By Portugal team
This article is published on: 31st January 2025
Good financial planning can protect your family´s future, save money and provide peace of mind. But where do you start?
When it comes to living in Portugal, understanding key tax rules, your financial options and the right questions to ask, can really make the difference.
You cannot choose where to pay your taxes—your tax residency determines this. If you are a tax resident in Portugal, you must declare and pay tax on your worldwide income and gains in Portugal, even if tax is also due in another country. For instance, if you receive rental income from a UK property, tax is due in the UK, but it must also be reported and potentially taxed in Portugal. You will get a tax credit from the UK so you will not pay tax twice, but tax may still be due in both countries.
Some believe that if they do not bring foreign income or assets into Portugal, they do not need to report or pay tax on them. This is incorrect, as Portugal does not operate a remittance-based tax system. All worldwide income and gains are taxable in Portugal, regardless of where they arise.
In Labour’s budget in October 2024, the government announced that the concept of UK domicile (which currently determines one´s liability to UK inheritance tax on their worldwide estate) will be replaced by a residency based system from 6th April 2025. Therefore, individuals who spend 10 or more years out of the last 20 (before death) will only face UK IHT on UK based assets. Restructuring your asset base outside of the UK can greatly reduce or eliminate any future UK IHT.
Portugal does not have a direct inheritance tax, but stamp duty at 10% applies to Portuguese assets inherited by non-immediate family members (e.g. siblings, nieces, and nephews). Holding assets outside of Portugal and proper estate planning can help minimise future tax burdens for your heirs.
If you are living in Portugal, you do not have to transfer your UK pension overseas. Whether an overseas transfer is right for you depends on multiple factors, including how you plan to use your pension. For example, if you intend to withdraw your pension in full, a transfer may be unnecessary and could incur fees without added benefits. However, if you do not intend to use your pension during your lifetime and meet the UK non-long-term residency rules, a transfer could remove your pension from the UK Inheritance Tax net.
Foreign pensions, including UK pensions, are generally taxable in Portugal. While NHR offers a temporary reduced tax rate (currently 0% or 10%), this benefit does not last indefinitely. Planning ahead and restructuring during your NHR period could significantly reduce future taxation.
Investing in a Qualifying Non-UK Pension Scheme (QNUPS) or an investment bond depends on your personal circumstances. However, a key difference is that QNUPS income is always taxable, meaning you may pay tax even if no gain is made or you have made a loss! With an investment bond, only the gain element is taxable, which may be a more tax-efficient option.
A common misconception is that if you do not take income from your investments, you will not be taxed. In Portugal, tax is due on an arising basis, meaning income, dividends, and capital gains are taxable when they are paid or realised (sale or switch of any fund/holding), unless held in a tax-efficient structure such as a pension, company, trust, or investment bond.
When selling a property in Portugal, 50% of the capital gain is taxed at scale rates. However, main residence relief is available if 100the full proceeds are reinvested into a new primary residence, a pension, or a long-term investment. The latter options allow flexibility to release capital while securing future income.
If you receive income or pensions in a currency other than euros, fluctuations in exchange rates can impact your finances. Using a currency exchange service or planning ahead with fixed-rate transfers can help stabilise your income and reduce the risk of unfavourable rate changes.
With over 35 years’ experience, Debrah Broadfield and Mark Quinn are Chartered Financial Planners and UK Tax Advisers specialising in cross-border advice for expatriates. For a complimentary initial consultation please contact +351 289 355 316 or portugal@spectrum-ifa.com. Alternatively, visit www.spectrum-ifa.com.
By Barry Davys
This article is published on: 18th January 2025
Change is inevitable, and for many, it can be unsettling—especially when moving to a new country like Spain. Navigating the complexities of a new tax system, managing investments in unfamiliar markets, and ensuring your financial future aligns with both your personal goals and local regulations can be daunting.
Fortunately, in the 19 years I have been in Spain, many of my clients have placed their trust in me, allowing me to guide them through these challenges on their financial journeys. While seeking professional advice might involve a cost, the peace of mind it provides – and the assurance that your wishes are carried out efficiently and effectively – makes it an invaluable investment.
For expats living in Spain, the need for a financial adviser becomes even more apparent. The financial landscape here is unique, with specific regulations, tax implications, and cultural nuances that can easily trip up even the savviest individuals. An experienced adviser ensures that every decision you make is informed, compliant, and tailored to your needs.
When you choose to work with a financial adviser in Spain, you gain far more than someone to manage your investments. Here’s what we bring to the table:
As an adviser with decades of experience, I’ve walked with my clients through every stage of life. For expats, ensuring your financial affairs are in order is crucial—not just for you, but for your loved ones. If your next of kin are unfamiliar with Spanish legal and financial requirements, settling your affairs can become an overwhelming burden.
A good financial adviser ensures everything is prepared ahead of time, reducing stress for those left behind. This includes organising inheritance planning to minimise tax liabilities and ensuring your wishes are carried out exactly as intended.
Even as I consider the future of my own practice, I reflect on the importance of continuity. For my clients, this means having a trusted team in place to manage their affairs should I no longer be available. Similarly, expats need to consider how their financial arrangements will be managed over the long term, especially in a foreign country.
