The European Commission Pension Scheme

By Spectrum IFA
This article is published on: 8th February 2018

08.02.18

There are many benefits to working for European Institutions; the opportunity to be involved in policy making – changing the lives of millions, the opportunity to be integral in shaping the future of Europe and the opportunity to travel. This does not include the generous benefits; such as the good salaries (though those have been coming down in recent years), the opportunity to send your child or children to the European School of Brussels (either heavily subsidised, or free), and, of course, the opportunity to become a member of the gilt edged, well-funded, European Commission Pension Scheme.

The European Commission Pension Scheme is what is known as a defined benefit/final salary scheme. This means that when you retire, the organisation guarantees you a monthly payment (or defined benefit), every month of every year of your retirement, until you die. When you pass away, your partner will receive a reduced monthly payment, known as a Survivor’s Pension for every month, of every year that they are alive, until they die. As you can imagine, this is an extremely good scheme to be involved in, as when you retire, you will receive up to a maximum of 70% of your final basic salary, for the rest of your life, and your partner will receive up to a maximum of 60% of your final basic salary until they die.

The issue is, the European Commission Pension Scheme is not just given to anyone who works there; you have to qualify for it. This means that you must work there for at least ten years before you are eligible. The good thing is that this does not have to be consecutive. You can leave and return. Contributions are deducted from yourself and the EU, and a lump sum is collected that will form the basis for your eventual pension.

However, what happens if you leave before the ten years? Does the money just disappear? Well, no. You can take the lump sum with you and use it for whatever you like, as long as it is a pension. The pension must meet stringent EC guidelines before you can transfer it; see what I mean here: https://spectrum-ifa.com/eu-pension-transfer-eu-institutions-eur-money/

Having worked here for a number of years, I have accumulated knowledge and experience on this matter and can explain to you how your pension works, and help you transfer it should you need to. Contact me below for either query.

Modelo 720 Reporting

By Chris Webb
This article is published on: 1st February 2018

01.02.18

Modelo 720 – WHAT’S IT ALL ABOUT?
In 2013, the Spanish Government launched an “anti-fraud” plan to prevent tax evasion. Although aimed at discovering assets bought by Spanish nationals with irregular money, it also affects members of the international community living in Spain that hold assets abroad.

It is important that you don’t ‘bury your heads in the sand’ regarding this requirement, hoping that you won’t get caught………because eventually you will.

The Modelo 720 reporting requirement is based on tax residency; if you are deemed to be a tax resident in Spain, then this requirement affects you. In general, you will be deemed tax resident if you are in living/working in Spain for more than 183 days a year, and remember that the onus is on you, the individual, to be able to prove otherwise to the authorities, should they decide to investigate. The reality is that in most cases, it would be very difficult to demonstrate this to the Spanish Tax Authorities and so most people would be deemed Spanish tax resident by them.

WHO HAS TO REPORT?
Any person, permanent establishment or company who is tax resident in Spain and is the owner, titleholder, representative, authorised person, beneficiary, or has disposal powers of assets located outside of Spain worth more than €50 000 (see assets below), must report the value of these assets. Any assets held in other currencies must have that value converted to Euros to gauge whether it exceeds the Euro limit imposed.

WHEN DO YOU REPORT?
Between 1 January and 31 March of each tax year, you must submit details of assets from the previous year. If you have previously reported your external assets on the Modelo 720, then there is no need to resubmit a report every year unless the value of any of the asset classes has increased by €20 000 or more.

WHICH ASSETS MUST BE REPORTED?
There are three main asset classes that need to be reported if the total value of each class is over the €50 000 limit:

Bank/Building Society accounts located outside of Spain – It is important to note that if you hold several bank accounts and THE TOTAL amount held exceeds the €50 000 limit, then ALL the accounts need to be reported, regardless of whether each one is under the limit.
Investments / Life or disability insurance policies – If you are the owner or policyholder of an investment or insurance policy then these will need to be declared if they exceed €50 000. Again, there is a requirement if you have multiple investments or policies, that if the total value exceeds the limit then they will all need reporting.If you are holding Life Insurance Bonds, then the surrender value of the policy is deemed as the value. If you hold “pure life” policies that only pay out a benefit in the event of death and have no physical surrender value these do not have to be reported.Interestingly if you are holding what we describe as Spanish compliant Life Insurance Bonds, then the onus of reporting on the Modelo falls to the institution themselves. They have their own version of the Modelo to comply with meaning they do not necessarily have to go on your individual report.
Property – Owners or part owners of an overseas property where the value exceeds the limit must report these properties.

