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Possible effects of Brexit in Spain

By Charles Hutchinson - Topics: BREXIT, spain, United Kingdom
This article is published on: 6th December 2018

06.12.18

At 11pm on March 29, 2019, the United Kingdom will officially leave the European Union.

Much has been written about the millions of Europeans living in the UK and the millions of Britons living in Europe, but little about the tax consequences for Britons who are non-resident in Spain but have interests in the country, mainly owning real estate properties.

Britons could lose the following tax benefits in Spain when the United Kingdom leaves the EU:

Non-resident income tax on real estate: the Spanish Government imputes a benefit in kind to owners of holiday houses that is taxable as income. By definition, a house owned by a non-resident cannot be their main home, so every non-resident owner of a house in Spain, even if it is not rented out, has to declare an imputed income and pay taxes on that income annually. The income tax rate is 19% for those living in an EU member state, Iceland and Norway, but it is 24% for the rest.

Therefore, Britons could end up paying 24% tax on the imputed income instead of current 19%.

Rental income tax: non-resident owners of Spanish properties who get income from renting them out are liable to Spanish non-resident income tax on the gross income. However, those living in an EU member state, Iceland and Norway are entitled to offset some costs from their rental income and therefore are taxed only on the net profit.

Therefore, Britons could end up paying 24% tax on gross income with no deductibles, compared to the current 19% on net profit.

Inheritance and gift tax: regional governments are empowered to regulate this tax, the consequence being that the tax liability will vary depending on the region. The difference can be substantial.

Non-residents are subject to Federal law, which is normally less favourable than Regional law. However, those living in an EU member state, Iceland, Norway and Liechtenstein can choose the application of the most favourable legislation for their situation, Federal law or Regional law (in which the properties of major value are located).

Therefore, Britons could lose the right to apply for Regional law. In Andalucía, for example, there is a threshold of 1 million euro, meeting certain requirements, to which Britons could not be entitled.

This is just a short list of the possible tax consequences of Brexit. The UK may join the EEA (European Economic Area) like Iceland, Norway and Liechtenstein. If the Norway-style agreement is adopted, a major part of EU law could still apply, but that is by no means clear at this point.

*Source: J.C. & A. Abogados

Deal or No Deal…?

By John Hayward - Topics: Article 50, BREXIT, eu citizens, spain
This article is published on: 20th November 2018

20.11.18

As someone who has lived and worked in Spain for more than 14 years, and keen to stay here with my family for the foreseeable future (children moving to other climes accepted), I am very interested in the rights of British citizens in Spain post Brexit. A colleague of mine is part of a group in Italy set up to protect the rights of British citizens there. A member of this group has put together a very comprehensive list (non-exhaustive) of things that you may need to do to prepare for a No Deal Brexit scenario, which after the events last week, seems to be becoming an ever-closer reality. I have made the list more Spanish.

Whilst there may be some deal agreed anywhere up to teatime on the 29th March 2019, there are several items on the list which many people should already be applying.

At the same time we don´t want to get caught up in scaremongering, I have come across several reassuremongers who just choose to live in the “it won´t affect me” world. There are already changes being made to British statutes in readiness for leaving the EU, with or without a deal. Getting one´s house in order now is almost certainly going to be easier than from 30th March 2019 onwards.

Here is your almost definitive list of things to do to prepare for a NO Deal Brexit.

1. MAKE SURE YOU ARE LEGALLY RESIDENT IN SPAIN UNDER CURRENT RULES.

That means you should:

  • Apply for residencia under the current rules. As an EU citizen you must register as a resident if you plan on living in Spain for more than 3 months.
  • You should register in person at the Oficina de Extranjeros (immigration office) or designated police station in the province where you live.
  • Before going to your local Oficina de Extranjeros or designated police station, you must make an appointment online, which can be done on the Spanish public administration website.
  • Once on the online appointment booking system, you should select the province where you live and then the option “Certificados UE” and follow the instructions to select and confirm your appointment time.
  • When you go to your appointment, you will be required to provide documents to support your application. You will need evidence of a specified minimum level of financial income which could be in the form of a letter from your Spanish bank manager and, if you are not working, private health insurance or an S1 (which you obtain from the UK if a pensioner). This will evidence your legal residence in Spain and give you proof that you were legally resident on 29 March 2019. This may be like gold dust in the case of a no deal exit, and if there is a Withdrawal Agreement it will help you benefit from a streamlined process to receive a new card if necessary under post-Brexit rules.
  • Years of living in Spain do not necessarily count – only legal residence. So if you have been living ‘under the radar’ so-to-speak, try to rectify the situation in advance of 29th March 2019.
  • Apply for a Residencia de carácter permanente (‘permanent residence’) under existing EU provisions if you have been legally resident for at least 5 years. It is the best evidence that most of us can have of our long-standing residence in Spain.
  • Make sure that you’ve submitted tax returns in Spain. As a resident, (whether in the first 5 years or afterwards with Residencia de carácter permanente, you are required to submit tax returns and pay tax in Spain on your global assets, income and gains even if all of them originate from the UK).
    Make sure that you either have private health insurance (obligatory for the first 5 years of residence unless you have an S1 from the UK or are working), or that you’re registered in the Spanish health system (e.g. you already have a Residencia de carácter permanente under existing EU provisions).

