Wealth Tax in Spain

By John Hayward
This article is published on: 10th May 2021

10.05.21

The UK tends to rely on income and inheritance taxes to generate revenue, but countries such as Spain and France, also apply wealth tax (Impuesto sobre el patrimonio). This is an asset tax and can be on cash, real estate, pension funds, shares, investment bonds, ISAs, and even cars. Portugal also has a wealth tax but this relates solely to immoveable property.

Spain eliminated wealth tax in 2008 but then “temporarily” reintroduced it in 2011 and it has been here ever since.

Each autonomous region sets their own allowances and rates after initial direction by central government. The Spanish State’s allowance is €700,000 plus up to €300,000 for one’s main residence. This is per taxpayer. It is important to note here that a property only becomes a main residence after 3 years of continuous habitation. There are a number of exceptions to this rule.

The State’s rates of wealth tax are as follows:

Lower Band Limit (€)	Upper Band Limit (€)	Tax rate (%)
Nil	167,129	0.2
167,129	334,253	0.3
334,253	668,500	0.5
668,500	1,337,000	0.9
1,337,000	2,673,999	1.3
2,673,999	5,347,998	1.7
5,347,998	10,695,996	2.1
Over	10,695,996	2.5

Wealth tax in Valencia has changed over the years. In 2019, it was announced that the tax-free allowance was being reduced to €600,000. With effect from 2021, the allowance is being reduced further to €500,000. This means that more and more people will become subject to wealth tax.

In addition to the reduction in allowances for 2021, Valencia has higher wealth tax rates than the State’s own rate, as follows:

Lower Band Limit (€)	Upper Band Limit (€)	Tax rate (%)
Nil	167,129	0.25
167,129	334,253	0.37
334,253	668,500	0.62
668,500	1,337,000	1.12
1,337,000	2,673,999	1.62
2,673,999	5,347,998	2.12
5,347,998	10,695,996	2.62
Over	10,695,996	3.50

Example:
If a couple have assets totalling €2.5 million, including a main residence worth €600,000, the individual annual wealth tax bill based on the State allowance and rates could be around €600. Using the Valencia allowance and rates, the tax bill could be almost €1,800. To clarify, this is per person and payable each year.

Depending on one’s income, and if one is a resident in Spain, the amount due can be reduced. The wealth tax due cannot exceed 60% of one’s taxable base (e.g., annual pension income, savings, etc.) when adding the wealth tax to personal income tax liabilities with a minimum payment of 20% of the wealth tax due. It is important to make certain that all of one’s assets are eligible for this rule.

Spanish Tax Guide Download

Tax in France – what needs to be declared

By Katriona Murray-Platon
This article is published on: 6th May 2021

06.05.21

No-one needs reminding that 2020 was a year like no other. Our lives were changed in many ways and this had an effect on our finances. Luckily there were many government schemes and initiatives to help people overcome the financial difficulties suffered in lockdown and because of the health restrictions. However now that 2021 tax season is upon us, what now needs to be declared?

Salaried workers bonus is tax exempt
Last year some salaried workers may have received a consumer bonus which is exempt from tax up to €1000 (or €2000 if there is an interest agreement/“accord d’intéressement”) Public workers and health workers also received a bonus which is exempt up to €1500.

Overtime hours are usually exempt up to €5000 per year, however the exemption threshold has been increased to €7500 for those hours carried out between the beginning of lockdown (16th March 2020) and the last day of the emergency health state set at 10th July 2020. This applies to salaried workers in the public and private sector as well as those under special regimes. All exempt overtime must still be declared on the tax form and will be included in the tax income reference rate for the tax household.

The Ministry for Economy and Public Accounts has announced that the payments paid by companies to their employees to cover the costs of working from home are exempt from tax up to €2.50 per day worked at home and up to €50 per month for 20 days and €550 per year.

Salaried workers who choose to deduct their actual costs rather than applying the flat 10% abatement on their salaries, can still choose this options without supplying supporting documents however these deductions may not be so beneficial depending on your level of salary. As always it is best looking at both options and seeing which works best for you.

Charitable gifts in 2020
Although things were hard for many people last year, it was also a year, more than ever to help those less fortunate. Gifts given in 2020 to humanitarian organisations and victims of domestic violence result

in a tax credit of 75% of the amounts donated up to a maximum threshold of donations of €1000. Over this threshold and for donations given to other organisations (including political parties), the rules haven’t changed, the tax reduction is 66% for such donations and he maximum threshold is 20% of the taxable income. The excess can be carried over over the next 5 years and results in a tax reduction under the same conditions.

