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Inheritance Tax in Catalonia

By Chris Burke - Topics: Barcelona, Catalonia, Catalunya, Inheritance Tax, Spain
This article is published on: 11th October 2019

11.10.19

*UPDATED 1st January 2020

In the circle of life, it’s an unfortunate occurrence that parents or relatives pass on from this world we live in and leave an inheritance, whether that is property, money, investments or other assets. The value of this inheritance may or may not be the kind you are used to having or looking after, and that is where we/ I come in, to make sure this your inheritance is safe and looked after, taking into account your life situation both now, and in the future.

How is this inheritance taxed in Catalonia though? I hear many stories or ideas among people I meet but no one seems to know for sure, or get it right anyway. One of the reasons for this is that it depends on where the money comes from, i.e. which country and what asset is being received. Many of my clients are from the UK, how does it also work there? In the UK it is usually very simple, if someone dies being resident in the UK and leaves you assets up to £325,000,there is usually no Inheritance Tax (Paid by the estate); anything over this is taxed at 40%. However, in Catalonia it is not that simple (Surprise surprise, I hear you say!) and alongside what is declared and maybe tax payable in the UK, you must also declare and pay the relevant tax here

Firstly, Inheritance tax in Catalunya is paid for by the receive, not the estate, and very importantly, you have 6 months to declare this inheritance, EVEN if you haven’t received it yet (this is from the date of decease) or you will be fined the following way, on the amount of tax you are liable to pay:

  • 5% in the following 3 months (i.e. months 6-9 since death)
  • 10% from 3 months to 6 months
  • 15% from 6 months to 12 months
  • 20% plus interests after 12 months

The good news is that there are discounts on inheritance tax in Catalonia, and most people are surprised by the amount of tax they have to pay, in a good way. To start with, there is usually no tax to pay on the first €100,000 being received if you are a child or spouse of the deceased. If you are a parent of the deceased, the allowance is €30,000 and any other relative receives a €50,000 nil tax amount including grandchildren.

From this point on, there are further reductions between 97-99% and there are also other factors to be taken into account, such as are the children under 21, disabled or if from a family business. The quickest and simplest way, I feel, to give you an idea of what tax you would pay is if I use the most common example, of a parent living outside of Spain, leaving their child whom is living in Catalonia an amount of money/asset not including property (there would potentially be extra tax deductions for receiving this):

Example (guideline) of someone tax resident in Catalonia, inheriting from a parent in the UK:

Amount to be inherited Tax due in Catalonia
€100,000 €0
€250,000 €383.82
€500,000 €4,300.05
€750,000 €16,866.68
€1,000,000 €40,473.29

These are approximate and we always suggest getting in touch to confirm exactly what the amount would be, and for help declaring it. For the assets themselves, it is worth knowing that many assets overseas are not always efficient to have while living in Catalonia. For example, investments or Isas in the UK are declarable and tax payable on any gain in Spain annually, EVEN if you do not take any of the money, unlike in the UK. This is where we help our clients to get organised efficiently and manage the assets if needed.

If you have any questions relating to any of these points, or anything similar, don’t hesitate to get in touch.

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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!

Tax Advice in Spain for Expats

By Chris Burke - Topics: Barcelona, Spain, Tax, tax advice, Tax Relief
This article is published on: 24th September 2019

24.09.19

Whenever someone gets in touch with me, the first, most important thing I suggest they do is to make themselves and their family as tax efficient as possible, i.e. tax planning. There is no point having a ‘leaky bucket’: their money earning interest but more than needs to is pouring through the ‘tax holes’ they haven’t plugged or planned for.

So, apart from the obvious reason of minimising the current tax you pay, why is it important to review your tax situation? It is to make sure you are aware of ‘stealth taxes’. Stealth taxes are those which are not easy to detect and that many people are not aware of.

If you are a government, you want to win as many votes as possible to be elected (or re-elected). You need money to spend, but raising taxes on the upper echelons will damage your votes, raising taxes on the working classes will also damage you votes, and both will be very vocal. Therefore, what has become increasingly popular with governments is to increase taxes that won’t necessarily hurt voters’ pockets on a day to day basis, but which could do in the future.

