☏ +34 93 665 85 96  |  ✑ info@spectrum-ifa.com
Viewing posts from: November 2000

What is the point of having money?

By Barry Davys - Topics: Investment Risk, Investments, Moving to Spain, Retire in Spain, Retirement, Spain
This article is published on: 14th June 2020

14.06.20

The point of having money is personal to you. Looking after your money should always start with your requirements. Your life has its own twists and turns. Your hopes and dreams are just that; YOUR hopes and dreams. How you feel about money is personal to you.

In this article I give you a framework for why you may want money. Once you have the framework, you can colour in the detail in a way that suits your requirements.

Knowing your answer to the question, ‘What’s the point of having money?’ is the starting point. Money, savings, investments, whichever you wish to call it, provides you with choice. The reason for having money is that it gives you one of three things; security, freedom or opportunity. Which choice you choose is up to you. The answer may be correct for you but different for your neighbour, even if you live next door in the same size house.

Security
Security means that you have enough money to be able to settle your debts, pay nursing fees if required, pay for medical treatment and perhaps be able to help the children to buy a house. People who want security often have a home free of mortgage; their little piece of heaven that they own.

debt free home

To settle on having security means you need capital. Often people choose not to take risk with their money because they want to be certain it is there if they need it. A fall in the stockmarket will not damage the security blanket of money in the bank. Your savings are just one big emergency fund. In these times of extremely low interest rates there are only a few places to get a little investment return for this option.

More and more, I see that this form of planning is undermined by long life expectancy and inflation. Hoarding the capital without making it work can lead to the erosion of the buying power of these savings. Sadly, insecurity comes after years in retirement when people realise that what they thought was enough money, is not.

freedom and lifestyle

Freedom
Freedom is gained when your savings are invested to provide you with sufficient income to live on, whether or not you continue to work.

To achieve this position depends on what lifestyle you have. The more flamboyant the lifestyle, the harder your money will need to work.

To achieve a feeling of freedom, money is required, and it needs to work hard. You yourself should feel in a “life is good” state of mind. Your money must be making money and it must later be able to provide you with income if you want or need it. Making money means that you need to invest in shares, bonds and perhaps some property (in addition to the home where you live). If you do not have the inclination or skill to do this yourself, you should work with a professional adviser or use funds. Some investments can provide you income now and others with capital growth. The growth parts will protect against inflation and can mean you can increase your income later.

Opportunity
Do you want your life to be full of opportunities? To be a space tourist? To ride a Harley Davidson to Lapland from Denmark like Steve Forbes (Forbes magazine) did, just to see the Northern Lights? Or both? What an opportunity that would be seeing the Northern Lights from earth AND then see them from space. Or to be one of the first investors in the company that makes the software for all the driverless cars in the world? As your world is a world of opportunity there are many, many more things that you can do with your life; most people will never ever get the opportunities you do.

invest in technology

To build this life takes more money. You may have sold a business, for example. Or received an inheritance. And this money will have to work hard for you. You may have some core holdings to give you a diversified portfolio, but you will also have to take some risks to make your money work hard enough to provide you with a life full of opportunities. Take more risk with your investments, but be able to withstand an investment that doesn’t perform well. In addition to the investments used by someone looking for freedom, you may also invest in a new business, for example. This takes skill to analyse the potential of investments and you will benefit by taking advice from qualified and experienced people.

Whether you need help with deciding on your choice or you wish to discuss how to execute your plan, please contact me for assistance. An understanding of your concerns when discussing your aims and choices together with the expertise to execute the plan for your benefit can make for a strong and trusting professional relationship.

Tax increases in Spain

By Barry Davys - Topics: Barcelona, Inheritance Tax, Spain, Tax, tax advice, Tax Efficient Savings, Wealth Tax
This article is published on: 16th May 2020

16.05.20

This is an article for those of us who live in Spain but will apply in every developed country around the world.

The Covid-19 pandemic has led to a worldwide lockdown, including here in Spain. The economy has been shut down with the likes of Seat in Barcelona stopping production and Barcelona tourist numbers collapsing. We all know this because we are all a living part of the lockdown.