Independent workers
Companies and individual tradespeople benefitted a lot from the government help last year. Fortunately the financial help granted by the solidarity fund to companies most affected by the health crisis, the exceptional financial help to independents (CPSTI RCI COVID 19) and those paid by the additional pension schemes of independent professionals and lawyers (CNAVPL and CNBF) are all exempt from income tax. The other help from public or private entities are taxable if there is no specific legal provision that exempting them otherwise.

Auto-entrepreneurs and micro-entrepreneurs who were exempt from paying part of their social charges must include in their tax declaration the turnover figure that was not declared to URSSAF because of this exemption.

Home help tax credit – changes to the conditions
The home help services normally give rise to a tax credit of 50% of the amount paid out. These expenses are deductible up to €12,000 (plus €1500 per dependent and person over 65 years, up to a maximum of €15,000). However in 2020, during lockdown some of these services had to be temporarily suspended or even cancelled, or in certain circumstances could be carried out online.

If you employed someone carry out a service in your home, you may have benefitted from the partial compensation for the hours that your employee was unable to carry out during lockdown. These compensated hours cannot benefit from the normal tax credit and if you nonetheless paid your employee their salary even though they couldn’t actually work, this cannot be used for the tax credit (it is classified as a solidarity donation).

Exceptionally, some services, which in principle took place in the home, but were in fact carried out remotely because of the health crisis, still give rise to the tax credit under the same conditions as other home help services. These include online additional schooling support lessons and individual lessons (gym, music etc) given to adults or children. The Ministry of Economy and Finance has specified that these services “must have involved a minimum amount of effective interaction, implying a physical presence of the person supplying the service at one end of the screen/telephone line and the be specifically given to the person paying for the service at home”. This therefore does not include online group lessons or watching pre-recorded videos online. This derogation applies throughout the time that people were not allowed to go out either because of lockdown or curfew.

Professional landlords who waived rent
If you are a professional landlord and you waived the rent of your tenants for a commercial or professional premises rented to a company that was difficulty because of the Covid crisis, you can still deduct your expenses (ownership expenses and mortgage interest). You also can carry forward your rental loss, up to €10,700, on your overall income. The additional loss – and the part of the deficit arising from the mortgage interest – will be carried forward and deducted from your income over the following 10 years.

There is also a specific tax credit if you definitively waived rent for November 2020 only (not any of the other months in 2020). The tenant company must have employed at least 5000 employees and have been closed to the public (even if they were able to do click and collect) or to have carried out its business in one of the sectors of business that were eligible for the solidarity fund as listed in Decree no 202-371 of 30.03.2020 (hotels, travel industry for example).

Furthermore the tenant company must not have been in financial difficulty on 31st December 2019 or have been under court ordered administration proceedings as at 1st March 2020. The tax credit is equal to half of the unpaid rent if the company employed less than 250 employees. If the number of employees was between 250 and 5000, the 50% is calculated on the two thirds of the rent. If the tenant company is managed by an ascendent, descendant or member of your tax household, you must justify the cash flow problems in order to deduct your expenses and get the tax credit.

Voluntary retirement contributions
You can deduct from your total income the sums paid into a retirement scheme such as PER, PERP or Préfon up to the normal deduction limits. If you have opened a PER for your child (whether a minor or of age but still within your tax household) you can deduct the payments even if they payments were paid by your own parents (the child’s grandparents) Children have their own deduction amounts even though it is not necessarily stated on the tax return.

Download your French tax guide here

Are you a French tax resident who owns a house in the UK?

By Andrea Glover
This article is published on: 4th May 2021

04.05.21

UK Property Matters

I thought I would write this month about the topic I am asked most frequently about at the moment by clients and prospective clients, which is the subject of owning property in the UK as a French tax resident.

There are many reasons for deciding to keep properties in the UK when moving to France. Whether it be a ‘bolt hole’ to go back to for those that frequently return to the UK for family or work, or as an investment to generate rental income to supplement retirement.

There are several potential French and UK tax consequences to consider, when owning property in the UK, which I will cover in general terms by each specific tax area.

Wealth Tax

Wealth tax in France is called Impôt sur la Fortune Immobilière (IFI). The assets that are taxable under IFI are all worldwide real estate and investments in real estate which includes, amongst others, the main home as well as second homes. Business property assets are exempted subject to certain conditions.

The tax is triggered by eligible net property wealth of more than €1.3 million. For UK expatriates living in France, foreign assets are exempt from wealth tax for the first 5 years.