WHAT IF YOU DON’T REPORT IN TIME / CORRECTLY?
The Spanish Tax Authority has implemented a series of penalties for those who do not comply with this regulation. These penalties can be imposed for late filing, incomplete/inaccurate filing and even for presenting the information to them in a way not deemed acceptable; basically, it must be done online. These are considered very serious offenses and the penalties in these cases are fixed, generally to an amount of €5 000 per item or “set of data” on the same asset, with a minimum of €10 000. The amount is reduced to €100 (with a minimum of €1 500) if the information is filed late without prior notification from the government. Speaking to some accountants and Gestors, they believe and have seen fines to be around €150 if you file late without any notification, but the law states differently so in reality the exact fine is questionable.

WHAT IF YOU DON’T REPORT AT ALL?
Should the Spanish Tax Authorities discover that you have assets with a cumulative value over €50 000 in any of the above asset classes and deem that you have wilfully not disclosed this information, penalties are imposed. In some cases the fines issued are as high as 150% of the value of the undeclared assets!!!! It is also important to note that there is no statute of limitations when it comes to the Modelo 720 so there is no limit to how far back they can go…………

There have been numerous complaints about the unfairness of the Modelo 720 and the fines being imposed. The European commission has been in discussion with the Spanish Tax Authority to reduce the fines. The latest I have heard is that the 150% penalty of undisclosed assets would not stand and would be reduced to the lower fine levels, providing the assets were reported voluntarily, which just means it falls from the undisclosed category to the late reporting category and doesn’t help those caught not declaring. The Tax Authority is pushing for people to report their assets voluntarily, maybe there will be softer sanctions in the future but for now, this is how it stands.

If you want to discuss how to report the Modelo 720 please feel free to get in touch. I work closely with a qualified accountant in Madrid who can file on your behalf if there is a requirement to do so.

French Tax Changes 2018

By Spectrum IFA
This article is published on: 23rd January 2018

During December, the French budget completed its Parliamentary process, with little change to the initial proposals. Shown below is a summary of our understanding of the principle changes.

INCOME TAX (Impôt sur le Revenu)
Income tax bands of the barème scale have been increased as follows:

Income	Tax Rate
Up to €9,807	0%
€9,808 to €27,086	14%
€27,087 to €72,617	30%
€72,618 to €153,753	41%
€153,784 and over	45%

The above apply in 2018 in respect of the taxation of 2017 income, for example, pensions and earnings.

SOCIAL CHARGES (Prélèvements Sociaux)
The Contribution Sociale Généralisée (CSG) has been increased by 1.7%. This results in investment income and property rental income (unless exempted by a Double Taxation Treaty), being liable to total social charges of 17.2%. In addition, where France is responsible for the cost of the taxpayer’s healthcare in France, social charges at a rate of 9.1% will be applied on pension income.

FLAT TAX on revenue from capital
The Prélèvement Forfaitaire Unique (PFU) – also known as the Flat Tax – has been introduced. This will be charged on the total amount of interest, dividends and capital gains from the sales of shares, received by the taxpayer. It also applies to certain gains in withdrawals from assurance vie contracts and this is covered in more detail in the following section.

The Flat Tax rate is 30%, made up as follows:
➢ a fixed rate of income tax of 12.8%; plus
➢ social charges at the rate of 17.2%.

However, the option to pay income tax at the progressive barème scale tax rates above (in lieu of the Flat Tax rate of 12.8%), plus social charges of 17.2%, is still possible, but only at the taxpayer’s specific request. In this case, the taxpayer will also benefit from the existing 40% abatement on dividends (but not for social charges).

Capital gains from the sale of shares, no longer benefit from taper relief, where the gain is taxed at the Flat Tax rate.

