Viewing posts categorised under: Banking
Savings Bank Account Comparison in Spain
By Chris Burke - Topics: Banking, Barcelona, Saving, Spain
This article is published on: 5th March 2019
The most efficient way of losing money is to keep it in a current account. Many years ago offset mortgages were introduced, which were a great way of saving interest being paid on your mortgage. Effectively, any interest on savings you had in an account that was linked to your mortgage account, reduced the mortgage payments by that amount, more or less (most simplified explanation). So, if you had a mortgage of €250,000 and savings on a linked account of €50,000, each month it’s almost as if the mortgage was only €200,000 and you would only pay interest on that amount.
To understand why current accounts are the main way to lose money, let’s suppose,for example, you have €50,000 sitting in a current account for a rainy day. Inflation has been running at around 3% lately (that’s the increase in the regular items we buy). Therefore, just for your money to KEEP UP with that, it needs to grow by €1,500 per year. Over a period of 4 years that’s €6,000.
Therefore, it is very important that you have this money working for you, especially after the hard work it took you to earn it, both to keep up with inflation so it keeps its purchasing power and to grow to build your wealth.
The very least you should do is have the money in a savings account, or similar. So what are the current bank savings rates in Spain? Well, they will guarantee to lose you money every year, but they are better than having money sitting in your current account:
- 1.5% ING – interest rate per annum, deposit term 1 month
- 0.5% WeZink (Banco Popular) – interest rate per annum, paid given monthly
- 0.3% BNP Paribas – interest paid quarterly
Another way of keeping your money safe and perhaps earning a larger return if you are lucky, in sterling, is having UK Government backed Premium Bonds (annual prize fund interest rate of 1.4%). Did you know that you don’t need to be British OR live in the UK to have these?
If you would like to explore other options, then feel free to get in touch and we can discuss what will work for you AND your money, giving you flexibility along the way. Knowledge and advice will help you plan your finances.
Potential Catalan Issues
By Chris Burke - Topics: Banking, Barcelona, Catalonia, Currencies, Elections, Investments, Spain
This article is published on: 5th October 2017
It seems Catalonia and Spain are continuing their loggerheads and head jutting, but what most people are starting to consider are their OWN assets and issues being a resident here, particularly if you are not Catalan. I have received many emails this week from worried clients and contacts, about having their money here and what they can/shouldn’t do.
See below my 5 TOP FINANCE TIPS for the current predicament and indeed some of the areas we help people with.
Spain’s stock market has taken a severe hit this week, with two of the Catalan banks, Banco Sabadell and Caixabank down 6.3% and 6.7% respectively. Indeed today Banco Sabadell is holding an emergency meeting, Thursday the 5th October, to approve relocating their headquarters out of Catalonia.
Therefore, as an emergency communication to my clients and contacts I thought it would be useful to know what you should be thinking about and the main questions that have arisen this week:
1. Personal Money in banks
Any money in a bank, unless used to live on a day by day, is devaluing in real terms. If Spain reacts to Catalonia declaring independence, we have no idea what might happen. In the last crisis, banks made it difficult to move and even limited the money you could take from your bank account. If you have ‘excess funds’ in accounts in banks, you may want to consider other options so you still have full control of your money and no worries.
2. Business Bank Accounts
If your business account is with a Catalan bank, but you have a personal one that is not, you CAN move money into this. However, you have to be careful and follow these guidelines:
‘In order to avoid problems with the consideration of dividends it would be preferable to do a loan agreement between you and your company and to file a form through la Generalitat, in order to demonstrate the date of the loan and the content of the agreement. There is no stamp duty to be applied and it is not necessary to go to a Notary, but it is better to have this document done, just in case, if in the future somebody asks about this amount.
Source: Silvia Gabarro, GM Tax.
Anyone with sterling Money will have felt the pain of the currency weakening since the Brexit vote. Analysts have been saying for months that this is very undervalued, and built on worries about the UK leaving the EU. However, there are still fundamental issues within the EU, including the real major problems of the Italian banks, the fragile Spanish economy and a few members who are heavily in debt and unlikely to ever be able to repay this. Now we also have the Catalan Independence problems coming to a head within Spain, this could be compounded. Then in May next year we have the Italian elections which could be interesting to say the least.