Capital Gains Tax (CGT)

As a French tax resident selling property in the UK, you are liable to CGT both in the UK and in France.

Since 2015, the UK has applied CGT on the sale of property of former residents noting that private residence relief, if applicable, is available for the final 9 months of ownership. It is only the gain from April 2015 that is taxable and the normal tax free allowance (currently £12,570) also applies.

French CGT and social charges are applicable in France on the sale of a UK property and are based on duration of ownership. Some exemptions do apply, for example when the property was the principal residence in the previous 12 months, although certain conditions apply.

Under the UK/France double tax treaty, UK expatriates can receive a credit in France for any UK CGT paid on the sale of the UK property, but they cannot offset any UK CGT paid against a social charge payment.

UK Property Rental Income

Rental income from a UK property, when resident in France, still requires the completion of a UK tax return.

As a result of the UK/France double tax treaty, income tax and social charges are not payable in France. However, it is important to note that this income is still declarable in France and is taken into account when establishing the tax bands applicable for all other declarable income.

Inheritance Tax on a Property Held in the UK

The subject of French inheritance tax is a complex subject that could justify an article in its own right, but in general terms, under the UK/French Double Tax Treaty on inheritance tax, the UK property would fall under UK inheritance rules and applicable taxes.

In summary, owning property in the UK has potential tax consequences in both the UK and France and as with all such matters, I would recommend that you seek the advice of a suitable expert in all circumstances.

Download the 2021 French Tax Guide

French Tax Returns 2021

By Katriona Murray-Platon
This article is published on: 3rd May 2021

03.05.21

The right to make mistakes

There is an expression in France which goes “In May, do what pleases you” (en mai fait ce qui te plait). This refers to the fact that any frosty weather will have gone by the end of April and you can go out and enjoy the warm weather. However, there is something very important that needs to be done before we can go out and enjoy ourselves and that’s the tax return. Although the tax return is available online in early April, personally I’m not psychologically ready to deal with my tax return until May and then not even that much! As a former tax adviser I used to do around 200-300 returns for clients between March and June, but I have to admit that doing my own tax return is quite a task and requires preparation. It’s a bit like deciding to do a full Sunday roast; you need to make sure you have all the ingredients because you don’t want to get the meat in the oven and discover that you’ve not bought the gravy!

If you think French tax is daunting, you’re not alone. The French themselves find their tax returns difficult and the French authorities know that it isn’t easy. Moves have been made in recent years to simplify the system with information being automatically declared by employers and banks so that it appears in the tax return, but there is still information that needs to be checked and other information (like expenses or tax credits) that must be included to calculate the tax correctly.

The preferred method of declaration is online, or even through an app on your smartphone or tablet. However, whilst the French authorities would prefer an online declaration, if this is your first year declaring or you really can’t do it online, you can submit a paper return.

The deadline for a paper French Tax Returns 2021 declaration is 20th May this year whereas the online deadlines are:

26th May for departments 1 to 19 and for non-residents
1st June for department 20 to 54
8th June for departments 55 to 976

These dates relate to the place where you were resident on 1st January 2021.

Even though the French tax authorities are trying to make the system simpler, even introducing an “automatic declaration” this year for those 12 million French tax payers with income and expenses already known to the authorities, the Finance Minister knows that people still make mistakes. The most common of which is failing to declare a child who is in college, lycee or university. Another is that if you opted for the marginal rate on your interest and dividends before, the option is carried over and the box 2OP already ticked on the declaration but an alert message will appear if this regime is not the most favourable. The ten most common errors can be found on the website oups.gouv.fr. Costs for childcare for children under 6 years old, confusion over who includes the child when the parents are separated or divorced and tax deductions for charitable gifts are among the most frequent mistakes.

Since a law introduced in 2018 to help improve the relationship between the administration and the general public, you now have official permission to make mistakes in your declaration. You are presumed to be declaring in good faith and you have the right to make a mistake when making your declarations without being penalised from the outset. Any individual or company can amend, either voluntarily or if requested by the authorities, their mistake if it has been committed in good faith and for the first time. This doesn’t cover fraudsters or repeat offenders and whilst it means you can avoid a fine you will still have to pay any extra taxes that are due. Tax advisers and accountants are mad busy at the moment, so if you haven’t already found one to do your tax return they will be very reluctant to take you on now. However, some tax offices may allow you to make an appointment and bring your papers and information to do your tax return with them. You have an official right to make a mistake and as long as you submit something before the deadline, you can then correct it later.