While it’s possible to manage your finances independently, the risks of missing out on key opportunities or making costly mistakes are significantly higher. This is especially true in Spain, where the rules and regulations are often different from those in your home country.
Working with a financial adviser ensures that every aspect of your financial life is optimised and aligned with your goals. It’s not just about avoiding pitfalls, it’s about unlocking opportunities that you might not even know exist.
Whether you’re new to Spain or have lived here for years, the value of professional financial advice cannot be overstated. By partnering with a knowledgeable adviser, you gain more than financial stability, you gain peace of mind, knowing that every decision you make is informed, strategic, and designed to protect your future.
Don’t leave your financial future to chance. Take the first step today. Send me a summary of your situation at barry.davys@spectrum-ifa.com and discover how tailored financial advice can help you achieve your goals while navigating the unique challenges of living in Spain.
Contact me now to begin your journey toward financial clarity, security, and success. Your future self, and your family, will thank you.
By Barry Davys
This article is published on: 8th January 2025
Enhancing Your Financial Strategy with Trusted AI Tools
The buzz around Artificial Intelligence (AI) is hard to ignore, with tools like ChatGPT becoming increasingly accessible. While AI offers exciting possibilities, my approach remains measured and focused on one goal: enhancing your financial planning experience.
AI is a powerful tool, but it’s not a replacement for personalized advice.
Instead, I use AI to complement my expertise, freeing up more time to focus on your unique needs and objectives. Below, I’ve outlined how AI is being integrated into our processes and the benefits it brings to you.
Will AI take over jobs?
AI is ideal for repetitive tasks, such as sorting recyclable materials in factories. In financial planning, it’s a supportive tool, not a replacement for human judgment and empathy.
Will my financial planning be fully automated?
Absolutely not. Financial planning is deeply personal and requires understanding your goals, values, and circumstances. While AI can assist with specific tasks, I remain at the heart of your financial strategy, ensuring your plan reflects your needs.
I take an incremental approach to adopting AI, focusing on areas that directly enhance your experience and outcomes:
1. Cash Flow Modeling
AI helps generate clearer, more timely reports, allowing us to review and adjust your plan efficiently. Future developments will include portfolio research and implementation improvements, currently in the testing phase.
2. Tax-Efficient Savings
Calculating taxes on investments with complex withdrawal patterns has traditionally been time-consuming. AI now streamlines this process, reducing calculation times from weeks to days, ensuring more accurate and timely tax planning.
3. Investment Research
AI aids in analyzing market trends and investment options, giving us deeper insights to recommend strategies aligned with your goals.
4. Communication
AI enhances how I communicate updates on your financial plan, changes in tax laws, or regulatory developments. You’ll receive information faster and in more digestible formats, keeping you informed every step of the way.
AI is an augmentation tool, not a replacement. It allows me to dedicate more time to addressing life events and complex planning needs, including:
While AI supports behind the scenes, you can trust that I remain your adviser – a person you can rely on for clarity, guidance, and answers to all your financial questions.
AI is being introduced thoughtfully, with the sole aim of improving outcomes for you. Rest assured, I’m not becoming a robot or avatar. I will always be here to provide personalized, human-centric advice tailored to your unique circumstances.
If you have any questions about how AI is being used or how it benefits your financial plan, please don’t hesitate to reach out.
To start a conversation book a call with Barry Davys using his online system. This allows you to choose a time that is convenient for you for the call which can be either a phone or video call.
By Gareth Horsfall
This article is published on: 5th January 2025
Happy New Year to everyone! I hope that you are reading this feeling relaxed and rested. Who knows what 2025 will throw at us from a political and financial point of view, but the most important thing is our health (physical and mental) and making sure we all keep communicating with one another.
So, in this January 2025 Ezine I just wanted to just follow up on my year with you. After sending out my last few Ezines, and writing about our new house and move away from Rome in 2024, many of you have written back to congratulate us and offered many words of support and also wisdom because I know that many of you have also been through, or are continuing to go through a similar experience. I have to say that I wake every morning now feeling fresher and more mentally alert than before. I even started my year this morning (2nd Jan) with some early morning outdoor exercise (no need for the closed gym anymore) to get back into the normal health and fitness regime that I follow (after all the panettone and other goodies during this period).
I wanted to thank you all for your words and thoughts of support in 2024 and thought this E-zine might be a good opportunity to send you some fotos and afterwards to provide some of my own thoughts about the year ahead from a financial and economic point of view (my own thoughts, I must add!)
Below are some pictures from my house adventures in 2024.
The house as it is now – day and night.
The living room, then and now:
My wife has got quite handy at sunrise and sunset shots as well:
Then I am sure you will all be happy to see me doing some hard manual labour for a change:
*From left to right:
My first decespugliatore experience (in 38 degs!), picking pears, excavating a random pipe which led to nowhere, re-laying the same pipe which now goes somewhere!
And my famous ‘trinchea’ for laying the new pipes, which is now filled in and working like a dream!