Therefore, it could be argued before the Euro weakens any further, a good time to transfer money into sterling from Euros.
Many Catalan/Spanish banks whose client’s money is invested have more of an emphasis on their own funds or Spanish funds, than a non Spanish bank/investment would. We call this being more ‘Spanish Centric’. If the Spanish stocks are booming then this is fine, however if not the case this could be very dangerous to your investments, whether personal or corporate.
The larger the stock market, the closer correlation (it does the same as) to other large stock markets. Therefore, if your money is invested with a truly global bank/investment firm you will not put your money so much at risk to this.
Believe or not, some businesses and people are relocating due to the current predicament, and some companies share prices have even gone up by 20% on revealing this news to the press!
You may or may not want to consider this, or be in a position to, but your personal and corporate finances do not need to worry if you have them set up correctly. Companies’ savings and your personal money can be with a ‘Portable bank/institution’ that acts like a balloon. Wherever you go, you pull your balloon along with you happily. Then, when you want to access some of the money, you let some ‘air’ (money) out and adhere to the local rules of where you are. No need to open up bank accounts in different countries, or go through the extensive administration. Just tell us you want your money and after some due diligence you shall receive it, wherever you are and knowing the process is legal and compliant.
Banks start plans for Brexit
By Chris Burke - Topics: Article 50, Banking, BREXIT, europe-news, Spain, United Kingdom
This article is published on: 22nd March 2017
After U.K. Prime Minister Theresa May set a date to trigger the formal mechanism for quitting the EU, within weeks some of the worlds Big investment banks will begin the process of moving London-based operations into new hubs inside the European Union.
The biggest winners look likely to be Frankfurt and Dublin. Those people familiar with the plans, asking not to be named because the plans aren’t public, include the Bank of America, Standard Chartered Plc and Barclays Plc. To ensure continued access to the single market they are considering Ireland’s capital for their EU base. Meanwhile, Frankfurt is being eyed by Goldman Sachs Group Inc. and Citigroup Inc respectably others said.
Dublin shares similar laws and regulations as its U.K.neighbour and is the only other English-speaking hub in the EU. Whilst Frankfurt is a natural pick, given a financial ecosystem featuring Deutsche Bank AG, the European Central Bank and BaFin.
Executives want to have new or expanded offices up and running inside the EU before the U.K. departs in 2019. With banks increasingly expecting a so-called hard Brexit – the loss of their right to sell services freely around the EU from London.
It is thought London could lose 10,000 banking jobs and 20,000 roles in financial services as clients move 1.8 trillion euros ($1.9 trillion) of assets out of the U.K. after Brexit, according to think tank Bruegel. Other estimates range from as much as 232,000 jobs to as few as 4,000.
Avoid Bank Charges
By John Hayward - Topics: Bank Charges, Banking
This article is published on: 20th March 2017
A number of banks have a variety of current accounts. It would appear that customers are not always advised by their bank what is the best account for them. For many expatriates, especially those buying and selling property, when money is paid into or from a bank account, the charges made by banks can be huge. It is quite common for charges to be made on both the money entering the account, after a sale of a property, and then again on the same money when a new property is purchased and money is transferred to another party. Some banks have accounts which do not attract fees. There will almost certainly be conditions such as a minimum deposit into the account each month. However, and for many retired expatriates, these conditions are not likely to be too difficult to satisfy. You may even be paid interest on balances or receive bonuses on direct debits. Make certain that the account you have is the best for you.