The first time I did a roast dinner as a student I had to call my grandma (a former professional cook) and I am happy to say no one got food poisoning! Like many things in life, these things can seem daunting to begin with, but if you do your best and follow the instructions, you will be proud of yourself once it is done and then you can go out and enjoy the sunshine with a large glass of wine!

Do you have non-euro based cash deposits?

By Gareth Horsfall
This article is published on: 29th April 2021

29.04.21

Inspiration for this article came from a client (they often do) who fell into one of those sneaky little finance laws in Italy that not many know about, nor really pay much attention to, including the Agenzia delle Entrate (AdE) so it would seem.

However, laws are laws and as I have written many times before, the rollout of the Common Reporting Standard in 2016: the international accord to share financial and tax information between different countries is appearing more and more on my radar. I now get a steady stream of people who say they have received a letter from the AdE asking them to declare their financial position regarding assets/monies held abroad.

In the case of the subject of this article, this is not a law which has, as yet, been specifically identified by the AdE, but one might argue it is only a matter of time.

€51645,69 or 1 million lira

The figure quoted above is important in relation to how much money you hold in deposits in foreign currencies (cumulatively) at any one time.

There is a part of the Italian tax law (L’art.67, comma 1-ter del Tuir) relating to the application of capital gains taxes and capital losses, which would appear to be little understood by most.

The law states that where you hold over €51645,69, (1 million lira equivalent) cumulatively, in foreign currency accounts (non EUR) for a ‘period of over 7 days‘, then when you transfer any of that money into EUR (or another currency), the amount exchanged is automatically subject to the calculation of capital gains tax (or losses) in Italy, because the transaction of changing money from one currency to another itself, is assumed, after 7 days of the money being held in deposit, to be a speculative transaction as the result of a ‘trading operation’ instead of merely a conversion of currency for any other means.

How do I calculate my gains?

This is where it gets a bit complicated as you might imagine and is not quite as simple as the image above would make you believe.

Without wishing to go into too much detail in this E-zine, you take the amount of euros (or other currency) that you end up with in your account ‘after exchange’, but then need to refer to a EUR cost of those monies at the time at which you originally received that foreign currency. You convert that sum into EUR using the Banca D’Italia exchange rate on the specific date or dates when they landed in your account, depending on whether you received the funds in one go or if they were accumulated over time.

As you might imagine this could be hellishly complicated if you have been receiving monies in from various sources over a period of time. However, reference would have to be made to each deposit in non-EUR currency, and a EUR equivalent calculated on the day when it was deposited in the account. In the case where deposits are not documented, for whatever reason, then the Agenzia delle Entrate will refer to the worst monthly conversion rate to EUR for that said currency, in the tax period in which the liability arises (i.e. calendar year). This could work in your favour in some cases, and create additional tax liabilities in others, so care needs to be taken.

Finally, if you do not convert all the funds in your foreign currency account into EUR then the ‘last in first out’ principle applies. This means you must refer to the latest deposit/s in any of your foreign currency accounts, which equate to the sum which you have exchanged to EUR or other currency, and use the Euro conversion value on the date that those funds arrived in your account.

Questions? Talk to me

Sound complicated?

It is!

The client I referred to at the start of this email was pulled up by her bank because the bank itself, Fineco, is Italian, and therefore where they see or suspect a specific activity they must warn the client that they need to take remedial action (in this specific tax case it is the declaration on the Modello 770).

In truth, a lot of you are using various currency exchange services, the most recent being Wise (ex-Transferwise). They are not an Italian institution and therefore are not obligated to tell you about this law, should it apply to you. The onus is on you to ensure that you make your tax declarations correctly and timely. However, without working knowledge of laws such as this one, then it is unlikely that you are going to do what you are supposed to do unless advised by someone like myself, or your commercialista highlights the fact to you.

I hold more than €51645,69 in non-Euro deposits – what do I do now?
Before we start worrying about any capital gains tax or losses, there is the usual requirement to ensure that any foreign currency accounts are declared in your tax return every year and you pay the €34.20 ‘bollo’ per account.

In addition, we have this extra requirement that if you do hold ‘more than‘ €51645,69 in foreign currency deposits in any one calendar year, you are a resident in Italy, and have held the funds on cash deposit for more than 7 days, and exchange some of that deposited money into another currency (euro or any other) then you have an obligation to calculate any potential profit/loss as a result of the exchange.

To avoid this law the simple answer is to bring the euro value of your foreign currency deposits under this €51645,69 and ensure they stay under every year.

If you are potentially in this situation then it might simply mean looking at your overall financial planning and whether you a) need to keep high deposits and b) seeing if you can find alternatives, such as money market accounts or low risk investments, whilst meeting any shorter term cash requirements that you may have.