In response to what looks like the worst economic crisis in the 300 years of modern data collection, governments and central banks around the world have provided some $7 trillion dollars of stimulus packages to economies and workers. It is the fastest and biggest reaction EVER to an economic crisis. Well done, the central banks! It genuinely is helping to make sure that as we slowly exit lockdown, individuals and companies will be in a little better condition to start up again.

Would I have it any other way? No! However, the question we now need to answer comes from Angela Merkel when asked to provide a European bailout in the 2009 crisis; “But where will the money come from?” A valid question. And even more so for the crisis that has come from the coronavirus pandemic.

Saving in Spain, ISA, Tax Free Saving in Spain

The money will come, in part, from higher taxation. In the UK today, a menu of proposed increases in taxation has been leaked. In Spain, a loophole in wealth tax legislation that allowed some unit linked insurance savings plans to be exempt from

wealth tax has been closed. What is significant is that these changes are coming now, before we are even clear of the lockdown and virus.

The changes to taxation in Spain are likely to include savings tax, inheritance tax and wealth tax in particular. Changes were already being discussed and the economic fallout from the pandemic provides the reason to bring forward these changes. Specifically, the EU has told us to harmonise inheritance tax across Autonomous Communities as there are big differences in the amount of tax to be paid.

In the draft budget for 2020, there is a proposal to change savings tax. At present, we have three bands of tax. The top rate for gains and investment income over €50,000 is 23%. A new band will be introduced for gains and investment income over €160,000 of 27%. We should expect this change to happen soon as it is already in the budget which is going before Parliament for approval. The first case I have seen where this will apply would lead to an additional €48,000 in tax. It is pertinent to bear in mind that these tax rates can apply to the gain on some property sales.

In addition to the wealth tax change described above, we understand that others may now be considered.

Planning actions

Help is at hand. There are planning actions that can be taken to minimise the tax issues. Here is a three point plan to minimise the effect of these changes:

1. Savings Tax. Move investments into Spanish tax efficient investments. These are available and you do not have to move your investment to Spain to qualify. They are available in Sterling as well as Euros and USD. If you would like confirmation on which of your current investments are tax efficient in Spain, I am happy to review them with you.

2. Inheritance Tax. This requires very careful consideration before making decisions to manage inheritance tax. Making sure you can maintain your lifestyle is an important part of this planning, especially for the survivor in the event of one half of a couple passing away. Once these criteria have been met, planning is feasible. A recent case of planning has saved £87,719 in UK inheritance tax for a couple living here in Spain. For nearly all of us from the UK, our estate at death will be assessed for UK inheritance tax.

3. Wealth Tax. Sometimes, the planning for wealth tax is simple. In other cases, not so simple. Care is needed and it is worthwhile asking for a review.

We have had our cake in the form of stimulus to protect the economy. We will shortly find we will have indigestion from eating the cake in the form of higher taxes. Fortunately, we still have a few indigestion tablets available to relieve our pain.

If you wish to discuss tax on your savings, inheritance tax or wealth tax please feel welcome to call. If this helps, you can match your availability for a call with mine online here.

Financial Planning for Business Owners in Barcelona

By Barry Davys - Topics: Barcelona, Business Owners in Barcelona, Spain
This article is published on: 8th January 2020

08.01.20

This is the first in a series of three articles on the challenges of financial planning in your personal life when you own a business or are a significant shareholder in a business. This first article is planning when starting a business. The next article covers planning when you have an established business. The final article, the one we all want, goes through what happens when you sell the business and find yourself cash rich.

When starting a business, it is the business that gets the attention and often your personal, non-business, financial position is left unplanned. I would recommend at this stage you do prioritise the business as if it goes well, your business is likely to be the driver of your wealth. It should certainly grow your wealth quicker than investing in funds, shares, etc. It will probably make you wealthier than investing in Bitcoin!