And finally, our famous kitchen which was finally installed 100% on the ‘Virgilia di Natale’ and we were able to make Xmas dinner in it. (Thankfully, as I didn’t fancy trying it on the camp stove in the outhouse).
My job over the next few months, apart from ongoing work, will be to get all the necessary papers together to present to my commercialista and take advantage of the Bonus Edilizia for 2024. In the end we probably maxxed them all out, playing with the main one of 50% on most works, bonus eletrodomestici and then the other detractions such as the cost of the estate agent. The paperwork will be a mission in itself but I have been quite good at documenting and filing everything as we went along so its just a case of putting it altogether for the commercialista. (I can’t advocate enough for keeping good and regular records if you embark on this kind of journey as the paperwork requirements to take advantage of the bonuses are quite something).
And so, as my thoughts now move away from building to ongoing maintanence, I thought I would share some of my thoughts for what I see from 2025 and to touch on some of the things which are probably in everyone’s mind. (I should add that, as usual, I will be attending the Spectrum IFA Group annual conference again around the 22nd January and will be reporting back on the opinions of the people at the investment coal face, as they see it).
As far as I see things, I think we are in for a volatile ride. This is not to say that I see things turning out negatively for use in 2025, far from it. It could actually turn out to be positive for investment returns, but it will likely come with some periods of volatility during the year, certainly more so than 2024, I suspect this will be driven primarily by President elect Donald Trump. He has been voted for a second term and knows he cannot be voted for a third so he really has nothing to lose. His rhetoric already has been quite interesting, from wanting Canada to become the 51st State of the USA to purchasing Greenland.
It is easy to write him off as a lunatic, and certainly I suspect the Canada comment was really a way to wind up Justin Trudeau, but Greenland would be a much more strategic and important asset for the USA, because of the Arctic shipping corridor which Russia is already utilising to it’s advantage. Rising arctic temparatures now mean that it is open for the whole of the year. (Goods shipped from East Asia to the UK could save up to 10-12 days in shipping time over the traditional Suez Canal route and save over 40% in costs!). Donald Trump is probably very aware of this and would prefer that Russia does not get power and control of this route.
Apart from that he is going to come out of the gate on the 20th January with the tariff gun, is my thinking. I imagine he is going to hit everyone and everything with tariffs, where it is not in the interests of the USA. (The EU needs to prepare itself) I would think that his biggest target will be China to try and balance trade between the 2, but even more so to encourage businesses to return to the USA rather than offshoring production in China. He has also fired off a comment about imposing 100% tariffs on any country that joins a currency union in the newly formed BRICS economic community, so as to preserve the dominance of the US dollar.
However, the BRICS economic community are not going to be phased by this because they are unlikely to be ready to launch any common currency for quite some time and can always wait 4 years until Donald Trump is no longer in power. (Countries and economic unions have a much longer time outlook than a US Presidential term).
One thing which I hope he will achieve is his desire to put an end to the Ukraine Russia war. I am not sure what form this will take, but will likely mean Ukraine ceding already lost territory to Russia in exchange for calling a ceasefire to the war. Whilst I may not agree with the outcome, it will stop a war which seems more like a killing ground than anything else and has only demonstrated that Russia is significanlty more advanced militarily than we may have thought. The recent dropping of their ballistic Oreshnik bomb, as a warning to NATO, was a bit of an eye opener given that reports seem to confirm that it travels so fast that Western/NATO allies have no system to effectively intercept such a weapon. On that basis it’s better that Russia never has a reason to use it, in my opinion.
I suspect the situation in the Middle East, Israel and Gaza and Syria will not get any better in 2025. I can’t see any reason why anything will change there, sadly. More of the horrific images coming from Gaza and human rights abuses on both sides. I was taken a bit by suprise by the falling of the Assad regime in Syria, not more so than by an ex-Al Qaeda second in command, who is now a western ally. Somehow I don’t see that ending well.
And lastly, I will touch on the EU because it warrants some mention given Donald Trumps re-election.
It has become evident that EU nations have been riding on the coat tails of the USA for defence, through NATO since World War 2. I remember when Donald Trump was President first time around that he started demanding that NATO allies contribute their fair share of the defense budget to NATO and ‘requested’ that they increase their expenditure to 3% of GDP. I don’t remember the facts but I don’t think many EU countries did, apart from Estonia if memory serves me correctly.
This time I have seen reports of Donald Trump requesting 5% of GDP or he may withdraw the USA from NATO. This would seem to be a significant worry for the EU, and rightly so because ultimately any defense/borders/war with Russia are going to have to be funded/managed by the EU and no longer by the USA. Additionally, USA Tariffs on goods and increased defense expenditure are going to have a significant impact on EU member states. Already with the increased gas prices that we are paying (DT will also de-regulate energy exploration and production in the USA so they can start drilling and mining and become more resource independent again) many businesses are moving to the US or to places like Dubai to benefit from lower costs and /or lower taxation. This is a long-term serious problem for the EU and the bureaucrats in Brussels are going to have to step up to the plate. In the very short term I see this as having a serious economic impact but could lead to an economic boom time in the EU, especially in defense, as it relies less on the USA for support in the medium term.