However, for shares purchased before 2018, where the taxpayer elects for realised gains to be taxed at the progressive barème rates, taper relief will continue to apply, as follows:
➢ 50% for a holding period from two years to less than eight years; and
➢ 65% for a holding period of at least eight years.

This relief also applies to gains arising from the sale of shares in ‘collective investments’, for example, investment funds and unit trusts, providing that at least 75% of the fund is invested in shares of companies.

Likewise, for investments made prior to 2018 in new small and medium enterprises, the higher allowances against capital gains for investments in such companies are also still provided, as follows:
➢ 50% for a holding period from one year to less than four years;
➢ 65% for a holding period from four years to less than eight years; and
➢ 85% for a holding period of at least eight years.

Similarly, the Contribution Sociale Généralisée (CSG) deductible portion (6.8% out of the total social charges of 17.2%) will only be permitted in the case of taxation at the progressive barème scale rates.

Taxpayers will not be able to selectively chose the income that is subject to the Flat Tax and that which is subject to the progressive rates of the barème scale. The default is the Flat Tax and where the taxpayer makes an election for any income from capital to be taxed at progressive rates, this will apply globally. Therefore, careful planning will be needed by some taxpayers, particularly if they intend to make a disposal of a large holding of shares and/or receive a large payment of dividends.
The Livret A, Livret Développement Durable and Livret Épargne Populaire accounts remain exempt from income tax and social charges.

ASSURANCE VIE & CAPITALISATION CONTRACTS
Premiums paid before 27th September 2017
For premiums paid before 27th September 2017, there is no change. Therefore, the taxpayer has the option to be taxed at the progressive rates of the barème scale or the Prélèvement Forfaitaire Libératoire (PFL) rates, as follows:
➢ during the first 4 years at 35%
➢ between 4 years and 8 years at 15%
➢ post 8 years at 7.5%

Social charges at the rate of 17.2% are payable in addition.

For contracts with a duration of at least 8 years, the abatement of €4,600 for a single person, or €9,200 for a couple, continues to apply.

Premiums paid from 27th September 2017
For premiums paid from 27th September 2017, the taxation rate will vary according to the age of the contract, plus for contracts older than 8 years, according to the ‘threshold’ amount of capital remaining in the contract as at 31st December of the year prior to the withdrawal being taken.

The threshold amount is €150,000 per individual person (across all assurance vie policies), which is determined by reference to the amount of the premiums invested, reduced by any capital already withdrawn, and not the value of the contract.

The threshold is not cumulative between persons and therefore, couples who are taxed as a household cannot share in each other’s threshold. Thus, one spouse may reach the threshold level, whilst the other does not, for example, where one has say €200,000 capital invested and the other only has €80,000 invested.

The reform provides for the PFU to apply for assurance vie contracts of less than 8 years, regardless of the amount of the outstanding capital. Thus, the PFU rate of 30% will be globally substituted for the pre-27th September 2017 rates of 52.2% (up to 4 years contract duration) and 32.2% (4 – 8 years contract duration)

Therefore, according to the age of the contract, the following tax rates will apply:
➢ during the first 8 years, the Flat Tax rate of 12.8%
➢ over 8 years, 7.5% up to the threshold, plus 12.8% above the threshold.

Social charges of 17.2% are payable in addition.
Insurers will be obliged to deduct the tax of 12.8%/7.5%, i.e. depending on the duration of the contract, plus the social charges. Subsequently, for contracts older than 8 years and where the taxpayer has exceeded the threshold, any additional tax due will be charged through the taxpayer’s annual declaration.

The following table summarises the situation:

	Fixed tax rate applied
Gaines from premiums paid from 27/09/2017	Deducted by the insurance company plus social charges of 17.2%	Additional tax payable if threshold exceeded	Additional tax payable if threshold not exceeded
Contracts < 8 years	12.8%	No	No
Contracts > 8 years	7.5%	Yes, to reach 12.8%	No

The post 8-year abatement of €4,600 for a single taxpayer, or €9,200 for a couple, continues to apply.

All taxpayers will have the possibility to opt for taxation at the progressive income tax rates of the barème scale, plus social charges, at the time of making their tax declaration. As the insurance company would have already deducted the PFU tax, any excess tax already paid will be refunded following the processing of the tax declaration made in the year following the payment of the withdrawal. However, taxpayers should be aware that if taxation at the progressive rates of the barème scale is chosen for assurance vie gains in amount withdrawn, then this will apply globally to all income from financial capital.