Making your business the priority, however, does not mean that you can completely ignore your personal finances or manage them on a “when I get round to it” basis. Owning a business means it is very important to do your own personal planning because success can ebb and flow and, especially for a new business, it can go bust. Making sure your own affairs are in order protects your family and may even allow you to start up again, if arranged properly.

I recognise that different companies have different characteristics and that this can affect your planning. I also recognise that owners of businesses in Barcelona should base their planning specifically on Catalan laws and taxes.

Planning your personal finances when starting a business

Product – tick. Business plan – tick. Website – tick. Instagram – tick. Business partner – tick. Financing – tick. So the business is good to go and will, of course, be a success.

I wish all of you who are starting a business the very best of luck. It can be a most rewarding experience, even though it can also be exhausting and stressful. However, the data shows us that whilst 80% of new businesses survive one year, only 30% make it past the 10 year point¹. This statistic shows you why your personal finances will continue to need your attention.

Planning points:
1. Recognise that personal money differs from business money. Keep it separate!
2. Get your affairs in order before starting your business. If you have children, make sure you have life cover. Get private medical insurance so you can be seen quickly and get back to work as soon as possible.
3. Know what your personal expenses are before you start the business. This can help you decide how much to take from your business each month. Do not start your business and then take only what you think the business can afford. This will push you into debt personally.
4. Conversely, when business is going well, don’t buy flash cars, boats, luxury holidays etc. until you have sold your business or unless you are Bill Gates, Elon Musk etc. and your company is doing remarkably well.
5. Keep an emergency fund in your personal finances of at least 6 months’ expenses in case there is a business “wobble”.
6. When getting equipment and vehicles for your business do not buy them in the early days of the business, especially if you have to put personal money into the business to make the purchase. Your financial risk is minimised if you rent or lease equipment. We can also now get cars on a “subscription” basis. This means that instead of buying or leasing you pay a fixed monthly fee for the use of a car. This is like renting a car from Avis but you rent it from the car company. If you need to walk away after six months, you can do so with no liability. This is available from several car companies in Spain.
7. Keep flexibility in your personal finances. Do not, for example, put money into pensions in the early days of your business unless you have additional reserves. We cannot access money invested in a pension until you approach retirement.
8. This may mean that you need to leave money in the bank. In Spain, that means we will earn, at the moment, virtually no interest. Accept that fact and make your money

¹Forbes, Fortunley and Business Wire. Statistics are USA statistics

Financial Planning Impact of the Spanish Election

By Barry Davys - Topics: Barcelona, Elections, Spain
This article is published on: 13th November 2019

13.11.19

The 10th November (10 N) General Election has, like in many other countries in Europe, resulted in no party gaining a majority of seats in parliament. The result is unsurprising, but what does it mean for our financial planning as individuals who are living in Barcelona and the Costa Brava?

With elections come many headlines, often contradictory. More and more we need to look beyond the headlines to find real data that helps with our planning. This is an example of why we need to look beyond the headline. The headline is ‘Ibex (Spanish Stock Market) rises 9.45% year to date’. Beyond the headline we find that profits of the companies that make up the IBEX index have fallen 20% to end of September 2019. How does this contradiction happen? The Ibex has no top weighting, unlike other indices, so can be highly affected by one company or a sector. The largest company on the IBEX 35 is Inditex (Zara etc) at 14% of the index. The banking sector represents 21% of the IBEX. This can lead to a distorted indication of the performance of a broader selection of Spanish companies. I have used the example of the IBEX because we live in Spain but it is similar for most indices around the World.

Below, I summarise points of the Spanish election that will impact our planning:

There is no sign that plans for post Brexit will be changed because of the election. This includes, for example, not changing the double taxation agreement between Spain and the UK.

It is unlikely that the change to a standardised method of Inheritance tax across Spain, as required by the EU, will be implemented as there is no majority government. Existing inheritance tax laws in Spain will remain the same.

The 10 N election was triggered because of the voting down of the budget proposed by the last government. The new government could well face a similar struggle to pass a budget. This means no changes to the tax rules and spending plans.