Questions? Talk to me

Spring cleaning your finances

By Claire Cammack
This article is published on: 22nd April 2021

22.04.21

“When the dust settles on Brexit!” has been heard many, many times over recent months and even the last couple of years. But what of it? With the UK and some former EU partners enduring a bitter relationship, and the UK’s Prime Minister seemingly giving free rein to his ministers, it is difficult for many to see a clear direction. Though a clear direction is coming, according to the financial expert sector – and it may not be welcomed by expatriates! Generally, it is accepted that the UK will introduce hard measures to hang onto funds and to introduce punitive tax penalties for those funds that leave the kingdom.

Brexit seems to be “done and dusted”, yet where are we all? The global pandemic has clouded the issue but has forcibly created time for us to tackle the things that had been put off for too long. So what better time for a spring clean in your financial affairs.

Pensions will be hit first, according to the experts, then lump sum investments, if not simultaneously. It will not only be the UK taking measures. France, particularly, will be looking to gather what they can from expatriates living in France.

You don’t have to sit back and wait for governments to take action – and endure stress in the process! There are actions that you can take now and the first is to book a financial review with your Spectrum adviser who has a wealth of experience and resources available and at your disposal. We can quickly identify opportunities to bring your finances under your control and maximise investment and tax efficiency.

It’s not too late to act now to firm up your overall living status and ensure that all is in apple pie order for your peace of mind. Contact your Spectrum adviser for an expert appraisal of your situation.

Why do I need a Financial Adviser?

By Philip Oxley
This article is published on: 21st April 2021

21.04.21

Top 10 reasons!

As 2021 progresses and hopes of a better year than the last increase, I thought I would write about a question that arises for me occasionally in social situations. From time to time, I am asked, “Why do I need a financial adviser?”, or sometimes it’s simply an assertion, “I don’t see the point of having a financial adviser”. My usual response is to give a brief overview of what I do, however, depending on the circumstances, I don’t always offer a thorough response and then subsequently regret not having taken the opportunity to fully outline the benefits offered from the work my peers and I do.

I appreciate that in terms of popularity and reputation, my industry is not at the top of the pile – sometimes being undermined by the disturbing stories of people being scammed (particularly in the field of pensions), and also a small minority of advisers who are exposed as either not qualified/licensed to operate, or who fail to act in the interests of their clients.

However, I know from the feedback that my colleagues and I receive from many of our clients that the work we do is appreciated and valued by many – sometimes for quite different reasons. So, I thought I would outline the benefits of why, if you do not currently have an adviser, you might want to consider exploring whether your finances could benefit from professional advice and ongoing support.

This list is not meant to be exhaustive and I have tried to avoid a generic list, instead drawing upon feedback and anecdotal evidence from individuals – some clients, some not…yet! Hopefully, my list provides a selection of reasons why I believe the work we do can be of significant value to many.

1. Saving money/growing money

The fundamental purpose of my role is to help my clients save money, and to grow and protect the money they already have. Such savings can be made through lower fees, reduced currency exchange risk, tax-efficient investment structures, and ensuring the best pension scheme for the client is selected. These same actions can also have a positive effect on the growth and protection of a client’s money. By choosing the right investment, an impact can be made on reducing inheritance tax liability for loved ones. Furthermore, if the worst happens to you, by selecting the best pension structure, you can ensure that your loved ones can be beneficiaries of your entire pension, in accordance with your wishes.

2. Greater choice of options

Of the financial solutions that I can offer my clients, few (if any), are available through banks or insurance companies – schemes offered directly through these organisations are usually the company’s own in-house products. I am not suggesting that these options are not suitable, but the advantage of using a financial adviser is the breadth of choice and the ability to select the best available products that most accurately suit the individual. Also, whilst some financial products are available directly to the consumer, many are not and can only be provided in conjunction with professional advice.

3. Sounding board

Sometimes in life, it is nice to have someone to discuss important matters with. People often turn first to their spouse or partner, friends, and sometimes work colleagues. I often speak to people who believe that they have their financial affairs in good order, but they value having a professional and independent “financial health check” to confirm that they are on track, or to provide an objective perspective on some of the areas that might need some attention.

4. Acting as your better conscience (or encouraging people to do what they know is right!)

Let’s be honest, most people enjoy spending their money – whether it’s on their home (often, but not always, a good investment), clothes, food, entertainment, cars (virtually guaranteed to be money-losing, unless classic/vintage cars are your thing!), and holidays.