There is no change to the inheritance tax treatment of assurance vie contracts.

Examples of how the taxation will work:

Example 1
Mr X invested €200,000 in his policy in January 2017. In case of redemption after 8 years, as the premium was invested before 27th September 2017, the gain will be taxed at 7.5%, after application of the abatement of €4,600. Social charges of 17.2% on the total gain are also payable.

Example 2
Mr Y invests €200,000 in his policy in October 2017. In case of redemption after 8 years, as the premium was invested after 27th September 2017 and exceeds the threshold of €150,000, 75% of the gain will be taxed at 7.5% and 25% at 12.8%. The abatement of €4,600 will be first applied to the gain taxed at 7.5% and any balance applied to the gain taxed at 12.8%. Social charges of 17.2% on the total gain are also payable.

Example 3
Mr Z invests €100,000 in an assurance vie contract in 2007 and makes an additional investment of €200,000 in 2018. He decides to fully surrender the assurance vie in 2019, when the value of the policy is €360,000. €50,000 of the gain is attributed to the 2007 premium and €10,000 to the premium invested in 2018. Our understanding is that the tax on the total gain of €60,000 would be calculated as follows:

– 2007 premium: (€50,000 – €4,600) x 7.5% = €3,405.00
– 2018 premium: as he has only ‘used’ €100,000 of the €150,000 threshold against the 2007 premium, the balance of €50,000 can be applied to the premium paid after 27th September 2017, which is 25% of the €200,000 invested. Therefore, 25% of the gain of €10,000 relating to the 2018 premium will be taxed at 7.5% and the balance at 12.8%, as follows:

o (€10,000 x 25%) x 7.5% = €187.50
o (€10,000 x 75%) x 12.8% = 960.00

– Total tax = €3,405.00 + €187.50 + €960.00 = €4,552.50

Social charges of 17.2% on the total gain are also payable.

PROPERTY WEALTH TAX (Impôt sur la Fortune Immobilier)
Wealth tax on total assets (Impôt de Solidarité sur la Fortune – ISF) has been abolished and replaced with Impôt sur la Fortune Immobilier (IFI).

IFI will apply only to real estate assets and the principal residence is still eligible for the 30% abatement against its value. Therefore, taxpayers with net property assets of at least €1.3 million would be subject to IFI on taxable assets exceeding €800,000, as follows:

Fraction of Taxable Assets	Tax Rate
Up to €800,000	0%
€800,001 to €1,300,000	0.50%
€1,300,001 to €2,570,000	0.70%
€2,570,001 to €5,000,000	1%
€5,000,001 to €10,000,000	1.25%
Greater than €10,000,000	1.50%

However, at the outset of the debates on the proposed tax changes, it quickly became clear that MPs were not entirely happy about the idea of replacing ISF with IFI. In particular, for people with substantial wealth, who would also benefit from the Flat Tax, this was considered to be a step too far! Therefore, additional taxes have been introduced on certain luxury goods, for example, yachts and sports cars.

TAXE d’HABITATION
Taxpayers who are not liable to IFI will benefit from reductions in taxe d’habitation, in respect of their principal residence, subject to certain taxable income (Revenue Fiscal de Référence) ceilings not being exceeded. For a single taxpayer, the taxable income limit is €27,000 and for a couple, €43,000.

For those who meet the requirements, their taxe d’habitation will be reduced by 30% in 2018, 65% in 2019 and total exoneration in 2020. Where taxable income is just above the income threshold (up to €28,000 for a single person and €45,000 for a couple), the reduction in the taxe d’habitation will be proportionally reduced.

ENTRY INTO LAW
The changes have entered into law following publication in the Official Journal of France.
22nd January 2018

This outline is provided for information purposes only. It does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action to mitigate the effects of any potential changes in French tax legislation.

IF IN DOUBT, DECLARE THE ACCOUNT

By Gareth Horsfall
This article is published on: 22nd January 2018

22.01.18

The start of the year presents many challenges for me. The start of 2018 presents an interesting challenge that I am not used to. My quandary reminds me of my days at the school swimming pool. The water was always cold. The question was do I jump in and get it over with in one go or do I ease myself into the water gently and take it slower?

