Top financial tips in Spain – March 2024

Spring is well underway and it won’t be long before the wonderful feeling of summer is upon us – I personally can’t wait!

Part of my role is to make sure you are financially/economically smart and keep you up to date with ways to reduce taxes, increase wealth and anything else I feel an expatriate living in Spain should know. This month we focus on the following topics:

• British Passports – additional months rule!
• Inheritance & Wills – important tax tips
• What were the best investments of 2023

British Passports – additional months rule reminder!

If you are planning to travel to an EU country (except Ireland), or Switzerland, Norway, Iceland, Liechtenstein, Andorra, Monaco, San Marino or Vatican City, you must follow the Schengen area passport requirements.

Your passport must be:

• issued less than 10 years before the date you enter the country (check the ‘date of issue’)
• valid for at least 3 months after the day you plan to leave (check the ‘expiry date’)

Check your passport meets these requirements before you travel. If your passport was issued before 1 October 2018, ´´extra months´´ may have been added to its expiry date.

Surely this is obvious Chris you say? Well, since Brexit I am afraid not. Many people have passports which unknowingly have more than the 10 years validity on them and thus they travel to Spain thinking ‘great, my passport expires in October this year, more than 3 months after I arrive back in the UK from my trip to Spain’. However, the problem is Spain ‘doesn’t accept’ the extra 6 months that were added to the length of this passport.

I mention this because someone on my flight only recently was stopped from leaving the UK due to this. There are no alerts or checks from airlines even with online check-in until you get to the departure gate, a VERY painful way to find out. This applies to Spanish residents also!

Check your passport……. if it has the additional months, make sure you renew it before it’s not valid in Europe. New UK adult passports are now only valid for 10 years.

Inheritance & Wills – important tax tips
One of the FIRST things I tell anyone I meet professionally (whether they ask or not) is that the MOST important person to get on your side in Spain is a good tax adviser/accountant, particularly in respect of inheritance planning, and here is the reason why.

Depending on the relationship to the deceased, the value of the inheritor’s current assets, and the amount they receive, there could be a significant amount of tax to pay in Spain. Just by being organised in many circumstances this can be avoided.

Two case scenarios:

• Someone retired dies who has a partner but they aren’t living together/aren’t officially a couple for administrative purposes or married
• Someone dies and leaves money to grandchildren/nieces/nephews

In these scenarios and depending on where they live in Spain, tax could be payable at a rate of up to 72%……………however, this could be avoided by various methods including using gift tax at 5-9% prior to death or changing some administration before the person passes on from this world.

PLEASE make sure you are organised from an inheritance tax perspective if you think this could have an effect on you. Knowing what the potential tax could be will enable you to make important decisions or plan to avoid this.

What were the best investments of 2023?

Hindsight is a wonderful thing.

However its always important to review and understand what has happened, why, and then decide if you need to change your approach towards most strategies in life, including investing.

Amongst many options, thematic investing has become more and more popular over recent years. To explain this approach simply, you are focusing on a trend/area that you believe will give you higher potential growth on your monies than in a more general investment. For example if you believe that Cyber Security is going to be an area that more people will spend money on in the near future and therefore a good area to invest in, you could target investments that focus solely or predominantly on this specific topic. Because you are being more focused and targeted, this attracts higher risk because your money is invested solely in that area. However, if you are correct then the returns/rewards are generally greater because you have channeled your money into that specific area rather than taking a general approach.

In 2023 it is clear that when you review which investment funds worked well, two key areas stand out more than most (I do not take cryptocurrency into consideration because many investment companies will not consider this, due to still being viewed as an unknown entity, and it being largely unregulated).

Strong performers in 2023 were:

• Technology
• US stock markets

However, it’s important to note that the year before this these were both two of the worst performing…….so how do you know what investment funds to pick, how long to hold them and when to make any changes?

Well, by education……by constantly being informed on a range of factors related to these areas, which could include the following:

• Political
• Environmental
• Laws/legislation
• Economic

Alongside this, considering your investment timelines, your goals and your appetite for risk/reward, then you can start to put together a strategy that with regular reviews and ongoing advice, with someone you trust, will give the best chance of success to achieve your savings and investment goals moving forward.

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If you would like any more information regarding any of the above, or to talk through your situation initially and receive expert, factual based advice, don’t hesitate to get in touch with me.