A good example of this is something called the lifetime allowance. This is the ‘ceiling’ under which the value of your UK private pension will be in the regular tax bands. However, if your pension pot overshoots this limit, you will pay increased tax of up to 55% on anything over that ceiling. Never heard of this tax? Well, I can assure you there are some very normal, everyday, hard-working people who are not in the upper echelons of society and who, due to long pension contributions and having good investment advice, will reach this limit in their lifetime.

To explain this a little more, the lifetime allowance ceiling was introduced in 2006 and was £1,800,000 at its maximum. Over time, it has been reduced and reduced to its present rate of £1,055,000. During that same time inflation has increased, people’s earnings have increased, contributions to pensions have increased; so why should the ceiling go down? Stealth tax.

Moving forward, stealth taxes are likely to be the most popular way for governments to increase their income without the majority of people noticing.

Let’s think about this. What else could the government do along these lines to increase revenue? How about tax those British people living outside of the UK more? They don’t live there, they don’t have the same rights as everyone that does, so are they not an easier target? So, what could they do? Tax UK state pensions (currently they do not tax non-UK residents, although they are taxable in Spain)? Or how about tax those with UK private pensions a ‘non-resident tax’? Or tax those who move their UK pensions outside of the UK and not into a place where the UK government has an agreement with? In fact, the last one they do already!

What can you do? Well its quite simple really; plan now so that should any of the above or anything like this happen, your assets or monies are arranged to be as tax efficient as possible to mitigate these circumstances. If your assets are working just as effectively as they are now, but are much more tax efficient, it could save you and your family a lot of money in taxes in the future.

Perfect preparation prevents P*** P*** performance I believe is the phrase!

Hot investments: It’s time to get creative

By Chris Burke - Topics: Barcelona, Investment Risk, Investments, Spain
This article is published on: 18th June 2019

18.06.19

Investing needs savvy, like a game of chess. It’s best to make carefully thought through moves so that it’s not left to chance. The most crucial part of investing is being in the know.

As a financial advisor, this is something I research and stay on top of so that I can best inform clients. And I only recommend what investments I would feel confident investing in myself. That is very important for clients to know.

When it comes to the stock market, it’s about knowledge and catching the wave at the best time. Right now in the world of investment it’s prime time for investing in some promising and exciting creative industries, namely the e-sports /online gaming industry and AI (Artificial Intelligence).

As we all know, the internet, Amazon and Netflix have totally changed the entertainment industry. We are no longer controlled by which shows are on television or in the cinemas, as we now have the luxury of watching whatever we want whenever we want. But perhaps the most massive surprise in the past year has been the overwhelming popularity of esports – which is simply fans watching professional video gamers compete online. Ever heard of Twitch? Well, there are more people logging on to watch pros gamers competing on streaming sites like Twitch than there are watching CNN or NBC.

Last autumn, a shocking 57 million people tuned in to watch a professional video-gaming (esports) match. It was triple the audience of the actual 2018 NBA finals. As a result of this success, the biggest companies including Coca-Cola and T-Mobile have spent hundreds of millions to sponsor these matches.

So, as e-sports and gaming continue to conquer all, which types of companies might be good to get in on? The top gaming companies you might want to consider investing with are Nintendo, Valve Corporation, Rockstar Games, Electronic Arts, Sony Computer Entertainment, Ubisoft or Sega Games Co. Ltd.

investments in games company

And behind every great game is the hardware required to make it fanstastic. NVDA might not be a name you’ve heard, but literally all video games require ultra-high-performance chips and NVDA chips are the crème de la crème, used by over 85% of professional gamers.

(Forbes, 2018)

The ever-growing world of AI (Artificial Intelligence) has been booming and helping companies solve and manage many previous b2b and b2c issues and right now France is aiming to be one of the forerunners in the industry. Last year President Macron announced his government was investing €1.8 billion over 4 year period. A few of the top French AI start-ups are insurance fraud detection companies like Shift Technology; the AI voice assistance platform, Snips, which manufacturers can utilise for their products and Saagie, the online protection platform to store and guard our precious data for banks and insurance companies.