The question for me regarding my articles is always what can I write? However, the start of 2018 seems to be an exceptional year in that I have lots of ideas but the biggest question in my mind is how do I ease ‘you’ into these topics?

Well, I can tell you that in my schooldays I was always the jumper. I enjoyed (maybe the use of the word ‘enjoyed’ is a little strong but it was better than the other option for me) throwing myself in and then warming up through vigorous exercise. So it looks as though you are following me in as you read on……

LET’S TALK ABOUT BANK ACCOUNTS
I know that in 2017 you may have received a request from your non Italian bank asking you to provide a T.I.N. for International sharing of tax information purposes. The TIN being the Tax Identification Number or codice fiscale for Italian tax residents. This has caused a lot of concern as bank accounts abroad have often been left undeclared by Italian tax residents for a variety of reasons.

One of the reasons I often hear is that the balance is so low that a declaration is not required in Italy. This could be correct but in this E-zine I want to clarify this law to ensure that you don’t fall under the spotlight with the Italian tax authorities.

So what exactly is the law in Italy regarding the minimal balance which requires a foreign held bank account to be declared?
The law articolo 2, comma 4-bis, del D.L. n. 4/2014, convertito in Legge n. 50/2014, modificato dalla Legge n. 186/2014 states that there is a requirement to monitor foreign held accounts whose maximum total balance in the tax period exceeds €15000. (remember you need to convert to euro if your bank account is in another currency)

This means that if you have a foreign held account that in a calendar year has never exceeded €15000, you are NOT required to comply with the discipline of monitoring. If it has. then the Quadro RW should be completed.

IT’S NOT THAT SIMPLE
However, this is where the confusion begins because this implies that if the balance of the account does not exceed €15000 in the calendar year then no declaration is required. However, the obligation to complete the Quadro RW (declaration of foreign held assets) exists in relation to the average value of deposits into the same bank account, consequently bringing in a new measure of a minimum of €5000 in annual deposits.

e.g. if I were receiving a pension income of £1000 a month into my UK bank account and had outgoings of £900 pm, the balance of my account would never exceed the €15000 in any year, but it would exceed the annual deposit of €5000. (my income payments would be £12000 in the year). Those income payments could be subject to income tax. A declaration of the account should be made.

A CLEAR DISTINCTION EXISTS BETWEEN THE MINIMUM ANNUAL BALANCE OF €15000 AND THE ANNUAL DEPOSITS OF €5000
e.g. I have a dormant account in the UK and the balance is £3000. The account does not receive deposits but earns interest. I must declare the interest in Italy, but the balance of the account has never exceeded €15000 and the deposits do not exceed €5000. Do I still have to declare the account? Well, actually you do! Your commercialista should note it for monitoring purposes but it would not be taxed. However, there is still a requirement to monitor it on the Quadro RW.

CLEAR AS MUD?
My motto is, and has always been:

IF IN DOUBT DECLARE THE ACCOUNT
The best way to look at this is to consider the consequences of declaring versus the sanctions for not doing so.

THE COST OF DECLARATION
If you declare the account the fixed tax on the account is €34.20pa (not including any tax on income payments, interest, or VAT liable payments).

THE SANCTIONS FOR NON DECLARATION
If you don’t declare the account and you are discovered then the sanctions could range from 3-15% of the account balance if it is not a black list country.

If the country is black listed then the sanction is doubled. (6-30%)

IS IT WORTH THE RISK?
For the sake of €34.20 per annum it is probably worth declaring the account.

I would add that I have recently seen 5 letters from the Agenzia delle Entrate sent to different people living in Italy stating that under the Common Reporting Standard International share of tax information agreement, that the agenzia is aware that these people have assets and income payments from foreign financial institutions and that they are investigating why these have not been declared on the individuals tax return.

So, finally, we are left without a doubt that this financial and tax information is now being shared, as if we were ever in doubt.

