a start, and some of the leaders are blazing a trail that others are bound to follow. Again, from bad to not-so-bad is still something to celebrate.

Download our guide to responsible investing and ESG

In Italy, it is easy to complain about the bureaucracy, but I have to admit that some things are getting better. For anyone doubting this, consider the advent of SPID (Sistema Pubblico di Identità Digitale), which acts basically as a digital gateway to any interaction with the public administration. It is a Substantial Headache to get set-up (capital letters intended), but once you have it working, it is very useful. Also, consider PEC (Posta Elettronica Certificata) – a sort of “registered e-mail”. For anyone who has spent time and money sending raccomandate from their local post office – and let’s face it, you haven’t really lived in Italy until you’ve had to send a raccomandata, you really should invest in a PEC. For 10 euros or so a year you can send as many digital raccomandate as you like from the comfort of your own home, and they have the same legal validity as their paper counterparts. All companies and state entities have to have a PEC, so they are a very effective way of making official communications.

Of course, this technological advancement has also been a way for the Agenzia to concentrate its tax-collecting efforts. They are no longer in the dark about your assets abroad, thanks to the mechanisms of CRS (Common Reporting Standards). Most people have now come to terms with this and are making the necessary declarations. If you or someone you know have been sitting on the fence – talk to me about the best way of sorting out your situation – the key being that you should do this before you receive any requests for clarification.

There are also a number of tax incentives that have been launched in recent years, favouring pensioners, digital nomads and even very wealthy people. I took the opportunity recently to speak to tax practitioner Judith Ruddock from Studio Del Gaizo Picchioni about a number of them (as well as other matters of interest for Italian residents) and have published a podcast which you can find on Apple Podcasts, Spotify, Google Podcasts or Stitcher.

Please also check out my other podcasts, available on
Spotify, Google Podcasts, Apple Podcasts and Stitcher.

Inheritance Tax in Catalunya

By Barry Davys
This article is published on: 11th July 2022

11.07.22

Inheritance Tax in Catalunya – A Guide

Inheritance tax in Catalunya is calculated using the same basic principles as the national system in Spain. As in the national system, the taxable entity is the person RECEIVING the bequest, not the person who has passed away.

However, the allowances (deductions) and rates of tax are different in the Automonous Community Catalunya from the national rate. The law that sets these rates and allowances is Catalunya Ley19/2010 which was amended in February 2014.

Who’s this article for?

People living in Catalonia
People who have recently inherited or are about to inherit
People whose parents are doing inheritance tax planning

Overview
Inheritance tax in Catalonia is calculated in a different way than in many other countries and even in other autonomous communities in Spain. The tax to be paid is not necessarily bad. The tax can be less than in the UK for example.

What you get?
This guide gives a reasonable understanding of how Catalan inheritance tax works and the possible amount to pay. You get access to an adviser who specialises in this area and an introduction to an English speaking lawyer who specialises in helping International people living here.

Your Investment
The time taken to read the guide, and perhaps a second read as Catalan IHT tax takes some getting used to. You will also need to book an initial telephone call if you want advice specific to your situation.

If you are resident in Catalunya these are the rules that will apply. Here we have produced a guide to Catalan Inheritance Tax. The most important deductions available are as follows:

Personal Deductions
The starting point in making the calculation is to work out which Group the person receiving the inheritance belongs to as follows:

Group I Children, including adopted children, under the age of 21
Group II Children over 21, spouses, parents and grandchildren
Group III Close relatives such as brothers and sisters, aunts and uncles
Group IV More distant relatives or unrelated

Allowances/deductions available in Catalunya are:

Group I
Deduction of €100,000 plus €12,000 for each year under 21 years of age up to €196,000

Group II
Spouse: €100,000; Child: €100,000; Other Descendants: €50,000; Parents: €30,000

Group III
€8,000

Group IV
No deductions available

Disabled Heir
In addition to any personal deductions applicable a beneficiary who is disabled may add an additional €275,000 deduction if the disability is determined to be greater than 33% or €650,000 where it is greater than 65% disability

Heir over 75 years old
A deduction of €275,000 may be applied where the heir is over 75 years of age who is a beneficiary within Group II though this deduction is applied instead of the other allowances.