Still, borrowing by Spain will increase each year and this is similar across many European countries. Despite this, European government bonds have a very high price, many giving negative interest. Should you include these in your portfolio at this price?

The high prices in the stock market index and government bonds mean that headlines appear that suggest investing in commercial property as an alternative (there are lots of commercial property funds available). These headlines can include property growth rates from the last 10 years where property has enjoyed falling and very low interest rates. However, economic growth is slowing across the World and technology is changing our work, how we shop and play. Slowing economic growth and technological change mean that commercial property is not likely to do so well. A very careful approach to which property a fund manager buys will be especially important over the next 10 years. Without a majority government, we are unlikely to see Spain buck the World trend for lower economic growth.

We can take the following actions because of the elections:

Tax in Spain. We know the taxes and how to plan in a tax efficient manner because we have not had revisions since the last budget. Make your investments tax efficient.

Not all commercial property will do badly. Warehouses and logistically important points will do better than factories, for example. Warehouses are part of the Internet delivery system, which is becoming an increasingly large part of the shopping process for both companies and individuals. If we like commercial property we do not have to invest just in Spain. It is possible to invest in most of the developed markets.

When Barcelona city indicates that it will use driverless cars in the centre of the city, investment funds will buy car parks. It is estimated that the use of driverless cars will reduce the need for car parking in a city by as much as 70%. This could be a good opportunity as these car parks will be turned into other property types such as 3D printing manufacturing points, drone landing spots for internet deliveries and more. Admittedly, we may need to wait awhile before this happens.

Do not despair with shares. The major indices are used for headlines to give an indication of the relative price position of the market. Yet these indices are based on only a few companies e.g.

Spain Ibex – 35

France Cac – 40

Germany Dax – 30

UK FTSE – 100

There are many other companies to invest in these countries. We can also use funds which invest in companies doing business in and with India or China, for example.

There are some excellent opportunities in markets but it requires very careful and technical analysis to know which companies. Get help! See a previous article “5 mistakes the rich never make” which explains how the rich get help with their planning. I put this into practice in my own planning by using fund and investment managers to do the day-to-day management of my investments.

Good luck with your planning. If you would like to discuss help please feel welcome to contact me, especially if you own a business or are approaching retirement.

About the Author
Barry Davys is a partner with The Spectrum IFA Group. He lives in Barcelona and provides financial planning specifically for international people who live in Catalonia using his knowledge of Catalan, Spanish and UK tax. The advice is given in English. Business owners and people approaching retirement find his guidance particularly useful.

Interest rate outlook and what it means for your investments

By Barry Davys - Topics: Barcelona, Interest rates, Investment Risk, Investments, Spain
This article is published on: 1st October 2019

01.10.19

I had a very nice dinner a few days ago with an investment manager I have known for 12 years. We meet regularly and he is one of the investment managers in London that we, as a company, use for some of our clients. So we know each other professionally quite well and one of us always acts as devil’s advocate to the other one’s position in discussions. It is a great way of getting your point of view tested. Yes, we did talk about Brexit, but the more important issue was the fact that long term interest rates are likely to stay low for a very long time in Spain and in Europe. So here are some thoughts about what these low interest rates mean for our savings and investing.

First, Brexit. Brexit is on everyone’s lips and quite understandably so. Whether you love it or hate it, no one seems to be able to work out what is going to happen. I admit to not being able to work out where it will end. The Brexit outcome is incredibly important to us as individuals and businesses. Yet what about for our savings? Britain is the sixth largest economy in the World. Sounds important. According to the World Bank, the World economy is $86 Trillion. Britain’s economy is $2.8 Trillion. So Britain represents just 3.26% of the World economy. Which means we still have 96.74% of the World economy where we can invest!!!

Perhaps the more important story for savings and investments is the impact of very low interest rates that could stay low for decades. My dinner guest gave good insight into the future of low interest rates. This insight is important to us as individuals with savings and investments.