I fully expect that in the coming months and years that the systems that tax authorities have in place to analyse the financial information they are now receiving will become increasingly more sophisticated and it will eventually be an automatic process should any information that we have declared on our tax returns NOT match with that which they receive from foreign financial institutions. Certainly I don’t foresee a return to the old days when the responsibility was only ours. That same responsibility has now been taken away from us and the automatic share of financial and tax information will only get more sophisticated moving forward.

On that thought, I will leave you will my simple message.

If you haven’t started any financial planning as an Italian tax resident, then start now. You might end up paying more than you need to!

The ‘Flip side’ of Demographics; a Revolution in the Making?

By David Hattersley
This article is published on: 22nd January 2018

22.01.18

As a “baby boomer” born in the ‘50s, with clients aged between 27 and 93, I have had both the fortune and misfortune of being born slap bang in the middle of a seismic generational gap. It does appear that at the moment there is a greater emphasis and concern placed on an aging population and less attention paid to the “millennial” and “X“ generations and their futures.

Having grown up and experienced a revolution as a teenager in the ‘60s and ‘70s, I was heavily influenced by the contemporary music of that time. The global impact of Dylan, The Beatles, The Rolling Stones and The Who, of whom the latter’s recordings of “My Generation” and “Won’t Get Fooled Again” seemed to represent many of our generations’ feelings and desire for change, helped fuel that revolution. It seems like the recordings and lyrics of the aforementioned, even today, still ring true for the younger generation.

Just as much as music influenced us, so too did Hollywood, with films such as Easy Rider, The Graduate, Soldier Blue and Bonnie & Clyde springing to mind. These films came to represent a counterculture generation increasingly disillusioned with its government, as well as the government’s effects on the world at large, and the Establishment in general. It led to the questioning of “old fashioned values” based on a previous generation’s views. Shortly after, Shaft came to represent a genre, with the actor Richard Rowntree creating a lead role not seen before.

I sense from observations, and from discussions with other parents of varying ages and with the younger generation, the same sense of a growing dissatisfaction and concern with the current status quo.

So the simple question is, are we now at a stage where another “people’s revolution” is in the making? In the next few articles I will try to explain, albeit briefly, a potentially disenfranchised generation, the impact of this position on them, their reaction, and how this may impact the future as we know it.

As an adviser I need to keep up with change. Along with my own research, I also have access to the major resources of the fund managers that we use, their view being that change is happening already.

Brussels Presentation – Should I transfer my pension out of the UK, or not?

By Spectrum IFA
This article is published on: 16th January 2018

Brexit.
A word that exploded onto the British lexicon almost three years ago and has refused to dissipate. Indeed, instead of disappearing into the shadows and reappearing every time the ruling party wishes to dangle a carrot (or stick) in front of the populace, it has remained in full view without a day or week going by without it being mentioned on the news, by the watercooler, at home amongst family, or debated amongst friends and experts alike.

What does it mean? To some, it is wrenching back sovereignty from the EU Overlords, to others, it is an unmitigated mistake. To some, it is the taking back control of the British borders and stemming the tide of immigrants, to others, it is an unmitigated mistake. What is sure, is that it means that the UK voted to leave the EU next March and the EU28 will become EU27.

Whilst the politicians discuss the terms on which they will work together in the future and untangle the ties of the past, what does it mean for you?

If you have worked in the UK and have a pension (or more) there, then the lack of clarity and swirling uncertainty surrounding Brexit undoubtedly has you concerned about your money; fortunately, we at The Spectrum IFA Group have a solution for you.

On Wednesday 7th February, we have invited leading industry experts to discuss the potential implications of Brexit on your money and more specifically any pensions that you have in the UK. This is a must attend event for anyone who has worked and has a pension in the UK. Our experts will discuss likely scenarios and provide solutions for your pension concerns and we will also have a local Belgian Tax Expert who will talk about the tax treatment of UK Pensions here. The evening will end with finger food and drinks and an opportunity to meet and greet our experts, advisers, and attendees.

Click below to confirm your attendance, and we look forward to meeting you at the Renaissance Hotel.

Yes, I would like to attend the presentation on Wednesday 7th February/

How often should I have a financial review?