There is so much more to say here and I could make some more predictions. The fun thing is that none of this will not define your investment returns in 2025. Would you have predicted that in 2024, whilst Russia was at war with Ukraine, Israel/Gaza were was committing their deeds, the fall of Syria and the re-election of Donald Trump, would produce of return on the US stock market of over 20%? The analysts predict a return of around 14% on the US stock market in 2025.
I will finish this E-zine just by saying that I am a great believer in the Black Swan event. For anyone who is not familiar with this theory it was coined by Nassim Nicholas Taleb in his book The Black Swan. The theory goes that until Western colonial powers discovered and colonised Australia it was believed that all swans were white. N0-one had ever seen a black swan. Therefore to see such a creature was a moment of shaking belief and requiring a re-thinking of ideas and plans.
He overlaid this onto the investment markets explaining that there are events of which we are ignorant, even to go as far as saying we have no knowledge whatsoever, until such time as they become evident, normally because of problems occuring in their respect markets: think mortgage backed securities (2008/9), Long Term Capital Management (Russian debt crisis 1998) The point is that we can never measure, prepare or be cognisant of these things before they happen, but they inevitably have significant consequences and create more stress for investors. The good thing is that they come along rarely and they pass, and we move on.
As always we need to remain diversified, manage costs where we can and have the right people managing our money to get us through such events.
In this E-zine I have shared some thoughts about what will happen politically and economically in 2025, but I remain postive for the year ahead from an investment focus. Good luck to all of us for the year ahead.
From the new house in Amelia….. Auguri alla Befana !!!!
By Jeremy Ferguson
This article is published on: 24th December 2024
I am writing this at the end of another year in which I found myself helping people relocate from the UK to retire to Spain. For many, this was a lifelong dream, for others it was a case of simply having had enough of the UK.
The process is now a lot more involved than it was before Brexit, and my role tends to be focused on making sure all of their finances stack up, and being as tax and investment efficient as possible once they arrive. There are certain things to consider before you leave the UK; an example could be taking your pension lump sum in the tax-free environment of the UK, or making sure your house sale doesn’t create tax implications once you become Spanish resident. This typically revolves around the timing of your move here, which can be critical in relation to effective tax planning.
What has really been obvious to me this year with most of my new clients is the ‘unusual part’ of my job that I had not really come across too much in the past. Most people have been used to making money all of their working lives, be it in the form of receiving a salary each month, or making profits from self-employment. But when retirement comes along, income from working suddenly stops and in the case of people retiring to Spain, they suddenly find themselves in a situation where they no longer receive ‘earned’ income. For many, this is a very difficult situation to deal with psychologically, as they become fearful of spending money.
And this is the unusual part I am referring to, as I find myself spending a lot of time with people running through their finances and expenditure, showing detailed projections of how long their money will last going forward. Of course, it is very difficult as no one knows how long they are going to live, and no one knows what their money will be making going forward, but by making sensible assumptions on both considerations a pretty realistic picture can be painted.
This is the point at which I really emphasise the power of ‘passive income’, and help people to understand its relevance and value. Simply put, even though you have stopped earning money when you retire, it doesn’t mean you have stopped making money. With interest on bank deposits, and growth on investments and pensions, whilst you may be enjoying life relaxing on the beach or playing golf, your hard-earned savings are working away in the background for you. This is why it is so important to keep a close eye on your assets, making sure they are working as hard as possible for you. I always refer to this as passive income.
Over time people become more relaxed about their new situation in retirement, but to start with it can be very difficult to adjust. This is why I spend a lot of time talking with people, explaining that as they ease into retirement this is something that will start to take a back seat in their daily worries, and spending money will become less of a stressful issue. Regular reviews of their financial situation are a great help when it comes to ‘proving’ things will be ok!
If you would like help when it comes to planning your retirement, then please do not hesitate to get in touch.
And let’s hope 2025 is a prosperous year for us all.
By Katriona Murray-Platon
This article is published on: 4th December 2024
The year 2024 is drawing to a close. Financially it has been a rather good year in the markets with a lot of our clients’ portfolios doing much better this year than previous years. Even as you start to prepare for Christmas or wind down at the end of the year, there are still some financial points you should be aware of.
The interest rates on the Livret A and the LDDS savings accounts will reduce from 3% to 2.5% next year (probably in February). Even though the rate has dropped these accounts are still a good place to keep money needed for the short to medium term. Any amounts that you do not foresee needing or you want to get a better return from without paying tax, should be put into an assurance vie.
Christmas is a time for giving whether that is to families or charities. Although gifts to friends and family normally have to be declared, for events such as birthdays or Christmas, you can give money to your loved ones without having to declare these amounts to the tax office. This is known as a “presents d’usage”. If you wish to give money by bank transfer it is advisable to put on the transfer order the words “Présent d’usage pour Noel” so that there is no doubt about the fact that it falls under the exemption.