In October 2007, interest rates in the UK fell from 5.5% to 0.5% in May 2009. Interest rates in Europe followed a similar path. The ECB in July 2007 cut its interest rate from 5.25% to 0.75% in May 2009. The ECB rate has now fallen to just 0.25%.

Will low interest rates stimulate the economy? Yes, it will, but not enough to get economies back on track. Mario Draghi, the current President of the ECB, says central banks changing interest rates will help, but Governments have to spend more too for sufficient economic growth to happen. As an example, Germany has been taking a lot of stick because it has not been spending. The amount it collects in taxes etc is equal to the amount it spends.

ECB

This is the German Government policy. This is a sensible policy unless parts of the country break down and need repairs. Two items that need repair in Germany are the military and the transport infrastructure.

The military, if the stories are to be believed, did not have one single usable helicopter earlier this year. Roads in Germany need repairs, including bridges. Spending money on these road repairs not only give jobs to workers and their companies but also helps the German transport system to run smoothly. This helps the logistics chain in the economy and gives a boost to the economy. These are two examples of where government spending is helpful and supportive of low interest rates. To offset a recession there has been some suggestion of Germany spending €50 Billion on infrastructure spending. As a comparison, Spain already is spending more than it gets in on taxes.

The Bank of England Monetary Policy Committee is responsible for setting interest rates in the UK. It has said that due to the Brexit uncertainty, the next UK interest rate move is likely to be down. The UK official interest rate is only 0.5% now, which gives an indication of the outlook for interest rates: near zero for a long time.

JP Morgan is the sixth largest bank in the World with assets of $2.73 TRILLION. Bob Michele, Global Head of Fixed Income at JP Morgan, has gone even further than the Bank of England in predicting the European interest rates. His analysis shows that Europe will have negative interest rates for the next eight years. Mario Draghi has also said that European economic growth will be very low for seven years, which is another indicator for low interest rates. Indeed for both the UK and the EU there are many forecasts of very long term, low interest rates.

On the bright side, borrowing costs are much reduced as a result of low interest rates. Monthly mortgage payments are much smaller than normal. Businesses and Governments can borrow at much lower rates. On the dark side, we get little, or indeed no, interest on our savings. How low can interest rates go? Rates are negative in Switzerland and Denmark for people living outside the country. These non resident account holders actually have to pay the bank to take their money. When interest rates on savings are very, very low, what do we do with our savings?

If we have savings should we consider paying off our mortgage? Mortgage rates in Spain around 1.63% fixed for 20 years (via Spectrum Mortgage Services, email me if you require details). It can be better to invest than pay off a mortgage at this rate. If we have other loans you should look to pay off the loan from savings if the interest rate

property investment Spain

on the loan is greater than you can achieve by investing. A good benchmark figure to use is if the loan rate is greater than 5% per annum you should consider paying it off from savings.

Despite these low rates it is essential that we keep some money readily available, probably in a bank, as an emergency fund. Yet, with these historically low interest rates, it is also essential we do not leave more than we need in the bank. Inflation, even low inflation, eats into the buying power of money left in the bank. It is an insidious effect we often don’t notice until we come to buy our next big purchase. It is at this point we realise that we can’t buy what we thought we could buy because we have had interest on our savings that was smaller than the rate of inflation. When this happens, buying power falls. Instead of being able to buy the sports version of a car we find we can only afford the base model.

We need to use other types of savings and investing strategies during times like these. There are many other options, but most alternatives come with some investment risk. What does investment risk look like?

You may not have realised, but since the market collapsed in 2009 there have been corrections of -16.0%, -19.4%, -12.4%, -13.3%, and -10.2% in the S&P 500!

What is the investment return on the S&P 500 since bank interest rates hit their lows in 2009? INCLUDING the falls above, it may surprise you that the return has been 219%.