It is not always easy to take a portion of your regular income and set it aside for the medium to long term, and of course, not everyone has the luxury of having a surplus at the end of each month.

However, a good comprehensive financial review doesn’t just analyse your assets (e.g., pensions, investments, savings, property), and liabilities (e.g., mortgage, credit card debts, car, and business loans), but also reviews your income/expenditure and your long-term wants/needs, to help assess whether there is the capacity to save, and how much.

A good financial adviser will encourage you to think about the long term and help you to take the right steps towards financial security.

5. “I have no money to invest” / “I can’t afford to use a Financial Adviser”

This is a response I occasionally hear, however, irrespective of financial situation – whether the individual’s money is invested in their business or home, or they live on a low income – I am always happy to conduct a financial review. I can usually share some valuable insights, even if the person does not subsequently become a client. Do not let these reasons put you off speaking to an adviser – my confidential financial reviews are free of charge, and there is no obligation to accept my advice (although, I am pleased to say, most people do!).

6. Protection and risk

Many people associate financial advisers with pensions or investing/growing wealth. However, a crucial part of good financial planning is about protecting any wealth that you already have, and making contingency plans for all possible disruptive events that might come your way. When conducting a confidential financial review, I always ask if such matters have been considered, and whether arrangements are in place to provide financial protection in all eventualities. Life insurance is not always necessary, but a will is essential – I can put people in touch with English-speaking professionals in France who can assist in both these areas.

7. No time

For those whose lives are extremely busy (I think many of us can relate to this category!), they simply do not have the time (and/or inclination – see point 9!) to look after their financial affairs. Often people know they should be devoting at least some attention to their long-term financial security, but just never seem to get around to taking action. Sometimes, these people are well-informed and know very clearly what their financial objectives are, but do not have time to implement their plans and would rather a professional undertake this work on their behalf.

8. Retirement planning

In this area, the work we do is not just about advising individuals on the importance of saving for the future or selecting the best scheme for their individual needs.

For British nationals living in France who have private pension schemes in the UK, a proper analysis should be conducted to decide if it is best to leave their pension schemes where they are, move them to a UK-based SIPP, or possibly offshore into a QROPS. There is no one correct answer and I am not going to get into the detail of this now – it was the subject of my last article!

The second critical element of this work is to forecast what level of income someone will require in their retirement once other sources of income reduce or cease, and to then plan how that need will be met through rigorous financial planning.

9. No interest in financial affairs

Of course, this is one that I struggle to understand! I have a relative, who will remain anonymous, who encapsulates the example perfectly. This is someone who is financially comfortable, but genuinely finds the subject of savings/investments (or anything to do with managing their money), of absolutely no interest – to quote, “Boring”!

As long as their money is secure and providing some growth, then they will quite happily entrust as much of the decision making as possible to their financial adviser. The key to this working is to get to know the individual very well, understand their risk profile, and be clear on the circumstances of when they wish to, or must, be consulted on decisions.

10. Knowledge/expertise

The final reason to use a Financial Adviser (and I accept this is obvious, but I needed a tenth!), is for the knowledge and expertise they can offer on available products (relevant to the country in which they work). The good ones will ensure that they thoroughly understand their clients, establish solutions that align with the individual’s aspirations, risk profile, and ethical stance. It is important that your adviser is permanently based in France, works for a French company, and is properly licensed with the relevant regulatory authorities. Above all, make sure they are someone you feel a connection with, who understands you, and who you feel confident in establishing a long-term working relationship with to support your financial goals.

In conclusion, last year was incredibly challenging for many people – both financially and emotionally – and whilst some of the restrictions we have all lived within have eased, realistically, it will be some time before life resumes with some sense of normality. Whilst everyone’s health – physical and mental – must always take priority, I honestly believe that knowing that your money is protected and growing tax efficiently, and that you have taken the necessary steps towards your long-term financial security, is one less thing for you to worry about and makes a small but important contribution towards peace of mind.

Taxes in Spain after BREXIT

By John Hayward
This article is published on: 12th April 2021

12.04.21

The Times They Are a-Changin’ (Bob Dylan:1964)

With the first three months of the year having seemingly whizzed by, I feel that there is a more positive feeling (generally) compared to a few months ago. More and more people are (slowly) receiving a vaccination of one brand or another. At the same time, we feel disappointed and worried that this could be a short reprieve if people lose their patience. We have witnessed crowds acting as if there is nothing out there to worry about. We may well see wave after wave of Covid-19 as the months and years go by. The main thing is to control it and, hopefully, an annual vaccination will be the least of our concerns.