If you haven’t been giving to charity regularly over the year, now is the time to gift money to any worthy causes. Gifts to charities of general interest or recognised as of public utility in France would allow you to benefit from a tax reduction of 66% of the amount gifted up to a maximum amount of 20% of your taxable income. Gifts to charities who help those in difficulty receive a tax reduction of 75% of the amount gifted for amounts under and including €1000. Any amount over €1000 will get a tax reduction of 66%. In both cases the tax reduction cannot be more than 20% of your taxable income.
You have until 4th December to amend your 2023 tax return online from your online account on the impots website.
After this date you will only be able to submit a paper return with any amendments.
Until 12th December you can change the amount of the 60% advance that you will get for your tax credits and reductions which is normally paid mid January.
December is the last chance to add some money to your PER retirement accounts if you have the money to do so and if you want to reduce your tax liability. You can put as much as you like into the PER but the tax benefits are limited to either up to 10% of your annual income up to a certain amount or 10% of the PASS (see below). You may also use any unused amounts from previous years, these will appear on your 2023 tax statement. This amount is deducted from your taxable income before being assessed at your marginal rate.
The PASS (plafond annual de la sécurité sociale) has increased by 1.6% and is set at €47,100 for 2025 or a monthly amount of €3925 (compared with €3864 in 2024). This has an impact on the maximum amount you can receive from daily sick leave pay for occupational illnesses or maternity pay, disability allowances or French pensions. It is also used to calculate the maximum amount you can pay into a PER retirement account.
There are still a few weeks in December and I will be working until 20th, seeing existing clients and meeting new ones. We are going to spend a few days in London and then travel up to Liverpool to spend Christmas with my family.
I hope you have a lovely holiday season with all your friends and family and I look forward to bringing you more financial news and information next year.
By Gareth Horsfall
This article is published on: 1st December 2024
Before I get into things I thought I would share a picture of my olive oil container (fusto), all 50 ltrs of it! The raccolta, which I did at the start of October with the help of some locals, produced approx 150 ltrs of oil, of which we split 3 ways.
It seemed only fair given I had no equipment and had no idea what I was doing and this will easily cover our annual consumption and maybe some gifts to friends and family. What a great experience though!
Next year I will get more organised and see what I can arrange. The olive oil may be virgin but my virgin olive oil raccolta days are now finally over! I am now starting to really earn that Italian citizenship!
On the property front we are finally getting to the end of the things to be done….at least for now.
After a disastrous first kitchen fitting we had to order another one and will receive that in the coming weeks. We have been cooking and eating in an out house for the last 4 months, but as the colder weather is now settling in it’s becoming more difficult to say the least!!
All the other little bits, which take time and effort, are getting completed meanwhile I am still loving the surroundings, olive trees and watching autumn turn to winter and the changing landscape. I am also finding that on our ‘terreno’ we have a whole load of wild plant foods growing: cicoria, wild finocchio, asparagus, and numerous other edible plants.
I would never have known if it wasn’t for the ex-owner who came around and pointed them all out and advised to do some foraging rather than keeping the grass short everywhere. I will see how that pans out, but it could be interesting and I am keen to try and use the land rather than just curate it (mainly because cutting grass every 2 weeks is hard work) and so I have lots more to learn. A fresh organic larder on the ‘terreno’ might just be the thing; in the areas that I have let grow wild to date the insects and birds seem to be having a ball anyway and some interesting wild orchid type plants have popped up as well.
Anyway, moving swiftly onto financial matters because I imagine you are more interested in that than my explorations of country life…
I refrained from writing an E.zine directly after the US election because everyone seems to have their own opinion of Donald Trump so it matters not what I think. In the end what does matters, for our purposes, are the financial markets and how they react to such events.
If you hadn’t noticed the immediate reaction was very healthy indeed and stock markets rose on the back of the news. Trump is a self confessed businessman after all !!
I saw him doing an interview the other day in which he said that he had spoken to lots of business people since his last time in the Oval Office and had asked what was more beneficial for them: reducing taxes or reducing regulation and bureaucracy. He explained that every one of them said that reducing over-burdensome regulation and bureaucracy was more important by far. So, it might be reasonable to assume that should he be able to follow through with this aim that he can provide a healthy landscape for US companies to flourish.
Certainly the indicators are good! He also has his Department of Government Efficiency head – Mr Elon Musk, rationalising the US government agencies so that should be something interesting to watch if his firing of employees when he took over Twitter is anything to go by.
I myself can confirm that over-burdensome regulation affects our business tremendously these days; there seems to be more and more paperwork than ever before, and much of it could be eliminated or reduced significantly. However, I don’t see that happening any time soon especially from the direction of EU, who set the rules, so we will continue to deal with it. Tech now plays an important part for us in gathering and dealing with client information and it saves you and I a lot of time.
But regardless of all of this, we have to consider how financial markets will continue to react and, at the time of the election someone shared on LinkedIn a graph which I will share with you below:
As you can see, the stock market doesn’t care who is in power, we can all have our own views on Donald Trump and his effect on the world, but in the end it doesn’t matter one tiny bit; but there are 2 takeaways from this graph:
1. The market rises over time
2. In every period there is market volatility and there will be moving forward.
The stock market may have risen since the election and Bitcoin is equally flying, but be under no illusion, at some point markets will correct.