By Amanda Johnson
This article is published on: 12th January 2018

12.01.18

There are no hard and fast rules regarding the frequency of a financial review. I believe, however, that there are several questions you can ask yourself, which may indicate that now is a good time to review your own situation:

Have my personal circumstances changed since my last review?
This can include firming up on plans for retirement, changes in your family situation, emerging health issues, a change in jobs or an inheritance. Any of these things could change what you need your money to do for you.

Do I know how the investments I hold are performing?
Have you received a recent statement and are you aware of how your investments are performing compared to others? Reviewing your finances can reassure you that you are on track.

Do I know the position of my current private pensions?
There are options available to expats which are not open to British residents. These are not right for everyone and a professionally prepared analysis is required.

The answers to of these questions may indicate that now is a good time to arrange a financial review.

Sitting down with your adviser will enable them to ensure that any investments held are appropriate for your current situation and risk profile and that you are not over exposed in certain areas.

Your adviser can also tell you how your investments are performing against other types of investment available in the market. Couple this with an ability to advise you of any changes in rules and regulations and you can see that a financial review can provide tremendous peace of mind.

Whether you want to register for our newsletter, attend one of our road shows or speak to me directly, please call or email me with the contacts below and I will be glad to help you. We do not charge for our financial planning reviews, reports or recommendations.

Spectrum sponsored Arts Society de la Frontera

By Charles Hutchinson
This article is published on: 4th January 2018

04.01.18

The Spectrum IFA Group again co-sponsored an excellent Arts Society de la Frontera lecture on 13th December at the San Roque Golf & Country Club on the Costa del Sol.

We were represented by one of our local and long-serving Advisers, Charles Hutchinson and Jonathan Goodman, who attended along with our co-sponsors Richard Brown and Lewis Cohen from Tilney Investment Management. Tilney also very kindly hosted a lunch afterwards for the committee, the DFAS Chairman and the Lecturer.

The Arts Society is a leading international Arts charity which opens up the world of the arts through a network of local societies (such as here in the Costa del Sol) and national events throughout the world.

With inspiring monthly lectures given by some of the country’s top experts, together with days of special interest, educational visits and cultural holidays, it is a great way to learn, have fun and make new and lasting friendships.

At this event, around 110 attendees were entertained by a talk on the art of Leonard da Vinci and the Mona Lisa entitled “The Woman who ate her Husband” by Nicole Mezey who is one of the UK’s top experts in this field. She was excellent and kept the audience gripped and entertained with her knowledge and humour.

The talk was followed by a drinks reception which included a free raffle for prizes including CH produced Champagne, mince pies and a Christmas pudding, together with a fully illustrated book on Leornardo. Tilney as usual excelled themselves by providing the top prize of a wooden set of candle holders designed and beautifully crafted by Viscount Linley, the Queen’s nephew, which caused a further stir after their last two years’ prizes!

All in all, a great turnout and a very successful event at a wonderful venue. The Spectrum IFA Group were very proud to be involved with such a fantastic organisation and we hope to have the opportunity to do so again in 2018.

Trusts – and French residency

By Katriona Murray-Platon
This article is published on: 28th November 2017

28.11.17

I remember during my legal studies, Trust law was not a popular subject. The French authorities do not like Trusts either. They don’t understand them, they mistrust them (pardon the pun). Interestingly Trusts originated in France, in Normandy, during the crusades. Crusaders entrusted their property to trusted third parties to manage until their return and the “trustees” had to pay the income to the crusader’s family. However today, the French authorities view Trusts as a way to hide assets (to avoid Wealth Tax for example) whereas from a UK perspective Trusts are a very useful way of managing assets for people who cannot manage them themselves and/or require protection. They are very often used in wills but when the beneficiary, settlor or trustee decides to go and live in France they may have forgotten all about the Trust and have no idea about the reporting obligations for Trusts in France.

Things are even more complicated by the notion of “deemed settlor”. When a settlor dies, the beneficiaries are deemed to be the settlor of the trust assets. Article 885 G ter of the French Tax Code states that the settlor or the “deemed settlor”, if their assets exceed the wealth tax threshold, must include the net value of the assets of the trust in the assessment of their assets on 1st January of the tax year.

Trusts are very often managed by solicitor’s firms and may contain investment portfolios. If a beneficiary is resident in another country the Trust falls under the requirement to report under the Common Reporting Standard Automatic Exchange of Information rules introduced by the OECD (please see my colleague Derek’s article).