This is just one index based on shares in one country and is used to highlight volatility in a market. To reduce the impact of this volatility our savings should be in diversified pots. A fair question for you to ask me is “With these low interest rates, what pots do you invest in?” The answer is I have a mix. I have some very steady, some

stock-exchange

would say old fashioned, funds. Others are with a mix of investments managed by a fund manager, including some investments in the S&P 500. I have some UK Premium Bonds for my emergency fund as they are easily accessible. I have income producing investments in my pension. Index linked funds give me some protection against inflation (just in case we get an unexpected event). I have some forward looking funds that invest in India and China. And then… well I have three small holdings in UK private companies making new technologies and an Exchange Traded Fund (ETF) for Artificial Intelligence and Robotics.

There is diversity across types of investments, e.g. shares, funds, regions and bonds. Within the higher risk parts there is balancing of risk. The three individual shareholdings in tech companies are very high risk because the value of the shares in each company depends on the results of that company alone. Balance is provided because the ETF performance which depends on the 41 companies it tracks. If one company does badly, there are 40 others to take up the slack. It was sensible for me to diversify from an investment being dependent on the results of one company, to something which is dependent on the results of 41 companies. Especially as I am not a researcher in the fields of AI and robotics.

This is my mix of investments, but it may not be right for you depending on what return you want and how much risk you are prepared to take. Do I also choose superb investments and do these investments avoid market falls? I admit it, no they don’t. But my diversification does.

Tax is also relevant to the good husbandry of your savings at all times, not just when rates are low. With money in the bank and interest rates so low, it is not much more than adding insult to injury when the taxman takes 19% to 21% of your interest. However, it is important that having moved your savings from a bank account you make the investment tax efficient. How to do this will depend upon your situation and requires individual advice.

This brief note gives an example of what we need to do now as we are faced with low interest rates for a long period. What is right for you will depend on your circumstances. Is it worth taking some risk? Yes, especially if you use several different types of investments; investments in different types of assets and different geographical areas. Putting your savings in different pots can help to reduce the investment risk.

As is often the case, what looks like a disadvantage, the low interest rates, means opportunities appear elsewhere!

Inheritance Tax in Catalunya

By Barry Davys - Topics: Barcelona, Catalonia, Catalunya, Inheritance Tax, Spain, Succession Planning, Tax
This article is published on: 28th April 2019

28.04.19

Inheritance Tax in Catalunya

So, we have now managed to control the amount of wealth tax due (Wealth Tax in Catalunya). However, when we receive an inheritance or leave something to our family, we are taxed again. Inheritance tax or ‘impuestos de successiones’ feels even worse than Wealth Tax. At this point we have now paid savings tax, income tax AND wealth tax. Now there is IHT on top! Like Wealth Tax, though, it is possible to manage your liability.

Inheritance Tax in Catalunya – How it works
Perhaps the most important aspect is that tax is charged to the recipient of a bequest or property physically located in Spain. For UK nationals living in Catalunya, this is a surprise, as in the UK it is on the estate of the person who has passed away.

Tax is due on the value of the bequest but the rate of tax is dependent on your relationship with the person who has passed away. A spouse, child, sister, uncle or non-related all have different methods of calculating the tax due. Once the tax has been calculated, there may be discounts to be applied to reduce the amount. Indeed, it takes at least four different steps when working out the tax due to end up with the final figure. Fortunately, help is at hand in calculating the amount.

It is also very important to understand that the tax return has to be submitted within 6 months of the death and the tax has to be paid by the same day. A common situation we see is where a person is due to inherit a share of a property but the property has not been sold within 6 months. The forms still have to be submitted to the Hacienda and tax paid based on an estimated value. Failure to do so results in a fine and interest.

How to Manage Your IHT
There are numerous strategies, but for British people, careful planning is required. In the UK it is the estate of the person who has passed away that is taxed, but in Catalunya it is the recipient; so we have two different systems with two sets of rules. Care is needed to ensure that planning in one system does not increase the liability in the other. Fortunately our qualifications and experience in the UK and in Catalunya mean we understand this issue.