The best thing to do is be invested in solid companies and diversify your portfolio. Match it to your risk profile and decide how much of those ups and downs you can stomach. Patience will take care of the rest for you.
Your financial enemy is not Donald Trump nor anyone who will come after it is simply inflation! The rise in the cost of goods and services over time. Keep your eye on that and not on the daily swings in markets.
On the subject of inflation, it continues its rise – I can’t believe how much things cost in relation to the new house we bought. I asked for a quote from a local gardening firm to cut a long hedge, which is quite overgrown, and when I got it back my eyes started to water. So, like a good Yorkshire man I went out and bought a chainsaw for €180 and thought I would just do it myself, piano piano. In the process I saved myself a whole load of money! Equally, the daily rate for builders, electricians, plumbers etc is now so high! Obviously their cost of work has increased and that is being passed onto us.
Are you an investor in crypto currencies? Well there is some rather alarming news for you moving into 2025, if you are an Italian resident for tax purposes.
From 1st Jan 2025, the capital gains tax rate on crypto currency speculation will increase from the flat standard CGT rate of 26% to a whopping 42%! Not great news for you if you have been investing in crypto and are sat on healthy gains, certainly given the fact that Bitcoin has risen significantly over the last few months, effectively doubling in price.
One way to mitigate the higher tax rate on your historic gains might be to cash out before the end of the year and pay your 26% on historic gains in next years tax return. At the same time you can buy back in and in that way you reset the clock on the purchase price, to the new amount. Clearly this means paying 26% CGT on your gains to date, but if significant then it could be worth it. From there on in it will be 42% on realised gains.
One of the things I help my clients with these days is taking a look at their tax returns and making sure that the section Quadro RW ( declaration of overseas assets) is prepared correctly.
This year I found a number of incorrect entries from commercialisti and got them corrected, saving some clients thousands in tax. However, to be fair to commercialisti they are often bombarded with information which is in English and on statements which they don’t know how to interpret. It is no wonder they sometimes get it wrong and we can’t expect them to understand non-Italian portfolio or cash transaction statements. However, that’s no excuse and either we or they have to be more attentive.
So, here’s one tip for checking your own Quadro RW.
You will find in that section that there are lots of little boxes, in which various values need to go. In box No.3 you will find the title.
This is nothing other than the number which you (or your commercialista) must select to identify the type of asset that you hold abroad, but clearly it’s not much good if you don’t have the list of identifier numbers. So, here, below, I have included a list of all the different codes:
| CONTI CORRENTI E DEPOSITI ESTERI | 1 |
| PARTECIPAZIONI AL CAPITALE O AL PATRIMONIO DI SOCIETA NON RESIDENTI | 2 |
| OBBLIGAZIONI ESTERE E TITOLI SIMILARI | 3 |
| TITOLI NON RAPPRESENTATIVI DI MERCE E CERTIFICATI DI MASSA EMESSI DA NON RESIDENTI | 4 |
| VALUTE ESTERE DA DEPOSITI E CONTI CORRENTI | 5 |
| TITOLI PUBBLICI ITALIANI EMESSI ALL'ESTERO | 6 |
| CONTRATTI DI NATURA FINANZIARIA STIPULATI CON CONTROPARTI NON RESIDENTI | 7 |
| POLIZZE DI ASSICURAZIONE SULLA VITA E DI CAPITALIZZAZIONE | 8 |
| CONTRATTI DERIVATI E ALTRI RAPPORTI FINANZIARI CONCLUSI AL DI FUORI DEL TERRITORIO DELLO STATO | 9 |
| METALLI PREZIOSI ALLO STATO GREZZO O MONETATO DETENUTI ALL'ESTERO | 10 |
| PARTECIPAZIONI PATRIMONIO DI TRUST, FONDAZIONI O ALIRE ENTITA GIURIDICHE DIVERSE DALLE SOCIETA | 11 |
| FORME DI PREVIDENZA GESTITE DA SOGGETTI ESTERI | 12 |
| ALTRI STRUMENTI FINANZIARI ANCHE DI NATURA NON PARTECIPATIVA | 13 |
| ALIRE ATTIVITA ESTERE DI NATURA FINANZIARIA E VALUTE VIRTUALI | 14 |
| BENI IMMOBILI | 15 |
| BENI MOBILI REGISTRATI (es. yacht e auto di lusso) | 16 |
| OPERE D'ARTE E GIOIELLI | 17 |
| ALTRI BENI PATRIMONIALI | 18 |
| IMMOBILE ESTERO ADIBITO AD ABITAZIONE PRINCIPALE | 19 |
| CONTO DEPOSITO TITOLI ALL’ESTERO | 20 |
Each number relates to the different type of assets you may hold. No 1 being conto correnti e depositi, which is current accounts and deposit accounts. However, be aware that there are different interpretations because National Savings Certificates or money market accounts, for example, will not fall into this category in Italy even though they may seem as though they should based on our interpretation.