2. CREATE, AND KEEP UP TO DATE, A DOSSIER, AS IF YOU ARE APPLYING FOR RESIDENCIA OR RESIDENCIA DE CARÁCTER PERMANENTE OR CIUDADANÍA ESPAÑOLA, IN PARTICULAR:

  • Collate copies of as many of your tax returns as you can get – tax returns, proofs of payment and receipt. These days there is online access to your tax files and records.
  • Put together a file of utility bills for at least 10 years if you can. This will prove your continued residence.
  • If your name is not on the bills for your household, or on any utility bills, get it added now.
  • For women in particular: make sure that the name on bills, bank statements, pension statements, payslips etc. matches the name on your passport if possible.
  • Put together a file of bank statements, wage slips and/or pension statements for the last 5 years if you’ve lived here that long. Longer is even better – 10 years is best. You may need these to prove the stability and sufficiency of your resources.

3. CHECK YOUR PASSPORT
Make sure your passport will be valid for several months after 29 March 2019. If not, consider renewing it early. Also, check your signature.

4. MAKE SURE YOU ARE IN SPAIN ON 29TH AND 30TH MARCH 2019
This is probably not the best time to make a family visit to the UK! Transport could be chaotic, with no agreements on air or other travel between the UK and EU.

5. TOP UP YOUR MEDICATION

  • If you currently rely on an S1 form for access to the Spanish health service and/or you need regular medication, think about making sure you have a good supply of it on 29 March 2019.
  • If the worst happens and the reciprocal health care system stops on that date it might take several weeks to get an alternative system up and running and there may be short term chaos. Making sure that you have the permitted 3 months of long-term medication would mean that you’d avoid having to pay full whack for your meds or being without a family doctor while the situation was resolved.

6. CHECK YOUR DRIVING LICENCE

  • If you’re still using a UK driving licence, apply for a Spanish licence now. It’s relatively straightforward and for most people, it can be exchanged (with some fees and a medical) without having to take a full Spanish driving test (theory and practical). It’s possible that UK licences will not be valid in the EU in the case of a no deal Brexit.
  • Consider applying for an International Driving Permit if you regularly drive in the UK.

7. THINK ABOUT MOVING MONEY
If you have bank accounts, savings or investments in the UK, consider moving them to Spain or into Spanish compliant vehicles, or some other EU jurisdiction now. Sterling may drop suddenly in the case of a no deal exit; there may also be temporary problems moving money in and out of the EU.

8. TRY TO HAVE A FINANCIAL BACKSTOP
If at all possible, try and make sure you have access to enough cash to see you through two or three months, especially if your income comes from the UK and is transferred monthly.

9. CONSIDER YOUR PERSONAL PENSION
If you have a personal pension (not state or public service occupational) and have not yet retired, think seriously about cashing it in if you’re old enough (take financial advice on the tax implications of cashing it in before doing so), or transferring it. A detailed pension analysis would be required to look at the suitability of doing so but it might just be possible to remove your pension from future UK political and tax problems as a result of No Deal Brexit scenario. There may be issues with passporting rights after Brexit that could cause problems with insurers making payments to those living outside the UK.

10. LOOK AT WAYS YOU CAN MAXIMISE YOUR INCOME AND MINIMISE YOUR EXPENSES

  • This applies particularly if the bulk of your income is in sterling, which may take a serious hit after a no deal exit. Can you survive if sterling hits parity? Goes below parity? What’s your bottom line? What can you do to turn your income into euro income?
  • Create a personal financial contingency plan. Look at ways you can cut your spending temporarily, and at ways you could create additional income.
    Get any potentially expensive dental or optical work done now.

11. IF YOU HAVE A BUSINESS THAT RELIES ON ATTRACTING PEOPLE FROM THE UK.

  • Can you change your client demographic? Whatever the deal or no deal, British people may limit their travel to the EU next year and you may need to find new clients if you’re to survive financially. Make sure you have a website in the language of the nationality of people you may wish to attract, if you haven’t already, and that you begin to advertise NOW to attract other customers.
  • But …
  • If there is a no-deal Brexit, it is uncertain as to whether you will be able to continue to run a business at all.
  • Even if there is a deal, you may not be able to provide services to customers in other Member States: that is still to be decided.

12. PUT SOME WORK INTO LEARNING SPANISH

  • Whether there is a deal or not, we may be required to re-apply for residencia and/or Residencia de carácter permanente.
  • We do not know whether a minimum level of Spanish language ability will be required (to date it has not been), but it is a good opportunity to work on the language skills. If nothing else, it opens other social doors and means you don´t have to stick to the same bar, club, or shop

13. THINK ABOUT, OR RE-THINK ABOUT, APPLYING FOR SPANISH CITIZENSHIP

  • For many people, their British identity and nationality is important to them and the idea of taking out Spanish citizenship has been regarded as ‘only as a last resort’. For some of us, a no deal Brexit might be that ‘last resort’. Spanish citizenship won’t guarantee all the rights you currently hold as an EU citizen (mutual recognition of professional qualifications, for example) but it will guarantee you the right to reside and to work – and as an EU citizen you’d continue to benefit from full free movement rights.
  • It you are thinking of applying for Spanish citizenship, try to ensure your application is lodged before 29 March 2019. The Spanish authorities do not say how long the process will take but assume at least months (las cosas de pálacio van despacio). In addition, language tests will be required (see point 13). If you’ve already made the application, there is more chance of everything passing through than if you wait till after 29 March when all the rules may change.
  • Be aware that taking out Spanish citizenship may affect the taxation of certain pensions and you should take good financial advice before applying.