So, there are some exciting and creative opportunities for investment out there but as a financial advisor, when it comes to investment portfolios research and timing are crucial, as is ensuring clients are in a financial position where they able to play the market without the fear of losing their life’s savings.

Before considering any investments, I always start by advising clients to ensure they have sufficient funds they can access quickly and easily and then discuss what length of time they would like to invest other sums for, as it’s my first priority to nurture and protect their financial future. I would not recommend any client to invest in something that I would not invest in myself, but each client is well-informed in the knowledge that if they have the money to try their hand at investing, it is of course a risk. But it’s a risk that can be rewarding and a real learning experience as well.

Qu’est ce que la “Loi Beckham”?

By Cedric Privat - Topics: Barcelona, Beckham Law, Spain
This article is published on: 20th May 2019

20.05.19

Depuis 2005, le Real Decreto 687/2005, également appelé “loi Beckham” (David Beckham en fut le premier bénéficiaire), permet aux nouveaux résidents espagnols d’obtenir une importante réduction fiscale.

En effet ce régime spécial des impatriés permet aux contribuables d’être imposés au taux fixe de 24 % jusqu’à € 600 000 de revenus annuels, puis à 45 % une fois dépassé ce seuil, et non au barème progressif de l’impôt sur le revenu ou IRPF (“Impuesto sobre la Renta de las Personas Físicas”).

Il s’applique la première année de résidence et les 5 années suivantes. Toute personne ayant un nouveau contrat de travail en Espagne (ou statut d’administrateur) peut potentiellement opter pour ce régime auprès de l’administration fiscale (sauf si vous avez résidé en Espagne pendant les 10 dernières années).

La demande doit être déposée dans les 6 mois à compter du début de votre activité qui apparaît sur l’inscription à la sécurité sociale espagnole. Quant à l’impôt sur le patrimoine, seul votre capital en Espagne sera susceptible d’être taxé.

Je me tiens à votre disposition si vous souhaitez de plus amples informations sur ce sujet, ou si vous désirez opter pour ce régime fiscal.

N´hésitez pas à me contacter

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.

Taking a Lump Sum from your Pension when Resident in Spain

By Chris Burke - Topics: Barcelona, Pension Lump Sums, Pensions, Spain, UK Pensions
This article is published on: 13th April 2019

13.04.19

*UPDATED 1st January 2020

There are conflicting stories on how much lump sum/one off amount can you take from your pension if resident in Spain and what the tax will be. Indeed, many people with UK pensions believe it is better to take their UK pension lump sum in the UK before (grey line here if they have already moved!) they move to Spain permanently, as they will pay less tax. Firstly, even if you have a UK pension but are resident in Spain, this has to be declared in Spain. Secondly, if you finished contributing before 2007 you actually can receive MORE tax relief in Spain than in the UK (dependent upon the pension you have and how you take it).

To clarify, in the UK you can currently take a 25% tax free amount from all your private pensions and anymore would then be taxable.

If resident in Spain, you have the right to take up to 100% of your personal pensions in one go (100% in capital), to receive part in capital and part through regular payments or to receive the whole amount through regular payments. If you receive an amount in capital (a whole or a part) then you can apply for a tax reduction of 40% of the amount received for any contributions you made prior to 2007. This option can only be applied once, so, if you have more than one pension plan, you have to receive all of them in the same tax year if you want to apply this reduction. To clarify, it is the value the contributions have accumulated to today that is tax exempt, not the amount of actual contributions made back then.

From January 2007 there is no tax exemption, zero. Therefore, any contributions made from this point receive no tax exemption, however if the contribution to the pension runs before and after this date the tax exemption is calculated the same way.

If you take the amount as a regular payment you will have to pay income tax as if you have received any other general taxable income (a salary for example). In both of these cases, the amount that is taxed (with or without the 40%) is subject to the general income tax rate.