Paying too much tax on pension income
When submitting an annual tax return in Spain, there are (at least) two ways of calculating the tax due on UK sourced income. One way is to tell your accountant how many pounds you received and the accountant will convert this into euros using the exchange rate from the previous 31st December. For example, the exchange rate used for annual tax returns submitted in June 2017 will be based on the rate as at 31st December 2016. The problem is that, with fluctuating exchange rates, one could be paying tax on money that was never received. Let’s say that each month from January to November you received monthly income based on an exchange rate of 1.15 but then by 31st December it had increased to 1.20 euros to the pound. Your tax bill will be based on 1.20 even though you had only received 1.15 for 11 months. The alternative way of submitting the return is to ignore P60s etc. and simply submit evidence of exactly what euros you received through the year. If you are not certain, talk to your accountant.
Obtain proof of your current address
More and more often, financial institutions will be asking for evidence of where you live. In so many cases, all bills are put in the name of only one partner and in these days of online banking, people are no longer sent bank statements and not all companies accept printouts from the internet. Make certain you have a bill (not mobile phone) in your name or obtain an updated Padron certificate.
Italy – Thinking about taxes?
By Gareth Horsfall - Topics: Banking, BREXIT, EU Select committee, Italy, Tax
This article is published on: 14th February 2017
Tax in Italy can seem complicated but with careful financial planning it needn’t be.
As a fiscally resident individual in Italy you are subject to taxation on your worldwide income (from employment, pensions or investments), assets, realised capital gains and the capital itself. The rates depend on the types of income you generate and which assets you hold. This means you are required to declare all your financial affairs no matter where they might be located or generated in the world.
Tax on Income
If you are in receipt of a pension income and it is being paid from a private pension or occupational pension provider overseas or you are in receipt of a state pension then that income has to be declared on your Italian tax return. Certain exemptions apply for Government service pensions.
It is a similar picture for income generated from employment. This is a slightly more complicated issue that depends on many factors. If you have any questions in this area you can contact Gareth Horsfall on firstname.lastname@example.org
Investment income and capital gains
Interest from savings, income from investments in the form of dividends and other non-earned income payments are taxed at a flat percentage rate. The same applies to realised capital gains.
Some wealth tax may apply on the value of your investments each year as well. This is charged on the capital value as at the 31st December each year
Property which is located overseas is taxed in 2 ways. Firstly, there is the tax on the income itself and, secondly, a tax on the value of the property.
1. The income from property overseas.
Overseas net property income (after allowable expenses) is added to your other income for the year and taxed at your highest rate of income tax in Italy.
2. The other tax is on the value of the property itself.
The value on which this is calculated is the equivalent of the Italian cadastral value of the overseas property. The value, on which the tax is charged, depends on whether the property is located inside the EU or not. A credit may be applicable depending on where your property is located.
Taxes on Assets
1. Banks accounts and deposits
A fixed charge is applied, per annum, per bank account, held overseas. Minimum balances apply.
2. Other financial assets
The wealth tax on other foreign-owned assets (IVAFE), covers shares, bonds, funds, cryptocurrencies, gold, art or other portfolio assets that you may hold. The tax is charged on the value as of 31st December each year.
Placing your assets in a suitably compliant Italian investment structure can help reduce taxes and adminstrative burden and aid in your financial planning in Italy.
You might pay more than you need to?
This is a general list of the taxes that could affect you when resident in Italy. If you haven’t conducted a financial planning exercise before moving to or since moving to Italy, you could be paying more than you need to. Our experience is that most people are.
We can, in most cases, identify a number of financial planning opportunities for individuals looking to move to, or already living in Italy, to protect, reduce, and avoid certain taxes.
How safe is your bank?
By Pauline Bowden - Topics: Banking, Investment Risk, Spain, Uncategorised, United Kingdom
This article is published on: 27th January 2017
Which bank? Which jurisdiction? As more amazing stories come out about the world’s banks, we have seen a shift from Deposit Accounts being a low risk investment, to a much higher rated risk. So what exactly does each jurisdiction offer as security against your bank going bust?
| Isle of Man
|| Personal / Company Account
|| 50,000GBP / NIL
(from 31st January 2017, proposal by
Government to increase to 85,000GBP)
Many people in this area of Andalucia have bank accounts in Gibraltar, the Isle of Man, Guernsey or Jersey. Of the above list, apart from Gibraltar, these jurisdictions have the least protection for the account holder.