14. MARRY A SPANIARD
This may not be as easy as it once was, with changes to immigration laws, but it might be a solution for you, especially where children are involved.

15. GET YOUR PROFESSIONAL QUALIFICATIONS RECOGNISED NOW

  • The European Commission has said that, whatever the outcome of the negotiations, Brexit does not affect decisions made pre-Brexit by EU27 countries recognising UK qualifications under the general EU directive on the recognition of professional qualifications (Directive 2005/36/EC). For details of which qualifications are covered see
  • ec.europa.eu/growth/single-market/services/free-movement-professionals/qualificationsrecognition_en
  • So if you have a UK qualification covered by that Directive and you need to be able to use it, apply to get it recognised before March 30th 2019.

16. ABOVE ALL…DON’T PANIC.

  • This is about hoping (and working) for the best, while preparing for the worst. Whatever happens, you won’t be alone.

And there you have it. There isn’t a better list anywhere about what to do in a NO Deal Scenario. I would like to say that I think that some kind of deal/arrangement will be agreed in the end because there is too much at stake on both sides of the Brexit divide, BUT I have to admit that I was wrong about Brexit happening in the first place and also about the election of Donald Trump as US president. I was convinced neither would happen. This time I am taking precautions and implementing most of the items on this list. I hope you do too.

The danger of waiting for Brexit

By John Hayward - Topics: BREXIT, Interest rates, Investment Risk, Investments, spain
This article is published on: 16th October 2018

16.10.18

There are many things that we don´t know the answers to regarding Brexit. There are even questions that we don´t yet know. However, some facts are known. One of these is concerning investing, or not, since 20th February 2016. This was the day that David Cameron, the then Prime Minister, announced that there would be a referendum on the UK´s membership of the EU. People have been fearful due to the uncertainty as to what will happen post-Brexit.

In the last two and a half years, life has continued and investment markets have risen significantly. At the same time, inflation hasn´t disappeared just because Brexit is on the menu. Figure 1 below shows how the FTSE100 has performed since 20th February 2016 along with the UK Retail Price Index. With dividends reinvested, £100,000 would now be worth £131,000.

If we adjust for inflation, this would be more like £119,000, but still a 19% increase. If the £100,000 had been left in a bank account, with no interest which is commonplace these days, the inflation adjusted value would now be more like £91,000. Waiting for Brexit has cost the wait and see person £9,000.

Figure 1. Performance of the FTSE100 since the referendum announcement in February 2016 along with the UK Retail Price Index.

There are people who are not happy taking on investments which carry risk. If we ignore the risk of inflation for the time-being, we have solutions which can cater for those who are happy taking some investment risk but without the volatility of stocks and shares. Figure 2 shows that an investment with approximately an eighth* of the risk of the FTSE100 has still managed to perform well, certainly when compared to inflation.

One must bear in mind costs, but even allowing for these, people who were invested through us on 20th February 2016 would have seen an increase of around 15%. Taking inflation into consideration, this would produce a figure of around 5%. However, comparing this with not being invested would have left the “wait and see” person some £14,000 down.

Figure 2. Performance of a low risk investment along with the UK Retail Price Index

With the exchange rate between GBP and Euros down about 12% over the same period, the need to receive more income from investments has become even more important, especially for those with income in GBP and costs in Euros. Losing 20% in real spending power has proven to be a tough pill to swallow. Get in contact so that the possible “Never Ending Story” called Brexit doesn´t lose you even more over the coming years.

* Source: Financial Express

Brexit uncertainty and much more…

By John Hayward - Topics: BREXIT, Costa Blanca, spain, UK bank accounts
This article is published on: 19th September 2018

19.09.18

Brexit uncertainty, losing access to UK bank accounts, victims of mis-sold pension and investment plans, personal visits from HMRC, and kids (sort of) go back to school

Brexit uncertainty
Not for the first time, I was asked how Brexit would affect my work in Spain. My standard answer is I don´t know, in the same way I don´t know for sure what the weather is going to be like tomorrow, irrespective of the forecasts which are given. Based on warnings, especially from social media sources, the weekend should have seen us floating down to Masymas on a dinghy. As it turned out, we had a pretty heavy shower providing some surface water in which a toy dinghy would probably have avoided running aground. Of course, I understand that other parts of Spain have suffered; coastal areas have been hit with tornadoes and waterspouts. My point is, even if you have a good idea what is going to happen, it is rare that things will happen as predicted. In fact, I´m not sure that anyone actually predicted the tornadoes. This happens so often in the financial world. With Brexit, I do not know what will happen. Deal or no deal. Take the money or open the box. Perhaps just phone a friend when necessary. I will just continue to jump the hurdles as they are laid out and not base my actions, or those of my family, on media guesswork, which is often a mile off the result.