A good start is to get a copy of your Unico tax return and check that the numbers are inserted correctly. You can work the figures out as well, but an asset declared incorrectly i.e bank account instead of stock portfolio, could end up costing you!
Remember, that you can down load a copy of your tax return now on the Agenzia delle Entrate website if you have a SPID or the carta d’identità elettronica which you have linked to the app. We have all the tools, so let’s use them or alternatively, just ask me!
On that note, I will leave you with this shorter E-zine. I will be writing about UK Inheritance tax and the very important changes that have occurred in the 30th October budget in my next E-zine. For once some tax changes could be a huge bonus for anyone looking to live in Italy for the rest of their lives and then pass on as much as possible to their heirs. The rules have been changed to make it much more clear on how you can now escape UK inheritance tax. For the likes of us who live in Italy, where from an inheritance tax point of view the country is like a fiscal paradise, we have a clearer path to taking advantage of Italy’s rules rather than the UK, but like almost everything it will require carefully planning and a full understanding of the changes.
I will certainly get that Ezine to you before Xmas !!
By Barry Davys
This article is published on: 26th November 2024
It is highly unusual for a UK budget to give us an opportunity to significantly reduce our tax liabilities. The budget of the 30th October 2024 has done exactly this, and by following a few basic steps it is easy, for those of us who have lived outside the UK for more than 10 consecutive years, to benefit greatly.
The UK currently has an Inheritance Tax system where the estate of the deceased is assessed based on worldwide assets if they were considered domiciled in the UK at the time of death. The term domicile and its meaning has been the important factor to consider up to now, and in the UK has a different meaning to “resident” or “residency”.
There is no need for us to go into the definition of domicile here, as the budget has changed the basis for Inheritance Tax (IHT) assessment to a “residency” test, which has also simplified the tax system.
If you have lived outside the UK for more than 10 consecutive years, your non UK assets will not be liable to UK IHT. The rule is as follows –
From 6 April 2025, the test to determine whether non-UK assets are within the scope of IHT will be whether an individual has been resident in the UK for at least 10 out of the last 20 tax years immediately preceding the tax year in which the chargeable event (including death) occurs.
(Editorial Note. Some other press and advisers are stating it is 10 years, not more than 10 years, outside the UK. This applies to a different tax in the Budget, not IHT).
To meet the rule it is necessary to have been out of the UK for more than 10 years, because of a Split Year rule for taxation that will also apply. Again, there is no need to go into detail here, suffice to know that we need to be out of the UK for more than 10 years in the last 20.
The benefit will depend on our personal circumstances, where our assets are based and the value of our assets.
I have used a case study to illustrate –
Mr & Mrs Ingles
– More than 10 consecutive years out of the UK in the last 20 years
– Assets outside the UK include Spanish compliant bonds, bank accounts, QROPS pension and property, all jointly owned, as follows:
Spanish bank accounts €98,000
Spanish compliant bonds €290,000
House (mortgage free) €525,000
QROPS pension €178,000
Total €1,091,000
– UK assets £325,000 jointly owned
Mr and Mrs Ingles can return to the UK and if death occurs within 10 years of the return the following will apply.
– UK assets assessed for UK IHT fall within the UK nil rate band. Tax due £0
– Assets outside the UK not assessed under the residency basis €1,091,000
At the time of writing the exchange rate would give a value to the non UK assets as £865,814. The savings from not having these assets taxed in the UK would be £346,325.60. (£865,814 * 40%)
Complete more than 10 consecutive years outside the UK, return to the UK and be unfortunate enough to pass away in the next 10 years, and your estate will get the additional benefits (on top of being IHT exempt on non UK assets):
If you pass away outside of the UK and your beneficiaries are in the UK, they will pay no UK IHT if you have met the long term non resident criteria. This is because your non UK assets will not be taxed in the UK. As the UK government taxes your estate, not the beneficiary receiving the bequest, no IHT will be payable.
And because you live in Spain, your UK based beneficiaries will be assessed on residency and as they are outside Spain they will not have to pay Spanish IHT on non-Spanish assets.
The changes to UK IHT rules are hugely important for those of us living outside the UK. It may be possible to leave anything from tens of thousands pounds (or euros) to hundreds of thousands to our family and/or worthy causes.
There is a great deal of planning that can be completed to get the best outcome for you. It will depend on your personal circumstances. However, as a principle, it is better to start this planning sooner rather than later.
To start a conversation book a call with Barry Davys using his online system. This allows you to choose a time that is convenient for you for the call which can be either a phone or video call.
Source: HMRC, UK Gov 30th October 2024
Notes
This article is for general information purposes only. Professional tax advice must be taken before undertaking planning to benefit from changes to the UK IHT system.
The content is based on our understanding of legislation at 25th November 2024
The policy paper issued by HMRC as part of the Budget becomes law when the Act of Parliament has been passed.
You can find out more about Barry Davys of The Spectrum IFA Group and his clients by clicking Barry Davys IFA
By Portugal team
This article is published on: 22nd November 2024
The UK’s latest budget announcement has ushered in significant reforms that could transform how British expats manage their pensions and inheritance tax (IHT) liabilities.