Lump Sum Pension Tax in Spain Lump Sum

Total amount of pensions: £150,000
Amount to be taken in lump sum/one off: £50,000
Amount tax exempt in Spain: £20,000
Pension lump sum amount income taxable: £30,000 (added to your annual income tax band)


Now if we look at the UK example we shall see the difference:

Total amount of pensions: £150,000
Amount to be taken in lump sum: £50,000
Amount tax exempt in UK: £37,500
Pension lump sum amount income taxable: £13,000 (added to your annual income tax band)

 

However, in the following scenario the Spain example works more in your favour:

Lump Sum Pension Tax in Spain Lump Sum

Total amount of pensions: £100,000
Amount to be taken in lump sum/one off: £100,000
Amount tax exempt in Spain: £40,000
Pension lump sum amount income taxable: £60,000 (added to your annual income)

 

UK Example

Total amount of pensions: £100,000
Amount to be taken in lump sum/one off: £100,000
Amount tax exempt in Spain: £25,000
Pension lump sum amount income taxable: £75,000 (added to your annual income tax band)

Important points to note here are:
If you cash in your UK pension OVER 25% and are registered in the UK as a non resident, an emergency tax code is likely to be used up to 45% and you will have to claim back what is owed to you. Unless you are able to provide a P45 from the current tax year following withdrawal from employment and/or current pension plan,

or

The pension provider already holds a P45 or up to date cumulative tax code received from HMRC as the result of previous withdrawals from that pension plan, and can apply it.

If you take your UK pension as a 25% lump sum, this should be declared in Spain and would apply to the Spanish rules of 40% being tax exempt and the rest income taxable. You would therefore pay any tax owed in Spain.

Only the FIRST Lump Sum is tax exempt so it’s important to realise that and make sure you plan effectively.

Regular payments from your pension fall under income tax

From 2007 onwards there is NO tax exemption of this kind.

Top Tips For Your Pension Lump Sum/One Off
When taking your lump sum, take it in the year that is most tax efficient for you, such as when you have lower income from other sources.

Moving your pension outside the UK could give you more freedom, more choices and potentially less tax to pay in the long term (depending on your situation).

Source: Silvia Gabarró GM Tax Consultancy Barcelona

The Many Benefits of a Financial Adviser

By Chris Burke - Topics: Barcelona, Financial Planning, Financial Review, Spain
This article is published on: 3rd April 2019

03.04.19

by Jannah Britt-Green

It might seem obvious to some, but when it comes to the genuine benefits of having a financial adviser, many people are still in the dark. Some people hold certain ideas or common misconceptions, which hinder them from receiving valuable advice and help with managing their financial life. Namely, people struggle to trust someone else with their money and they believe they will have to pay the financial adviser for their services.

When it comes to trusting someone else with our money and investments, yes – it is a chance we’re each taking. But if you find a good financial adviser, you can trust that they sincerely have your best interests at heart, because they will only gain if you gain. They are educated and experienced at helping clients to come up with an effective plan – a financial philosophy if you like – for choosing wisely and preparing for tomorrow. They also have the objectivity we lack when trying to make financial decisions. They aren’t bound by the emotional ties we have with our money and they understand the complexities of mortgages, investments taxes and laws, so they can help us make better informed decisions without so much stress.

Then comes the assumption that we will have to pay a financial adviser. This is most likely due to the fact that no one believes any good service – especially one wherein you could make money – could possibly come without a price tag. Not only is this untrue, but having a financial adviser can actually SAVE money. This is because financial advisers don’t make money from their clients directly. Instead, they get a cut from the insurance / investment / mortgage companies for bringing your business to them. Even better is that, due to the relationship the financial advisors build with these financial institutions, they by and large get a better deal than clients would receive if they were to try to get the same service on their own. I have tried and tested this out myself by looking into getting the same insurance through the same company on my own and found that I could not find the same deal that my financial adviser was getting me. From this point on, I was convinced.

Recently I interviewed IFA Chris Burke, an experienced financial adviser who has been living in Spain over the past decade, to ask him what he believes are the main ways he has helped and continues to benefit his clients.

The Truth
Like any profession, we as Financial Advisers know what works and what doesn’t, and how well it works. To be a good financial adviser, you have to ask yourself, ‘Is this what I would do?’ or maybe even more telling, ‘Is this what I would recommend my mum to do?’