Losing access to UK bank accounts
Headlines, both in newspapers and on the television, gave a couple of elderly people a shock. They believed they would lose access to their UK bank accounts after a no deal Brexit. This story first appeared in August this year and was highlighted again this week on television. The fact is that there will be certain banking facilities which, if there is no deal, may or may not, be available for a person living outside the UK. This refers more to deposit and loan arrangements, not to the account itself. Receiving money in the form of a pension may also be an issue in that, according to those who appear to know, making a payment from a UK pension to an EU country will be illegal. The alternative will be to have the payment made to a UK bank account for onward transfer to, say, Spain. For those, especially pensioners, who do not have a UK bank account after moving to Spain, it would be a good idea to open one in readiness for what might happen.

Mis-sold pension and investment plans
Unfortunately, I am being asked to help more and more with people who are suffering from poor financial advice. They have savings and pension arrangements that contain investments which arguably are not suitable and, to make matters worse, have not performed leaving policyholders with significant losses. In some cases, there is little we can do. The damage has already been done. However, in other cases we can restructure without incurring additional large set up costs, which are often part of the reason why these plans have not performed. We are always willing to take a look at investments without charging anything. If there is something that we can do, it will be organised in a fair and equitable manner with the details, blood, guts, and all, explained before you commit.

HMRC comes to the Costa Blanca
There was a presentation in Moraira this week with representatives from Her Majesty´s Revenue and Customs focusing on the obligation for UK tax residents to declare income from assets they hold outside the UK such as rent from a property or interest (no joke intended) on bank deposits or gains on investments. People have up until 30th September 2018 to make this declaration. For more detail you can visit this page from the UK Government website: www.gov.uk/government/news/hmrc-warns-its-time-to-declare-offshore-assets

The concern for some people was that they, as Spanish residents, had to declare, having missed the point, understandably, that the declaration was to be made by UK residents for foreign assets outside the UK. We already have the asset declaration for Spanish tax residents in the form of the Modelo 720. At Spectrum we can show you ways to position money within investments in what will still be EU jurisdictions post Brexit so that a) you don´t have to worry about what happens once the UK leaves b) you don´t have to declare the investment separately as this is carried out on your behalf and c) the beneficial tax calculation will still apply.

Kids back to school
Friday 7th September was the last day of summer holidays for our children, although my son will argue that they will continue until Christmas when the festive season kicks in. Since they were last in school, what seems like 10 months ago, but is actually only (!) 10 weeks, it is guaranteed that there will be a book missing or a broken pink pencil, our daughter´s favourite. However, we cannot get too excited. For our daughter, September is only half days and so work/school juggling is still a skill we have to develop.

To find out how we can help you with our financial planning in a manner protecting you and your loved ones, contact me at john.hayward@spectrum-ifa.com or call/WhatsApp 0034 618 204 731

Moving to, or living in Spain after Brexit – What do you need to do?

By Chris Burke - Topics: BREXIT, Residency, spain
This article is published on: 20th August 2018

20.08.18

If you have been living in Spain lawfully for at least five years, you will be able to apply for indefinite permission to reside there, which is termed ‘permiso de residencia de larga duración’ simply meaning ‘long term residence permit’. Note that you cannot apply until the UK has ‘potentially’ finally left the EU.

Apart from this, there are four main conditions to be able to remain in Spain after Brexit:

  1. No criminal record
  2. That you have not been ejected from Spain OR from a country which Spain has a verbal agreement with
  3. You have private health insurance
  4. You have a net monthly income of at least €799 for a family of two, and a further €266 per month for each additional family member

However, if after Brexit you have not been in Spain for 5 years but are living there legally, there is no great need to worry. The time you have spent there will count towards the 5 years and as long as you meet the above criteria, you will then be able to apply for the ‘permiso de residencia de larga duracion’. What you might have to do though, is apply for permission for what you will be doing in Spain. For example, if a retiree, you might need to ask to be that in Spain. Or, if you wish to work (see more about this below) you will need to apply for this also. If you wish to holiday for less than 3 months at a time, then you should not need to apply to remain in Spain for this. Before Brexit, obviously none of this was required.

Working, or not working, in Spain – after Brexit
If you wish to move to Spain after Brexit, but NOT work in Spain, you will need to apply for a ‘permiso de residencia no lucrativa’ meaning essentially a ‘non profit visa’. You will also have to prove you have money to live on, such as a regular permanent income (a salary would not count for this) or through bank statements showing that a minimum balance has been maintained over at least the last year, with your name and account number.

If you are an employee of a company in Spain, then they should be taking care of your application to stay.