Inheritance of the Family Home
Where a property inherited is the main family home then a reduction amounting to 95% of the value of the property up to €500,000 may be made where the beneficiaries are the spouse, child or parent of the deceased as well as collateral relatives, older than 65, that lived with the deceased during the 2 years previous to the decease . The property may not be sold for a period of 5 years if the reduction is claimed.

Allowances available for the Inheritance of the Family Business
A tax deduction of 95% of the value of the interest held by the deceased in the business This applies to all beneficiaries who were related to the deceased to the third level of blood relative and persons in the employ of the business for at least 10 years.

Allowances available for income from Life Insurance Policies
A deduction of 100% is applicable on any income from a life insurance policy held by the deceased up to a maximum of €25,000 where the beneficiary is the spouse, descendant or parent of the deceased.

Inheritance Tax Rates in Catalunya:
Once all deductions have been applied the final amount of tax payable is determined then it is necessary to apply the relevant rate:

Taxable Sum	Tax Payable on this Sum	Any Reminder up to	Applicable Rate on Remainder %
0	0	50,000	7%
50,000	3,500	150,000	11%
150,000	14,500	400,000	17%
400,000	57,000	800,000	24%
800,000	153,000	Above 800,000	32%

Existing Wealth:
Once the relevant tax has been calculated the result is multiplied by a coefficient determined by the existing wealth of the beneficiary as well as the group to which they belong:

Existing Wealth Multiplier Coefficien

Existing Wealth in Euros	Group 1 & 2	Group 3	Group 4
From 0 a 500.000	1,0000	1,5882	2,0000
From 500.000, 01 to 2.000.000	1,1000	1,5882	2,0000
From 2.000.000, 01 to 4.000.000	1,1500	1,5882	2,0000
More than 4.000.000, 00	1,2000	1,5882	2,0000

As a reminder the Groups referred to consist of the following beneficiaries:
Group I Children, including adopted children, under the age of 21
Group II All other descendants, spouses, parents and grandchildren
Group III Close relatives such as brothers and sisters, aunts and uncles
Group IV Distant relatives and unrelated

Special Deductions – Spouse
After applying the tax rates and coefficients above a discount of 99% shall be applied to any tax payable.

Special Deductions – Other Relatives Groups I & II
For Group I & II beneficiaries, apart from the spouse, the following discounts may be applied to the calculated amount of tax due, depending on the amount inherited:

Group 1

Bottom of Taxable Band Euros	Total discount to this level %	Top of Taxable Band Euros	Discount for this band %
0,00	0,00	100.000,00	99,00
100,000	99,00	100.000,00	97,00
200,000	98	100.000,00	95,00
300,000	97	200.000,00	90,00
500,000	94.20	250.000,00	80,00
750,000	89.47	250.000,00	70,00
1,000,000	84.60	500.000,00	60,00
1,500,000	76.40	500.000,00	50,00
2,000,000	69.80	500.000,00	40,00
2,500,000	63.84	500.000,00	25,00
3,000,000	57.37	upwards	20,00

Group II:

Bottom of Taxable Band Euros	Total discount to this level %	Top of Taxable Band Euros	Discount for this band %
0,00	0,00	100.000,00	60,00
100,000	60,00	100.000,00	55,00
200,000	57,50	100.000,00	50,00
300,000	55,00	200.000,00	45,00
500,000	51,00	250.000,00	40,00
750,000	47,33	250.000,00	35,00
1,000,000	44,25	500.000,00	30,00
1,500,000	39,50	500.000,00	25,00
2,000,000	35,88	500.000,00	20,00
2,500,000	32,70	500.000,00	10,00
3,000,000	28,92	upwards	00,00

Special Deductions – Other Relatives Groups I & II
The discount shall be reduced by 50% should the beneficiary apply any of the following deductions:

Family Business
Any other deduction to the amount of tax payable except the deduction applicable to the family home.