Honesty
Always tell the truth, even if that means telling them we can’t benefit them at that time. I will always use my experience to help people make the best decisions for them and help them do it, if they desire my services. What we do isn’t for everyone and their circumstances, but it might be one day.
Good Tips/Hints/Advice

People usually come to me for a meeting to see how I might be able to help them, but if occasionally someone isn’t sure whether it’s worth the visit, I will always confirm ‘You will take something beneficial from the meeting; knowledge, advice or a good contact; like a recommended Tax Adviser, or how to top up your UK National Insurance contributions at a discount, there is always something’. And you can continue to receive my advice, free of charge, by subscribing to my newsletter: Chris Burkes Newsletter

Grow Clients Monies/Pensions
If it’s not working, most clients won’t stay with you for long, especially if other solutions/the stock markets are indicating it should be working. Therefore, we continually keep up/outperform these as much as we can. We as advisers invest our monies/pensions where we recommend clients to, which for me is the biggest testimony.

Ongoing Advice/Knowledge
There is no point in having a ‘leaky bucket’, that is to say making client’s money grow but not optimising their tax situation. We are always informing, giving our clients knowledge on the best way to mitigate this and who can help them do it.

Due Diligence
We don’t always get it right, but listening to the experts whom we hold in high regard helps us to get it ‘more right than most’. And we are continually reviewing solutions to find new ways to help clients more.

The Beckham Law 2019

By Chris Burke - Topics: Barcelona, Beckham Law, Spain
This article is published on: 8th March 2019

08.03.19

*UPDATED 1st January 2020

Also originally known as ‘The Special Displaced Workers Regime’, The Beckham Law has been in place since it was passed by Spanish Tax decree in 2005. The Law has undergone two reforms/changes since its inception (2010 and 2015) and was originally open to all foreign workers living in Spain adhering to certain conditions.

Why was it brought in?
In essence, it was designed to attract brains, talent and wealth from all over the world, encouraging high earners to become Tax Resident in Spain (spending more than 183 days a year living there) and thus pay 24% income tax (IRPF), as opposed to rising up to 43% (or higher in certain circumstances). It was given its name by one of the first high profile sports people to use it, David Beckham, when he signed for Real Madrid.

Who can take advantage of it?
The main criteria to be eligible for the Beckham Rule are:

  • You must not have been a Spanish resident in the last 10 years when applying
  • You must be employed by a Spanish company, or a non Spanish company but with a permanent office here in Spain (You can be a director of a company but hold no more than 25% of the shares)
  • The rule can be used for the remaining Tax year you start in, and the following five
  • The application MUST be made within 6 months of starting your employment in Spain
  • You have to be resident in Spain and also have at least 85% of your work interests there

Reforms/Changes
The Law became infamous and a perfect fit for Spanish football clubs to buy some of the best well known footballers in the world, since the player’s tax would be much lower than in other countries. However, in 2010 the law was changed to address this popularity with high earning footballers, and a rule was brought in to limit the annual earnings applicable to €600,000, three years after David Beckham had left Spain.

Then, in 2015 they went one step further and completely excluded professional athletes from applying for this. However, those already on a contract were not affected. They also removed the limit of €600,000, but any income over that level is now taxed at 45%. Note that any capital gains would adhere to the current rules of 19%, 21% and 23% respectively (not applicable for the first €6,000).

Other Major Benefits
Critically, one of the major benefits of this rule is that under it, you do not pay taxes on any gains outside of Spain. So if you sell an asset with a taxable gain, such as a business or property in another country, you could make a considerable saving.

Moving on from this and to a more regular scenario, you would not pay tax on any property rental income, bank account interest, investments or savings in another country.

You would also not be required to submit certain other annual reports such as the ‘Modelo 720 Overseas Assets declaration’ during this period of time.

Why you might not want to apply for the Beckham Rule
There is no minimum annual earnings to apply, however you do not receive any personal income allowances, thus a general rule of thumb is that earning over €60,000 might make it worthwhile for you to apply.

The other reason you might not want to apply is that if the country you are from has a less favourable tax rate, then paying capital gains tax in Spain could be better.

If you have any questions regarding this, or would like to discuss applying for it or your personal situation, please contact us through the form below:
Source GM Tax Consultancy, Barcelona

Savings Bank Account Comparison in Spain

By Chris Burke - Topics: Banking, Barcelona, Saving, Spain
This article is published on: 5th March 2019

05.03.19

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.