Moving to Spain after Brexit as self employed
If you are looking to move to Spain and work for yourself, you can apply to be self employed, or ‘Autonomo’. You will need to be able to demonstrate the following, as well as applying for permanent residence as set out above, i.e. ‘permiso de residencia de larga duración’. The commercial activity you will be doing must comply with Spanish rules and you must:

  1. have the relevant qualifications
  2. have sufficient funds to invest in the activity to make it viable
  3. give the number of people you will employ, if any
  4. have sufficient funds to support yourself, on top of the funds for the activity (see above)
  5. Provide a business plan which makes sense to the Spanish Authorities
  6. not be suffering from a serious illness

Retiring in Spain after Brexit
When looking to retire in Spain after Brexit, there will be several criteria to fulfil and adhere to in your application. Those are:

  1. No illnesses that are a serious public risk (eg smallpox, SARS)
  2. €2130 monthly income for the main earner in the family, and an additional €532 for each dependant
  3. Proof of ability to sustain this income for one year

Note, after you have resided in Spain for 5 years, you can then apply for ‘permiso de residencia de larga duración’ as mentioned above and will only need to adhere to those criteria moving forward from that point.

The process – what happens when you are accepted?
When you have been accepted, you will be issued a visa within 1 month and you must enter Spain within 3 months for this to remain valid. If you have permission to work and you do not register with the social security office within three months of your arrival, your right to remain will lapse.

Where to apply when moving to Spain, after Brexit
To apply for permission to live in Spain, you go to your local Spanish Consulate, even if you are not living in your country of origin. The process is thus: the Spanish consulate confirms whether all the relevant documents are in order and that everything has been provided that needs to be. They, in turn, send this to a Spanish Government office who will decide if they will give you permission to move to Spain.

If your application is successful
If applying to live in Spain without working and you are successful, you can then pick up your visa within one month. If applying to work, you will then be asked to make this application, again within one month, once you have been given the ok to reside in Spain.

The visas are valid for one year, when it needs to be renewed for periods of two years moving forward. During this whole time, you need to abide by the rules mentioned above including having the required income to live/run your business. Then, after you have lived in Spain for five years you can apply for ‘permiso de residencia de larga duración’ and solely adhere to those rules, again as mentioned above.
Once you have moved to Spain legally, your rights, taxes and your families rights will be the same as any citizen of the EU. Like everyone else, having lived in Spain for 10 years, you can, if you wish, apply for Spanish residency. To do this you need to demonstrate that you have integrated into Spanish society, including speaking the language and understanding the culture.

If you would like to receive further important updates on living in or moving to Spain, as an English speaker, sign up to Chris’s Newsletter here:

Life assurance investment policies and Brexit

By John Lansley - Topics: Assurance Vie, BREXIT, France, Investments
This article is published on: 15th August 2018

15.08.18

Is the uncertainty over Brexit causing you uncertainty over whether to stay in France or not? Whichever side of the Brexit divide you are on, and in the knowledge that “nothing is agreed until everything is agreed”, there are some important issues to be aware of concerning life assurance-based investments and indeed insurance policies in general.

It is possible that ‘equivalence’ rules will apply, and UK insurers will continue to be treated after Brexit as they are currently. But bear in mind that some of the comments in this article are made against a background of a possible ‘no-deal’ scenario, where financial services would be hit hard, so it’s important to look objectively at some of the likely implications when considering your future options.

Firstly, in order to set the scene, Brexit is set to take effect at the end of next March, following which there may be a transitional period of 15 months, during which much will continue as at present. For many of us the most important question is whether we are able to remain in France (or other EU27 country) or whether we will have to, or simply wish to, return to the UK.

With such a move comes the question of if and when you cease to be tax resident in France and instead become UK tax resident again. This is a complex area, and of course many will have been spending large parts of each year in both countries, perhaps technically risking UK residence already, and clearly this is an issue that many will need to address in detail.

For those who have investments held via life policies, and who enjoy all the benefits these offer, a change in tax residence is an event that necessitates an early review of such investments in order to determine whether they can continue as they are or whether any changes need to be considered, and this is a matter you should discuss with your financial adviser at the earliest opportunity.

French Assurances Vie
These are offered by insurance companies in France, Ireland and Luxembourg, and provide considerable tax and succession planning benefits. They also provide access to diverse investment possibilities in different currencies, and French law even allows you to hold individual listed company shares, so certain assurance vie contracts provide this facility, which can be very useful.

However, it’s important to realise that such flexibility will be punished by the UK’s HMRC if you become UK tax resident – this is because such a policy would be regarded as ‘highly personalised’ (see also below) and would be deemed to generate profits of 15% pa, which would be subject to your highest income tax rate. This would be the case even if losses were made during the year, and is clearly something to be avoided if at all possible.

You may not even use the facility to hold shares, and hold only funds, unit trusts or similar, but fortunately this treatment can be avoided by converting the policy to a ‘collectives only’ version before moving to the UK. SEB Life International, a major provider of such policies, offers an easy conversion process for existing policyholders and, if you hold one of their policies, it would be worth asking yourself whether requesting this conversion is appropriate – if you don’t ever intend to hold shares, and there is a vague possibility of becoming UK resident in future, it might be worth acting now.

Other assurance vie providers don’t always offer such investment flexibility, and so are unlikely to be affected, but if you are unsure you should check with your financial adviser.