Another issue specific to British people living in Catalunya is that they do not plan for RECEIVING a bequest. When asked to assist with planning for inheritance tax it is nearly always from a view of “what can I leave to my children?”. Yet before then people often receive bequests from their parents and family which triggers a tax charge. Planning for receiving a bequest can be as important as planning for leaving a bequest.

Certain assets are exempt from Inheritance Tax. Careful choice of where investments are kept can also help. Finally, dovetailing UK and Catalan Inheritance planning can also make a difference.

If you would like to discuss how to manage your Wealth Tax liability, please email me at barry.davys@spectrum-ifa.com, call me on 00 34 645 257 525, or use the contact form below.

BREXIT and our right to remain in Spain

By Barry Davys - Topics: Barcelona, BREXIT, Residency, Spain
This article is published on: 29th November 2018

29.11.18

Brexit and our Right to Remain in Spain

There is much work still being carried out by both teams in the Brexit negotiations, despite the Withdrawal Agreement. However, until all issues have been agreed upon, including the Northern Ireland border issue, fish and Gibraltar, and the UK Parliament has approved the agreement, nothing is certain about the Brexit.

For those of us living in Spain, there is something we can do now which provides some protection. We have been recommended to do this by the British Embassy in Spain. The action we can take now is to register for “Permanent Residency”.

Without having to give up our British passport or take Spanish citizenship, we can apply for permanent residence if we have lived here for more than five years. This gives us the same rights as a Spanish person to reside in Spain. Making this application whilst Britain is still part of the EU will be easier than when Britain is not part of the EU.

If you already have a residency card, please check to see whether it contains the word “Permanente”. If it does, you have already completed this process. If you have a card that does not include this word, you should complete this process.

I am applying for permanent residency as I write this article and it is not (famous last words) onerous. Other people who have completed it have found the same. There are good notes, including information on what is required to make the application, at this web address. There are two forms that are required: one is the application form and the other is the payment of the fee form. Supporting documentation is also required; this is listed in the notes on the website above.

The completed forms are submitted at your police station that deals with “extranjeros”. There are several in Barcelona, but in the Costa Brava, Girona is the place to go. Some advice suggests that the payment form should be first taken to the police station and then to the bank. Others suggest payment first (an online option is available) and then taking proof of payment with your application to the police station.

The application form is the Modelo EX-18 here and the payment form is the Modelo 790.

Confirmation of our residency status is essential for our tax situation too. I therefore recommend that if you can, you apply for permanent residency. Please feel welcome to Whatsapp me if you wish to discuss your situation at +34 645 257 525 or email barry.davys@spectrum-ifa.com

     

     

     

     

    YesNo

     

    YesNo

     

     

    The Spectrum IFA Group is committed to building long term client relationships. This form collects your name and contact details so we can contact you about this specific enquiry. For further information, please see our Privacy Policy.
     

    Tax and Savings in Spain

    By Barry Davys - Topics: Barcelona, Saving, Spain, Tax, Tax Efficient Savings
    This article is published on: 28th March 2018

    28.03.18

    This is an introduction to the differences between the UK and Spanish tax systems and an introduction to a European ISA equivalent. It has been produced to help answer two regularly asked questions. : “What is the difference in taxation between Spain and in the UK?” – followed by “Is there a tax free savings account in Spain similar to an ISA?”.

    For those of you not from the UK, I hope that the Spanish part of the table below will still be useful in allowing you to compare it with your home country tax situation.

    Tax UK Spain
    Tax Year Dates  6th April – 5th April  1st January – 31st December
    Income Tax Allowance  £11,500 €9250 up to age 64
    €10,400 age 65+
    €11,800 age 75+
    Capital Gains Tax Allowance £11,300  N/A but some gains can be offset against some losses
    Savings Tax Rates (interest and capital gains)  N/A
    Income Tax and CGT calculated separately
    19% to €6,000, then 21% for the next €44,000 and 23% above €50,000
    Tax Free Interest  £1,000  Nil
    Tax Free Dividends  £5,000
    Falling to £2,000 in 2018/19
    Nil
    Annual ISA Allowance  £20,000  Unlimited
    (see Euro ISA below)
    Pension Contributions Limits  100% of your earnings
    up to £40,000 pa
     €8,000 pa
    Inheritance Tax  Above £325,000 at 40% plus possible allowance against main residence of £125,000 in 2018/19 Autonomous community rules.