Many expats pay more tax on their inheritance than they should because they fail to follow some simple rules.
To discuss how to pay only the appropriate amount, please click the button below to get in touch with us.

This information is intended as a guide only. It is based on the current legislation for Inheritance tax in Catalunya as at August 2017. A suitable qualified tax lawyer should always be used to calculate a specific liability. If you require the assistance of a tax lawyer please contact barry.davys@spectrum-ifa.com who will introduce you to an appropriate lawyer. Please also note that this guide does not apply to Gifts (donaciónes) which have their own rules.

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Portuguese capital gains tax – changes from Budget 2022

By Mark Quinn
This article is published on: 27th June 2022

27.06.22

If shares, investments or Portuguese property were acquired before January 1989 there is no capital gains tax on sale for Portuguese tax residents. In any other instances, capital gains tax is applied at 28% to any profits made.

Indexation relief is also available if they were held for more than 2 years and is applied on a sliding scale.

For example, if you decided to surrender a UK Stocks & Shares ISA or share portfolio, the gain made on sale would be taxed at 28% in Portugal. If no gain has been made, there is no tax to pay. There is no exemption for NHRs.

However, the Portuguese Budget for 2022 which was approved on 27 May 2022 introduces a change with effect from 1st January 2023 regarding the taxation of ‘short-term capital gains’ i.e. gains realised on assets that have been held for less than 365 days.

For investors whose taxable income (including the short-term realised gain) is €75,009 or more, the taxation will be increased from the flat rate of 28% (or 35% for investments held in blacklisted jurisdictions) to progressive rates, which can be as high as 48% (or even 53% if your total income exceeds €250,000.)

Investors can mitigate ongoing capital gains tax on their investments by using one of several “tax wrappers” available to Portuguese tax residents. Each wrapper will differ in terms of its features and benefits and the most appropriate structure will be different for each individual.

However, the purpose of such tax wrappers is to essentially act as a ‘trap’ on any gains. This means that you can be in control of the timing of any taxable events and potentially create a much lower overall tax figure. Equally important is that the underlying fund manager is not constrained in any investment decisions by punitive tax charges that could apply to short-term transactions.

Please talk to us to assess the different range of investment options and wrappers, and what the most appropriate may be for you and your family.

Download your financial guides to living in Portugal here

Are you thinking of moving to Spain

By Jeremy Ferguson
This article is published on: 23rd June 2022

23.06.22

“Its so nice holidaying here, I’d love to live here all year round…’’

If you are a UK resident and here on holiday, it is very often these times that get people thinking about retiring to Spain. The attractions of the slower pace of life, a completely different climate, all those extra hours of daylight and sunshine, a lower cost of living, ( depending on lifestyle!), eating out often – on and on the list normally goes.

When the UK was part of the European Union, taking the plunge and moving to Spain was relatively straightforward, aside from the obvious challenges of the actual move. You could sell up, jump on a plane and then when you were here, apply for residency, register at the town hall etc, and that was pretty much it.

Now however, that simply isn’t the case. There is the fact that as a UK citizen, you no longer have the freedom of movement within the EU, something many people still haven’t come to terms with. You can of course still come here to live, but you will need to make an application for a Visa. If you are looking to retire, then this needs to be a non lucrative Visa.

I work closely with experts who can assist with these applications, who know the process inside out and make this part all very straightforward for you.

The financial planning side of the whole process is also essential, and that of course is where I get involved. It is important you dispose of or organize your assets in the most tax efficient way you can before you leave the UK. For example, making sure your pensions are correctly dealt with and selling your main residence at the right time to name just a couple, and of course understanding the tax system and rates applicable once you are here.