UK Single Premium Policies
Many people in the UK own these as they provide significant UK tax advantages, and operate in a similar way to assurances vie (although the precise treatment is different). As is the case with French assurances vie and similar local policies in other countries, these allow the (relatively) tax-free roll up of income and gains inside the policy, and much less onerous taxation of withdrawals than is the case with income and gains from conventional investment holdings.

For those who have moved to France and who still hold such policies, the tax treatment can vary. There is no means by which profits can be taxed as long as these remain within the policy; however, withdrawals and encashment proceeds need to be declared to the tax authorities and, since tax treatment can vary from area to area, it is as well to assume that any such profits will be fully taxable.

In the past, there has perhaps been some inconsistency in how the rules are applied, but it is extremely likely that British people living in France after Brexit will find their affairs subjected to greater scrutiny, and such policies will face a much more certain and consistent treatment.

An important additional point is that UK policies suffer a form of UK corporation tax on the profits generated by the insurance company (and which therefore reduces the investment reward), which can’t be reclaimed or set against a French income tax liability, so they therefore suffer a form of double taxation that cannot be avoided.

Returning to the UK will mean that the tax benefits will continue to be available, but for those who remain in France it is important to review such policies as soon as possible – indeed, the best way forward might be to surrender the policies before Brexit and reinvest the proceeds via an assurance vie, so that all future profits will enjoy the favourable assurance vie tax regime. However, again, this is a complex area and is deserving of proper professional advice, depending on your own personal circumstances.

Offshore Policies
These are policies issued by insurance companies in the Isle of Man, Guernsey and elsewhere. These jurisdictions are not part of the UK, and hence currently not part of the EU either, but which have over many years seen a large number of policies sold to people resident in the UK and in various expatriate locations around the world.

There are two types – highly personalised (often referred to as personal portfolio bonds) and ‘collectives-only’, similar of course to the two types of assurances vie as described above.

For the UK resident, the highly personalised version is deemed to generate a gain of 15% pa, as described above, but the collectives version is treated in a similar way to the UK Single Premium Policy, with the ability to take up to 5% pa (cumulative) on a tax-deferred basis and excesses being subject to your highest income tax rate. UK policies enjoy a tax credit, which reduces the actual tax paid, but offshore policies see their excess withdrawals fully exposed because there is no tax credit given.

There are a number of ways in which tax can be mitigated, and which are beyond the scope of this article. However, returning to the UK will involve a careful review of all such policies to ensure that unnecessary tax bills are avoided, and fortunately most providers will allow you to convert the highly personalised policy to a collectives version before becoming UK resident, as long as you accept certain investment restrictions.

Anyone resident in France who holds such a policy and who intends to remain in France after Brexit should give careful consideration to whether the policy should be retained or whether it might be best to surrender it, pay whatever French tax is due, and then reinvest using, for example, an assurance vie in order to ensure ongoing tax-efficiency in France. For some, this might be a costly exercise, but it would be a one-off event and would ensure full future compliance in France at a time when many aspects of people’s affairs are subject to higher levels of scrutiny.

Policies Held In Trust
In some cases, UK and offshore life policies were set up in a simple trust, provided by the insurance company. Trusts have enjoyed a less than favourable treatment in France in recent years, but can still provide tax advantages in the UK. So, if by chance you have such a policy, whether you intend to return to the UK or remain in France will determine what action should be taken.

Other UK Insurance Policies
On moving to France, many continue to hold UK insurance policies of different types – perhaps an ongoing endowment policy, other life insurance, medical cover, car insurance and so on. It has always been important to advise your insurer of your change of residence in such a situation – simply providing a change of address on its own is not good enough, because a change of residence often means a change in the risk and hence a change in the premium. Only providing change of address details can effectively result in the insurer having a reason to reject any future claim.

However, the post-Brexit situation will mean that such continuing policies may not be effective at all, even if your insurer knows you are resident outside the UK. This is because, as with Single Premium Policies, the provider will be based outside the EU and, unless the equivalence provisions or similar are confirmed, the policies may cease to provide cover.

Other Brexit Issues
Brexit has affected, and will continue to affect, exchange rates and investments. We have seen how Sterling dropped against the Euro immediately after the referendum, as it has on other occasions of course, and this has had an immediate and lasting impact on UK sourced income and pensions for those living in the Eurozone.

What can be done? The use of specialist currency exchange providers can help but it also makes sense to reduce the overall risk by reducing reliance on such Sterling sources, wherever possible. This is not so easy if you rely on UK pensions, or property investments, but a detailed review of your assets would be an important step to take.

As for investment, the fall in Sterling was matched by a rise in the UK stockmarket, and generally the FTSE100 has continued to do well because of the large number of companies that enjoy US Dollar income streams, and which have reaped the benefits of a low Pound. But the trade and other problems Brexit is creating will mean that British businesses are likely to experience many difficulties, and therefore their ability to generate profits for shareholders (such as funds that invest in the UK and UK pension schemes) are likely to be hit.

This could be seen as a contentious issue but reliance on UK investments will exacerbate the problems caused by over-reliance on Sterling, and a more diverse approach would probably be preferable.

One area of particular interest is the decision whether or not to transfer your UK pension to a QROPS provider, as this can help address the issues of currency and investment strategy by bringing your pension capital more directly under your control.