Away from Covid-19, over the coming days and weeks I will be sharing my experiences relating to the concerns of others and their taxes in Spain, France, the UK, and even the USA. This information will cover income tax, capital gains tax, wealth tax, and inheritance tax in Spain and their link with taxes in other countries. I will also explain how I have helped people solve the bank charges problem, how I was able to find pension funds that the person didn´t know they had, and how I have happy clients whose investments have produced increases at a time when a lot of people have believed that the investment world is in dire straits (Perhaps relying a little too much on certain news channels and newspapers).

Since Brexit, there have been quite a few changes in Spain and I am certain that there are more to come. This has been a pretty steep learning/development curve and, as so often happens in Spain, opinion is rife. Knowledge, however, seems to be in short supply. It is quite frightening how many different answers you can get for the same question. Over the last few months, I have been studying the Spanish Tax Office’s information, steering clear of blog sites. At the same time, I have had meetings with my economista on various tax matters. Familiarity of investments outside Spain is lacking by many lawyers and accountants in Spain. It is for people like me and my colleagues to educate and liaise with clients and also with the professionals themselves.

With most countries having a focus on higher taxes or lower allowances in order to pay for the welcome support provided over the last year or so, and the likely consequence of higher inflation, it has become even more important to have savings and investments in the most tax efficient structures.

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HOW TO INVEST – Shares, Equities and Branch 23

By Spectrum IFA
This article is published on: 7th April 2021

07.04.21

This is the third and final in a series of articles where I have talked about holding stock options, vesting those options and holding them in a tax efficient manner. In this article, I will discuss the importance of de-risking and diversifying your portfolio, and finally how useful a Branch 23 solution is in mitigating against US Estate Tax on shares if you hold them.

WHY WOULD I WANT TO DE-RISK MY HOLDING?
I wrote in more detail about the effect of risk on your portfolio here. However, to explain briefly, it is considered risky, in investment terms, if you hold too much of one particular share or asset or if it makes up 100% of your investment strategy. Some people are perfectly comfortable with being exposed to this level of risk. Other people are less so. If you have 180,000€ in one particular share or equity, and that was all you had, then it might be a good idea to de-risk yourself and reduce the possibility of losing some, if not all of your investment due to market volatility.

WHAT IS THE ALTERNATIVE?
There are some alternatives available and they all centre on diversifying your holdings. If you have shares in a company, whether it be a start-up or a multinational organisation, you could benefit from diversification to insure against significant loss.

At Spectrum, we favour the multi-asset approach to investing for our clients. These investment vehicles allow our clients access to multiple funds, asset classes and locations through a single fund that is managed and monitored by dedicated specialists and experts on the investor’s behalf. This type of fund can increase the potential for diversification and reduce the level of risk.

CAN I BE LIABLE TO US ESTATE TAX HOLDING SHARES?
Yes, you can. If you are a non-US person (neither a US citizen, US green card holder, or a long-term US resident) with US situs assets (including, but not limited to, real

property located in the US, shares of US publicly traded companies, shares of US private companies) you will be liable to US estate tax where the value of said assets is greater than $60,000. The tax rate ranges from 18% to 40%.

A Branch 23 solution could reduce or eliminate any US estate tax for non-US persons which would ordinarily be required upon your death if your US situs assets are worth more than $60,000. Whilst within the solution, there are generally no US income tax or capital gains tax implications for a non-US person. This means that you can hold the shares (should you wish to) for as long as you want, safe in the knowledge that when you pass away, your beneficiaries will not have to pay potentially significant tax liabilities.

Please note that US tax can be extremely complicated and it is advised that you also speak to a US tax specialist to ensure that you are in line with US tax rules.

Contact me to discuss this in more detail at emeka.ajogbe@spectrum-ifa.com or +32 494 90 71 72.

Big brother is watching… or might be

By Katriona Murray-Platon
This article is published on: 2nd April 2021

02.04.21

After the fun and festivities of March (or those that could be had in current circumstances) it’s time to get down to serious tax work in April. The tax forms and dates of submission have not, at the time of writing, been released so that will have to wait until next month’s Ezine but usually the forms are available around the second week of April. If this is your first year of declaring in France you will have to go to the tax office to get the paper forms to complete. After submitting your first paper return you should then be given details to allow you to log on to your online account and do future returns online. The paper returns you will need are usually the 2042, sometimes the 2042 pro if you have professional income, the 2047 for all foreign source income and the 3916 for bank accounts and assurance vies (section 7 of the form).