One of the most important aspects of making your Visa application, (which has to be done at one of three Spanish embassies in the UK – London, Manchester or Edinburgh), is understanding what your finances need to look like to satisfy the Spanish requirements. These are mostly focused on the fact that they want to ensure you have enough money or income to live here self sufficiently.

Download our Guide - Moving to Spain, the money part

So you need to satisfy what is known as IPREM, literally translated this means “The Public Multiple Effects Income Indicator”. As a non EU member applicant ( Third country National ), you need to demonstrate you have 4 times the IPREM requirement, plus 100% extra per beneficiary. So in simple terms, if a married couple are retiring here you will need to prove income of €2,895.10 per month, or a lump sum of €34,741.20 for each year. It is also worth noting, your Non Lucrative Visa needs renewing after a year (for the next two years) and again after three years, again for the next two years. After the end of year five you will then obtain permanent residency. This all has an effect on what money they will want to see you have, be it in the form of Pension income, savings, cash in the bank etc. This not only applies when you make your initial application, but also for the following four years.

So if you are thinking about moving to Spain? You will need to make an application for a Visa. If you are looking to retire, then this needs to be a non lucrative Visa, it is really important to have a good handle on the financial requirements, not just for the initial application but also for the subsequent few years. Most of my work has changed significantly now when working with people who are planning their move here, as it is so much more complicated than it used to be.

As we are dealing with similar situations on a regular basis, it enables us to make the process as easy as it can possibly be for individuals.

If you would like to find out more about what planning would be needed to make living in Spain a reality, then please feel free to get in touch.

Investment Property in Portugal

By Mark Quinn
This article is published on: 21st June 2022

21.06.22

I’m often asked for my opinion on property as an investment, either in Portugal or elsewhere and I must admit it doesn’t tick many boxes as an investment.

For example, it is generally subject to income tax, capital gains tax and succession tax, as well as ongoing local rates. It cannot be converted into cash quickly or easily (illiquid) and it is expensive and time-consuming to maintain. It can also come with administrative issues such as unruly tenants, rental void periods and due to its static nature, it is difficult to plan around.

Having said this, property continues to be a popular investment choice as it is easy to understand and you can touch it, giving investors a sense of security and reduced risk. Additionally, we probably all know a few ‘property millionaires’. So, what are the planning angles and how can you ‘get out’ and enjoy your spoils tax efficiently?

Capital gains tax (CGT)
Portuguese residents are subject to capital gains tax (CGT) on their worldwide property gains, unless the property was purchased before 1st January 1989, in which case CGT does not apply.

For Non-Habitual Residents (NHR) selling Portuguese property and non-NHRs, CGT is due on 50% of the gain and is added to your other income in that tax year and taxed at scale rates. In addition to this, if the property is located overseas, tax may also be due in the country the property is located. However, if there is a double taxation agreement between the two countries e.g. Portugal and the UK, you should not pay tax twice on the same gain.

Portuguese property
NHR status does not have an impact on the taxation of Portuguese property. The tax treatment is the same for NHR and normal residents, but despite the potential for eye-watering levels of tax, there are some reliefs available if the property you are selling is your main home – it does not apply to rental property sold in Portugal. The two reliefs mentioned can be used in isolation or conjunction.

Main residence relief: You can mitigate all – or a portion of – the CGT by reinvesting the proceeds into another property in the EU or EEA. Any amount not reinvested is taxed
Reinvestment into a qualifying pension or long-term savings structure: This is a relatively recent relief and is particularly advantageous for those wishing to downsize (and therefore will not fully reinvest the sale proceeds), or for those moving back to the UK or elsewhere outside of the EU/EEA. There are strict criteria for qualification and we can advise on this area but most notably, you or your spouse must be retired or above 65 and the gain must be reinvested in a qualifying structure

Non-Habitual Residence (NHR)
NHR gives those selling foreign property an advantage as gains are exempt from CGT in Portugal. But what about the tax due in the country the property is located? Let’s look at UK property as an example. The UK only applies CGT to gains accumulated since 6th April 2015 and you will also have your annual CGT allowance to deduct of £12,300 per person. Additional reliefs may also apply, further reducing any gains, but this will depend on whether the property sold was your home or an investment property.