This is another complex area that requires very specific professional involvement, but your ability to use QROPS could be curtailed after Brexit. Already, transfers to non-EEA providers have been hit by a 25% exit charge, and this may be applied across the board after Brexit takes effect.

Conclusions
Change brings threats and opportunities, and can be especially challenging when you have retired and have made great efforts to adapt to what has perhaps been a very significant lifestyle change.

Fortunately, as ever, an awareness of the likely problems means you are better equipped to make suitable preparations. Hopefully this article has shone a light on some areas that could have a very significant impact on your finances and, more importantly, has suggested possible solutions.

Tips on Moving to Spain before Brexit

By Chris Burke - Topics: BREXIT, spain
This article is published on: 24th July 2018

24.07.18

With the UK likely to leave the EU in 2019, many people are making the move and leaving the UK whilst it is arguably still easier to do so than it will be after Brexit. But what are the key things you need to do in order to be organised from a personal financial advice point of view? Here I have listed my ‘Top Tips on moving to Spain’, the main areas I point people in when making the move, or having just arrived in Spain. This could save you a lot of time, money and headaches, and is only a small example of the way I help clients living here in Spain.

  • Confirming Non UK Resident Status with the HMRC
  • Potential Tax Rebate
  • National Insurance Contributions Whilst Abroad
  • Checking Your National Insurance Contributions
  • Becoming Tax Resident in Spain
  • Existing Investment Organisation
  • Inheritance
  • Healthcare
  • Life Insurance
  • Wills
  • Property
  • Private Pensions
  • Banking
  • Why Move to Spain Before Brexit

Please click on each link below to find out more regarding that area of expertise:

Confirming Non UK Resident Status with the HMRC
Tell the HMRC that you will no longer be a UK resident by filling in form P85, informing your local council and the UK state pensions department. This is important for the following reasons:

Potential Tax Rebate

In many cases you could receive a tax rebate, depending on which part of the tax year you leave in. Tax is taken from your wages and worked out on what you are paid each month, starting with the first month. Therefore, if your final UK salary payment is in September having been earning £4,000 per month, for example, that means the following months until the end of the tax year, in March, you won’t be paid anything. Therefore, because the HMRC would have been taxing you on the basis of completing that financial year, the tax you owe could well be reduced and in many cases a rebate will be applicable.

National Insurance Contributions Whilst Abroad

You can apply for Non Resident relief when living abroad, meaning that you can pay National Insurance contributions in the UK at half the cost, so around £11 per month (which mathematically is worth doing, considering life expectancy in Europe of 84). You can also backdate these up to 6 years if you have been out of the UK that long and haven’t been paying.
www.gov.uk/national-insurance-if-you-go-abroad

Checking Your National Insurance Contributions

You can see how many years National Insurance contributions you have by entering your number on the link below:
www.gov.uk/check-national-insurance-record

Becoming Tax Resident in Spain

It is important that when you move to Spain you choose the right tax regime to be part of. For example, if you are working for a Spanish entity, you may be able to apply for The Beckham Law, which means all worldwide income will be taxed for 5 complete tax years at least, at a flat rate of 24% (as opposed the normal rate of up to 46%).

Or, if you live in Spain, work for a Spanish company and spend up to two weeks of the month outside of Spain on business, you may be able to deduct tax for every day you are away proportionally. So, that could mean up to half the tax payable.
IMPORTANT – Some of these tax regimes only give you a limited time to apply for them. For example, within 6 months of paying tax here you have to apply for the Beckham Law.

It may also be of benefit to set up a Spanish company instead of becoming self employed, the main rule of thumb here being if your income is likely to be consistently over €60,000 per annum.

Existing Investment Organisation

Any investments you have when you become tax resident in Spain (that is, spending more than 6 months a year in Spain and having your economic centre of interests there being the deciding factors) will be reportable in Spain and might not be as tax efficient as they should be. For example, many asset classes such as ISAs or stock/share/fund investments (unless structured in a certain way) are declarable each year and tax is payable on any gains, whether you take any of that money or not. In some cases, you can have your assets organised so this is not the case, and the tax can potentially be reduced when you do withdraw any money.

Inheritance

In Spain, rules on giving away your assets are very strict and you are limited in what you can give away per year without incurring any tax. This is an area that is worth considering and organising before you leave the UK. In the UK there is usually no inheritance tax to pay on small gifts you make out of your normal income, such as Christmas or birthday presents. These are known as ‘exempted gifts’. There’s also no inheritance tax to pay on gifts between spouses or civil partners. You can give them as much as you like during your lifetime, as long as they live in the UK permanently. However, other people you gift to will be charged inheritance tax if you give away more than £325,000 in the 7 years before your death. See the sliding scale below:

In Spain, gift tax depends on the age of the person and their relationship to you. In many circumstances you receive a €100,000 exemption, following which a sliding scale up to 20% is applied in tax. Spouses can claim up to 99% relief. It is imperative to look at this before you move.