I often write about spreading your risk, by investing in different asset classes. Perhaps now we should also spread our bank accounts and have smaller deposits in more banks, in more jurisdictions.
It can make life a little more complicated, but it makes financial sense not to put all your eggs in one basket. At least then, if one egg gets broken, you do not lose all of them!
Holding cash as an asset class is no longer a “safe bet”. With interest rates so low now, the real value of the capital is being eroded by inflation. People that relied on the income from deposit accounts have seen their disposable income fall drastically, especially if they are sterling investors in receipt of sterling pay or pensions. Many are having to eat into their capital to maintain their lifestyles.
Alternative investment strategies need to be considered in order to protect the wealth that you already have and maximise the returns from that wealth.
Banks have floors?
By Chris Burke - Topics: Banking, Barcelona, Spain, Uncategorised
This article is published on: 24th January 2017
After a surprising final ruling by the European Union’s top court, some Spanish bank shares tumbled by as much as 10 percent recently. Spanish banks, including Banco Popular Espanol SA and Banco Bilbao Vizcaya Argentaria SA, may have to give back billions of Euros to mortgage customers.
Judges at the EU Court of Justice ruled in Luxembourg that borrowers who paid too much interest on home loans pre-dating May 2013 on so-called mortgage floors, are entitled to a refund from their banks. Banco Sabadell SA fell as much as 7.5 percent, while Banco Popular slipped as much as 10.5 percent, the largest decliner in Spain’s Ibex 35 benchmark.
The court said that a proposed time limit on the refunds is illegal and customers shouldn’t be bound by such unfair terms. Some banks are still making provisions for bad loans, which also adds pressure to profit.
The size of the problem
With €521 billion, home loans are one of the largest parts of Spanish bank lending business as they grew their real estate exposure during a construction boom in the country that burst at the end of the last decade.
BBVA estimated in July that the maximum impact from a negative ruling would be 1.2 billion Euros, while CaixaBank SA said at the time it would have to refund homeowners as much as 1.25 billion Euros. CaixaBank has already provisioned 515 million Euros, it said.
The EU court case comes as Spanish banks are under pressure from low interest rates and weak demand for credit, affecting their traditional business of lending.
The capital ratios of smaller lender Liberbank SA and CaixaBank will be hit hardest by the ruling, brokerage firm Renta 4 said in a note to clients. Liberbank will see a 75 basis points impact on its CET1 ratio, while CaixaBank will suffer a 40 basis points hit. Banco Popular will have a 36 basis points impact.
The ruling doesn’t affect the solvency of Spanish banks nor the strength of the mortgage market in the country, Spanish banking association CECA said in a statement. The Bank of Spain estimates the maximum amount of mortgage floors affected by the ruling is slightly above 4 billion Euros, an official said.
Common Reporting Standards
By Chris Burke - Topics: Banking, Barcelona, Exchange of Information, Offshore Disclosures Facility, Spain, Uncategorised
This article is published on: 13th June 2016
What is it and what does it mean?
Common Reporting Standards is also known as automatic exchange of information (AEI). It originated in May 2014 with 47 countries tentatively agreeing to share information on residents’ assets and incomes automatically as standard practice.
It is the Brainchild of the OECD (Organisation for Economic Co-operation and Development). Previously this information was shared at request, however this was not effective and largely unsuccessful. The main emphasis of this is to battle against tax evasion.
How will it work?
Countries will transfer all the relevant information automatically and systematically including:
- The name, address, TIN (Tax Identification Number) date and place of birth of each reportable person
- Account number
- Name and identifying number of the Reporting Financial Institution
- Account balance or value at end of calendar year, or if closed during that year
- Each country is allowed to determine which accounts are reportable
When will it start?
Most European countries will start reporting in 2017, including Spain and the UK. For note of interest, other countries will report in 2018 including Andorra.
Starting to report in 2017:
Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Dominica, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos Islands, United Kingdom
Starting to report in 2018:
Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Belize, Brazil, Brunei Darussalam, Canada, Chile, China, Cook Islands, Costa Rica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Kuwait, Marshall Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Sint Maarten, Switzerland, Turkey, United Arab Emirates, Uruguay, Vanuatu
What do I need to do?