There are two declarations which have to be filed. One for every event i.e. when the trust is created, amended or terminated, which must be filed in the month following the event. The other declaration is annual and must be made by the 15th June of each year and show the assets in the Trust as at 1st January of the same year. There is no income tax return for the Trust itself but beneficiaries should declare the income they receive from the Trust (whether it is dividends, interest, proceeds from sales of shares or rent from a property within the Trust) on their annual tax return form. If distributions are made to the beneficiaries, it may also be worth filing an event return mentioning the amounts distributed throughout the year.

Both of the Trust declarations require details (names, dates of birth, addresses etc) of each and every settlor, trustee and beneficiary whether or not they are French tax resident. It is the Trustees responsibility to file the information and the Trustee who will be liable for failure to declare, late declarations and for any penalties.

Since 8 December 2013, Trustees who failed to comply with their reporting requirements could have been fined €20,000 or 12.5% of the total value of the assets held in the trust, whichever was higher. For declarations due before this date the fine was only 5% of the assets in the trust or €10,000.

In March 2017 the French Constitutional Council ruled that the 5% or 12.5% penalties were unconstitutional with effect from 1st January 2017. The €20,000 fine does still apply however and can be cumulative, applying to each return that has not been filed on time.

With the Common Reporting Standards currently being enacted by the UK (including Jersey, Guernsey and the Isle of Man) and France, I believe that there will be a lot more questions from the French tax authorities in the near future and in particular regarding undeclared bank accounts and trusts. Whilst the French tax authorities ask nicely the first time, if they suspect that assets or income have not been declared they do have the power to apply these fines. To better understand your tax obligations as regards Trusts, please do not hesitate to contact me.

Taper Relief on Capital Gains from the Sale of Shares

By Derek Winsland
This article is published on: 16th November 2017

16.11.17

My colleague, Sue Regan, in her last article, gave details of a number of tax changes currently being debated in Parliament and which are expected to come into force by the end of the year. On a positive note, wealth tax (Impot de Solidarite sur la Fortune) is to be abolished, to be replaced by a tax on the value of property (Impot sur la Fortune Immobilier) or IFI. This can have real benefit to those with investments outside of property.

Less positive is the intention to abolish taper relief on capital gains from the sale of shares, which includes equity investment funds. This can have serious connotations for those investors holding investment portfolios outside of an Assurance Vie. Portfolios held within equity Individual Savings Accounts (ISA’s) in the UK, for example, will be affected. For UK residents, ISA’s represent an excellent savings and investment vehicle, with ‘income’ drawn from the ISA tax free in the hands of the investor. Growth in the investment attract no capital gains tax charge, irrespective of whether the gains are extracted or allowed to roll up within the ISA.

In the hands of a French tax resident though, ISA’s don’t enjoy any of the tax benefits UK residents take for granted. It is as if the ISA wrapper doesn’t exist. Instead, in France, taper relief is granted on gains made from equities (shares) where the holding is greater than two years. Where shares have been held for two years and up to eight years, the relief is 50%; after eight years the relief rises to 65% under the current system. Crucially, this relief also applies to collective investments where a minimum of 75% is invested in equities.

If you then factor in the fact that all gains are calculated in euros, shares and equity collectives in the UK held for a long time can be further reduced because the purchase price will be converted into euros using the exchange rate on the day of purchase. Likewise, the euro value is calculated on the day of sale. With the value of sterling currently low, the amount of any gain can therefore be further reduced if the exchange rate on the day of purchase is higher than the rate on the sale date.

All of this means that if you are resident in France, holding on to stocks and shares ISA’s in the UK, it really is time you thought about cashing them in, reinvesting the proceeds in the far more tax efficient Assurance Vie. Time really is of the essence.

If you feel you could be affected by this, or have personal or financial circumstances that you feel may benefit from a financial planning review, please contact me direct on the number below. You can also contact me by email at derek.winsland@spectrum-ifa.com or call our office in Limoux to make an appointment. Alternatively, I conduct a drop-in clinic most Fridays (holidays excepting), when you can pop in to speak to me. Our office telephone number is 04 68 31 14 10.