    Catalonia and Madrid have large discounts for immediate family

    Wealth Tax Limit  N/A at present  Autonomous community rules. Catalonia: over €500,000 with a €300,000 allowance for main residence, rates from 0.21% to 2.75%

    The main differences are in Wealth Tax, Inheritance Tax and the way savings are taxed.

    Wealth Tax in Spain

    In the UK there is not currently any Wealth Tax. There is in Spain and the rates and method of calculation are set by the autonomous communities. In Catalunya the rate is banded, starting at 0.21% and rising to 2.75%.

    Inheritance Tax in Spain

    In the UK, the estate of the deceased person is taxed as a whole, whilst in Spain, the person receiving the bequest is taxed based just on the amount they personally receive from the estate. The allowances and method of taxation also differ. The rates of inheritance tax in Barcelona and the Costa Brava are the same but will be very different if you live in Andalucia. For more information, please see Inheritance Tax in Catalunya as an example.

    Tax Free Savings in Spain

    In the UK, since January 1987 with the introduction of Personal Equity Plans (PEPS), we have been used to having tax free savings. Peps are now called ISAs and the allowance is now £20,000 per annum. If you live in Spain and have an ISA please note it is taxable in Spain. The fact that it is tax free in the UK does not transfer to Spain and you should look at the alternative below.

    Spain does not have an ISA system as such but there is a similar investment, sometimes known as the “European ISA”. It is tax free whilst invested and has a very beneficial low taxation basis, especially if you require income from your investment. It is a little more restrictive than the UK ISA but is still worthwhile.

    The two big advantages are that there is no limit and it is portable to other countries. If you would like to invest 10,000,000 euros in one year in the “European ISA” you can do! Unlike a UK ISA, the European ISA can go with you if you move country (not to all countries). If you return to the UK, the tax will be proportional to the amount of time you have been in the UK against the time you have had the European ISA. So if you have a Euro ISA for 10 years in total and have moved back to the UK for the last two years of the 10 years, the tax will be reduced. Specifically, the tax will be calculated and multiplied by 2/10ths. An 80% tax saving!

    *Sources: www.gov.uk/government/organisations/hm-revenue-customs
    www.agenciatributaria.es/

    If you would like more information on Inheritance Tax, Wealth Tax or the European ISA, please contact me on barry.davys@spectrum-ifa.com or telephone on +34 645 257 525. If you have UK ISAs, I will also be happy to advise you on how to make these tax efficient in Spain.

       

       

       

       

      YesNo

       

      YesNo

       

       

      The Spectrum IFA Group is committed to building long term client relationships. This form collects your name and contact details so we can contact you about this specific enquiry. For further information, please see our Privacy Policy.
       

      Good News for Premium Bond Holders

      By Barry Davys - Topics: Premium Bonds
      This article is published on: 27th November 2017

      27.11.17

      Good news for all of you out there who hold premium bonds!

      Due to the equivalent interest rate increase recently announced by the Bank of England, NS&I has announced that there will be an increase in the size of the prize fund for the popular Premium Bond scheme. Though this isn’t a real terms interest rate change, it does mean that there will now be more funds available for bond holders to win.

      The chances of winning with a single bond will be increased sizeably from 30,000 to 1 to 24,500 to 1.

      See below a small table taken from Telegraph.co.uk to show the substantial change in prizes!

      Prizes           No. of prizes November 2017           No. of prizes December 2017
      £1m 2 2
      £100k 3 4
      £50k 5 9
      £25k 12 18
      £10k 28 42
      £5k 57 87
      £1k 1,366 1,660
      £500 4,098 4,980
      £100 22,190 22,792
      £50 22,190 22,792
      £25 2,325,993 2,853,919

       
      NS&I

      Recent Posts

        None Found