Make sure you have ALL your assets:
- Reported correctly
- Tax compliant i.e. not in investments/properties that will mean you pay more in tax
- Understand your personal situation, and what your options are.
Planning for the yachting season ahead
By Peter Brooke - Topics: Banking, International Bank Accounts, Residency, Saving, Uncategorised, Yachting
This article is published on: 22nd February 2016
You spend much of your professional lives working hard for other people; this season I want to challenge you to do one thing for you and your future every month.
MARCH (i.e. now):
Consolidate your bank accounts – you don’t need them all.Have an account in the currency in which you are paid and another in any other currency you regularly use. You don’t, need lots of accounts, but make sure your total balance is below the compensation limits for the jurisdiction in which you hold the account .
Don’t spend money just moving it around, open a currency broker account. If you need to move money from one currency to another, don’t use your bank, your currency broker can save you a small fortune on exchange rates and fees.
Invest in yourself! What are you going to do at the end of the season? Consider now what your next set of exams will be and when you can do them. Put money aside for fees and living costs. Check your visas and passports if you are crossing to the U.S. later in the year. And start a diary (see November…).
This is the really busy time; stop and consider your longer term future. How long do you want to stay in yachting? What do you want to do after yachting?What do you want to get from yachting (personally and financially)?
The season is calming down – are you really covered? Time to check exactly what health insurance you have on board and if there is any accidental injury or even death in service protection for you and your beneficiaries while you work. When you know, tell someone at home so they can claim on your behalf if necessary.
Cash is no longer king. At the end of your season you may have a pot of cash that you can’t get into your bank (due to strict money laundering rules). Negotiate to have tips paid directly with your salary into your bank account, keeping only the petty cash required. Many Captains will do this.
Tax residency is a matter of fact. Get organised and keep a diary of your travels. Yacht crew are “approached” by various tax authorities that believe you might be a resident. It’s not down to them to prove that you are a resident in their country, it’s down to you to prove you’re not. Understand the residency laws of the countries where you are most likely to become a resident, then keep a diary and flight ticket stubs, to support your case.
If you’ll be in the yachting industry for more than two or three years, seriously consider saving for your future, Your friends on land are paying tax and social security, which will give them something at retirement – are you? It’s up to all crew to put something aside (I suggest at least 25 percent of salary) while they’re in the industry to try and secure their financial wellbeing. The million dollar rule – to retire on an income of $/€3,OOO per month in 15 years, you will need approximately $/€1.1million in assets.
Don´t bank on low charges
By John Hayward - Topics: Banking, Barcelona, Spain, Uncategorised
This article is published on: 19th January 2016
Wouldn’t it be great if every time you were paid your pension or other income, you were paid a commission for receiving it? Then, each time you pay a bill, you receive a commission for paying it? You could make commission twice on the same money! Of course, this is not possible for us. It is for the banks though.
Let’s take an example based on real charges of a well-known Spanish bank and a couple selling a property in Spain for €300,000 and then re-purchasing a smaller property for €200,000 and investing €100,000 in an income paying bond.
On sale, their purchaser pays them €300,000 through a transfer to their bank. The bank charges 0.2% for receiving the money (€600). They then transfer the money to buy the next property and get charged 0.4% on €200,000 (€800). Finally, they transfer €100,000 to a Spanish compliant company based in another part of Europe for their investment. They are charged a further €400.
In total they will have paid €1,800 in bank charges for transactions other banks may not have charged anything for. The main aim is to choose a bank that does not charge. If high charges are the default, perhaps one should move to another bank. We can recommend a bank with no, or low, transfer charges along with no annual account fees.
One must also be aware that banks will probably earn a healthy chunk on currency exchange, selling the benefit that they do not charge a fee. With GBP falling back against the Euro, it is even more important to obtain a competitive rate. Whether it is for regular income payments, or one off lump sums, we can help you get the best deal.