For example, if you bought an investment property in Portugal in 1992 for £100,000 and it was sold today at £1m, ordinarily tax would be due on the £900k gain. But selling this as a non-UK resident, you only pay tax on the gain since April 2015. Using the straight-line method, the gain is £212,000 from which you can deduct your annual CGT allowance, leaving a taxable gain of £199,700. Assuming you had no UK income in that tax year, the tax due to HMRC would be £52,146 which is an effective rate of 5.7%.

Are you domicile or non-domicile?

By Mark Quinn
This article is published on: 16th June 2022

16.06.22

Domicile is often confused with residence, but it is quite distinct

The law of domicile is highly complex and has wide-ranging consequences on an individual’s tax position, as the recent furore surrounding Akshata Murty illustrates, but for most British nationals here in Portugal, domicile is a key factor for UK Inheritance Tax (IHT).

Individuals only have one domicile at a time and a very loose definition is ‘where you have a permanent home’. In my experience, this is often misunderstood and individuals who thought they were ‘definitely non-UK domiciled’ after living in Portugal for several years learn that in fact, they are very much still UK domiciled.

The are several types of domicile, namely ‘Origin’, ‘Choice’, ‘Dependence’ and ‘Deemed’ but here I will focus on the first two. Firstly, ‘Origin’. This is acquired at birth, usually from your father (or your mother if they were not married at the time of your birth). This is never fully lost but can be suspended by acquiring a new domicile of choice, but it is adhesive and will revive if the new domicile is lost.

Acquiring a domicile of choice involves forming a clear and fixed intention for a new country to be your permanent home, and therefore actually requires permanent residence.

Being non-UK domiciled is highly advantageous for UK IHT
The worldwide estates of UK domiciles are assessed for IHT in the UK, even if you live elsewhere. For non-UK domiciles, generally only UK based assets are assessed. It is worth noting here, that assets that derive their value from the UK but are held elsewhere e.g. company shares, will be deemed to be UK assets.

Shedding UK domicile is tricky
The burden of proof lies with the person claiming the change and the standard is particularly onerous. There is no checklist and your circumstances are looked at as a whole. Some factors that might be considered are family and business ties, location of friends and social interests, location of assets, acquisition of citizenship or languages spoken.

The adhesive nature of domicile is highlighted by Richard Burton’s failed attempt to change his domicile, which resulted in an IHT bill of £2.4m. Despite him living in Switzerland for 26 years, structuring his assets appropriately and subsequently dying there, the revenue was successful in arguing that his ‘mind and heart’ still remained in Wales. Their evidence being his choice to have the Welsh flag draped over his coffin and being buried with a book of Dylan Thomas poems. As you can see, what can be considered is very broad.

Traps
Non-domiciles by choice with a UK domicile of origin must be very careful with return visits to the UK, especially if they have a second home there. If they die as UK tax resident (by exceeding their day count) and were also deemed UK tax resident in one of the two preceding tax years, they are automatically deemed UK domiciled and their worldwide estate is subject to IHT.

A new domicile is retained until the new country is permanently abandoned, but unless another one is acquired immediately, your UK domicile of origin will revert automatically – even if you never set foot in the UK again.

Mixed domiciled couples must be careful. Normally assets passing between spouses are IHT exempt, but assets passing from a UK- domicile to a non-UK domiciled spouse are only exempt up to £325,000 unless they elect to be treated as UK domiciled for IHT purposes. This has a knock-on effect on their subsequent death. Usually, any challenge will come after your death, and it is up to your personal representatives to prove your intentions in life and gather evidence – which may not be possible, so you must ensure your record-keeping and evidence is strong.

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