These changes, particularly impactful for long-term expatriates, redefine key aspects of domicile, residency, and asset protection. Here’s what you need to know that will affect British expats and why understanding the changes is critical.
From Domicile to Long-Term Residency: a seismic shift
Historically, the concept of “domicile” has been central to determining UK IHT obligations for British citizens. Many expats found that, despite decades abroad, they were still deemed UK domiciled, exposing their global estates to IHT.
The new rules mark a major shift, particularly impacting British expatriates who have been living overseas for extended periods, replacing the concept of domicile with new long-term residence (LTR) rules. Under these new rules, the test for liability to UK IHT will be based on residency.
Those who have lived outside of the UK for at least 10 of the last 20 years will now be classified as non-UK long-term residents. This change means their global assets (except UK based holdings such as pensions, property, investments) will be exempt from UK IHT.
Therefore, expats intending to remain out of the UK for extended periods of time should seriously consider moving assets outside of the UK.
If an individual does not meet the non-residency criteria at death, their entire estate remains subject to UK IHT and the usual rules, exemptions, and tax rates apply.
New incentives: tax breaks on return to the UK
The budget introduced two noteworthy provisions for British expats considering a return to the UK:
1. Four Years of Tax-Free Foreign Income and Gains: The Foreign Income & Gains (FIG) rules allow non-UK LTRs returning to the UK to enjoy tax-free treatment on income and gains from overseas assets for up to four years.
2. 10-Year IHT Exemption: Returning expats can benefit from a 10-year IHT exemption on non-UK assets, provided they are are still classified as non-UK LTRs at the date of death. After this 10 year period, full UK LTR status applies, reinstating IHT liability on worldwide estates.
Pensions, QROPS & QNUPS – what has changed?
Under the revised rules, expats who have previously relied on UK pensions and offshore pension schemes such as Qualifying Recognized Overseas Pension Schemes (QROPS) and Qualifying Non-UK Pension Schemes (QNUPS) to protect their wealth will no longer be sheltered from UK IHT if deemed UK LTR at death.
Moreover, those who are non-UK LTR at death, but still hold UK based pensions will still suffer UK IHT on the pension as it is a UK situ asset.
An added element is how pensions interact with the Portuguese Non-Habitual Residence (NHR) regime and how, once the scheme ends, pension are generally taxed at scale rate of income tax (up to 53% with solidarity taxes).
Therefore, Portuguese residents with or without NHR who are holding UK, QROPS and QNUPS pension holders should revisit their pension planning.
Double whammy tax – 85%
Where death of the pensioner occurs before age 75, beneficiaries receive UK and overseas pension income tax free and post age 75, the beneficiary is taxed at their marginal rates of income tax. There have been no changes to these rules.
However, with the introduction of IHT to pensions, where death occurs after age 75, beneficiaries could be hit with a “double whammy” of 40% IHT and then income tax up to 45% on any drawdown.
Expats holding pensions should therefore be aware of this potential for double taxation and consider restructuring options for their intended beneficiaries.
Other benefits for expats
Most Brits will be aware of the “7 year rule” when making gifts during their lifetime, whereby there is the potential for the gift to be brought back into the UK IHT net if death occurs within 7 years.
An interesting outcome of the budget is, where a non-UK LTR gifts a non-UK asset, the gift is immediately exempt from UK IHT. There is no 7 year waiting period. Moreover, if the donor subsequently returns to the UK this gift will remain outside of the scope of UK IHT, even if death then occurs within the 7 years or the donor becomes a UK LTR again.
Final word
The sweeping changes underscore the importance of careful financial planning for British expats.
Restructuring assets and revisiting long-term strategies are crucial steps to minimise IHT, income and capital gains tax exposure, and to optimise tax efficiency, and those who are intending to be long-term, or permanent expats should certainly revisit their affairs in light of the new changes.
If you would like to discuss your position in detail, please contact us for a confidential and complimentary meeting.
By Craig Welsh
This article is published on: 12th November 2024
Some big news coming from our Malta office.
The Spectrum IFA Group, thanks to the efforts of our branch manager, Craig Welsh, will be the main sponsor of the Nations Cup.
The Nations Cup will be organised by the Royal Malta Golf Club, teeing off in December 2024. This will be a 3 matchday competition between teams representing Malta, GB & Ireland, Scandinavia and Nordics, and The Rest of the World.
This year’s innagural event will feature Spectrum IFA Group as the title sponsor, bringing a new level of excitement and international flair to the club. Known for delivering tailored financial planning services to expatriates across Europe, The Spectrum IFA Group is a fitting partner for an event that celebrates global connections and international sportsmanship.
The Nations Cup is set to become a highlight in the RMGC golf calendar, featuring teams from Malta, Great Britain and Ireland, Scandinavia and the Nordics, and a collective team from “The Rest” regions. This competition will foster camaraderie and regional pride as these diverse teams vie for victory.
We feel that Spectrum IFA Group is a fitting partner for an event that celebrates global connections and international sportsmanship. We look forward to the camaraderie and regional pride, as these diverse teams vie for victory on Malta’s greens!
We are looking forward to a successful event.