The 3916 has recently been amended to take into account the new information that needs to be declared. Make sure you tick box 8UU for bank accounts and 8TT on the 2042 form to flag the fact that you have foreign assurance vies.

Under Article 1649 AA of the French Tax Code, those tax payers who have foreign assurance vies must declare the policy number, the amount of the investment, the start date of the policy and the duration of the contract or investment, any top ups or payments or reimbursements of premiums made during the tax year and, if relevant, the amount of any withdrawals or the surrender value,

Article 344 C of the Tax Code has now added new requirements concerning the information for foreign assurance vie policies which are:

The identification of the policy holder: name, forename, address, date and place of birth,
the address of the head offices of the insurance company or similar institution and, if relevant, the subsidiary which grants the cover,
the person covered by the policy, its reference numbers, the nature of the risks covered,
the amount covered by the policy and the duration of this cover,
the dates of any amendments to the contract, total or partial withdrawals, which have taken place during the calendar year.

Our policy providers are aware of this new law and will send out the relevant information for you to add into your tax returns or attach as a document online.

Those who have regular at home services and pay via CESU usually receive a tax credit for these expenses, 60% of which is paid in January. From June 2021 the tax office will be trialling a new system of immediately paying the tax credit for home help for those employers in Paris and the Northern departments who use the CESU system, before progressively rolling out this system across the whole country in 2022.

According to a study from the US bureau of Labor Statistics in 2015 which looked at the number of jobs a person held between the ages of 18 and 50, the average person will have had 12 jobs. This is during a span of 32 years, so therefore the the number is likely to be higher for a person’s entire lifetime. This means that you are likely to have several pensions with several pension providers without knowing the value, investment strategy, performance or fees on these investments.

France has clearly realised this situation as well. Retirement plans for French companies are held by insurance companies, so when you leave the company you may not continue to receive information on what rights you have accrued. Now, thanks to new legislation, insurers must send the information on file to a centralised body. If you are or have been an employee in France you can go to the website info-retraite.fr to be informed of what rights you may have. The new law also requires employers to communicate a statement of the retirement products to those leaving the company. When I left my job in Paris I had a PEE (Plan d’Epargne Entreprise or company savings policy) which I had done nothing with. I was advised that as I was no longer an employee of the company this was just being eaten up by fees. I closed it down and reinvested the money into two assurance vies for my sons which are now growing nicely.

The Spectrum IFA group offer a free review of your pensions. We will help you obtain the relevant information from your pension providers and prepare a free report on your current pension plans and their benefits and whether they can or should be combined into one self investment pension plan or qualified overseas pension scheme. As I often say to clients, I agree with the many eggs in baskets principle but it is better having your baskets on a shelf where you can see them rather than eggs hidden around the farm!

If you have an SCI remember to put the 4th May in your diary (may the fourth be with you!) as this is the deadline for the income tax return for SCI companies that are not subject to corporation tax. This is also the deadline for accountants to file the income statements for those with industrial and commercial businesses (BIC), non commercial businesses (BNC) and agricultural businesses (BA). The deadline is extended to 19th May for online declarations. As yet the other tax filing deadlines are not known.

In the finance law for 2020 (article 154) a new law allowed the tax and customs authorities to use certain data published on the internet (Law no 2019-1479 of 28.12.19). The decree implementing this data mining provision was published in the Official Law Journal on 13 February 2021 (no 2021-148 of 11.02.21). This means that the tax authorities are allowed, experimentally and for only three years, to use information published by tax payers on social media (Facebook, Instrgam etc), sales sites (Ebay, Leboncoin etc) and other networking sites such as Airbnb and Blablacar. After researching, analysing and modelling fraudulent behaviour, the tax authorities can then use this data. They do not however have unlimited power, they are subject to the CNIL (National Commission for Freedom and Information Technology) and Parliament, to whom a report must be submitted in August 2022 and August 2023. The data mining can only be used to track non disclosed business activities and false declarations of off shore domiciles. Only “deliberately divulged” information can be collected and used, access to which does not require a password or subscribing to the website. Private posts or comments from third parties cannot be used. The data must be erased after 30 days if it isn’t going to result in an investigation. Data on sensitive subjects such as political views, religious beliefs and health information must be erased after 5 days on the same grounds. Whether this experiment will be extended or not remains to be seen but in the meantime it is another reason to be careful what you put out on publicly accessible social media.

If you have any questions or would like to speak to me about any of the points mentioned above please do let me know. Thank you to those who have got back in touch after reading my Ezine or have let me know that you are still enjoying reading these emails.