Years between gift and death Tax paid
less than 3 40%
3 to 4 32%
4 to 5 24%
5 to 6 16%
6 to 7 8%
7 or more 0%

Healthcare

When you first arrive in Spain, registering at your local health centre should be a priority in case of illness. The requirements can change, but at present the following should be sufficient for you to acquire an individual health card (Tarjeta Sanitaria). This will enable you to register with a doctor, visit a health drop in centre (in Barcelona a Capsalut) and purchase prescription drugs:

  • NIE (tax number/residence certificate)
  • Rental contract of your apartment
  • Social Security number
  • Empadronamiento (document from the town hall confirming where you live)

Life Insurance

Insurance in Spain, in general, can be much more expensive than in the UK, and life insurance is an example of that. Many insurance companies will allow you to carry on with the life insurance you have in the UK, but you must get this confirmed in writing by them. To give you an example, I have seen an insurance cover in the UK at £22 per month, costing over €100 euro per month in Spain, and the cost is not fixed for life like it generally is in the UK.

Wills

Foreign residents of Spain are not permitted to give away more than the freely disposed part of their estate (one-third) as the rest is reserved for the ‘obligatory heirs’. If an international or Spanish will is made stipulating that the laws of a person’s home nationality apply, however, no aspects of Spanish inheritance law will apply to either Spanish or worldwide assets. In layman’s terms, if you are British, you can choose UK law and therefore leave your assets as you see fit without having to adhere to Spain’s rules.

If your estate is dealt with under Spanish inheritance law, ‘forced heirship’ rules apply (known as the ‘Law of Obligatory Heirs’ in Spain). This means there are restrictions on how you distribute your estate, as a certain percentage needs to be set aside for certain relatives.

The Law of Obligatory Heirs states that if the deceased was married at the time of death, the spouse keeps 50 percent of all jointly owned property. The remaining 50 percent is put towards the estate. The estate is divided into three equal portions:

  • One-third is divided between surviving children in equal shares
  • One-third is reserved for surviving children but can be distributed equally or unequally according to instructions in a will. The surviving spouse retains a ‘life interest’ (usufruct) in this part of the estate and the children do not inherit until the spouse dies
  • One-third can be disposed of freely in a will
  • If there are no children, then surviving parents are entitled to one-third if there is a surviving spouse, or 50 percent if not

Property

This is currently a very popular asset to buy in Spain. Key points to be aware of compared to the UK are the extra taxes/costs (approx 13% costs on top of the purchase price of a property in Barcelona) and that the market is not as regulated as the UK, which means that there are estate agents out there that are just interested in their commission. You MUST make sure you purchase a property with a Cedula (certificate that the building has passed health and safety required by Spanish law) and certificado de habitabilidad (this means the property meets the minimum standard for living in), otherwise, you might not get a mortgage and also it will be difficult to sell later as it is not a legal place to live.

If you have never lived in the place you are moving to, I strongly suggest renting an apartment for a period of time, maybe even a couple in different Barrios/areas. That way you will get a feel of what works for you. In many cases, renting actually works out cheaper than buying somewhere, even taking into account the recent rental price increases.

Private Pensions

There are sometimes tax implications on moving your pension outside of the UK, which many people have done for the resulting benefits. In the last couple of years, 25% taxes have been implemented depending on where you move your UK pension to. There are opinions that this charge could apply to the EU, should Brexit go ahead. If you are planning to move abroad, either before or after Brexit, looking into this possibility will give you the options and knowledge to assess and make an informed decision.

Banking

Banks in Spain can be very ‘charge’ friendly and don’t always fully explain how your account works. Usually when you arrive banks will give you a ‘Non resident’ account, incurring extra costs and charges. However, you can quickly open up a ‘Resident’ bank account with no everyday running costs, such as bank transfers or costs for withdrawing money from their own ATMs. To qualify for a ‘Residents’ bank account and bypass potential costs you need to transfer in €600-€700 per month.

Why Move to Spain Before Brexit?

There will be certain criteria to meet to be able to move to Spain after Brexit, in particular if you are self employed or own your own business. This is expected to include a year’s cash flow in the bank, private medical insurance, proof that your business is viable and if retiring, a minimum income of around €2,200. I have a much more in depth article you can read if you wish to know more about this.

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

New QROPS tax charge for 2017 – Will this change after BREXIT?

By Spectrum IFA - Topics: Belgium, BREXIT, France, Italy, Luxembourg, Netherlands, pension transfer, Pensions, Portugal, QROPS, Retirement, spain, Switzerland, United Kingdom
This article is published on: 20th April 2018

20.04.18

In the Spring 2017 Budget, the UK government announced its intention to introduce a new 25% Overseas Transfer Charge (OTC) on QROPS transfers taking place on or after 9th March 2017. The HMRC Guidance indicates that the OTC will not be applied in the following situations:

  • the QROPS is in the European Union (EU) or EEA and the member is also resident in an EU or EEA country (not necessarily the same EU or EEA country);
  • the QROPS and the member is in the same country; or
  • the QROPS is an employer sponsored occupational pension scheme, overseas public service pension scheme or a pension scheme established by an International Organisation (for example, the United Nations, the EU, i.e. not just a multinational company), and the member is an employee of the entity to which the benefits are transferred to its pension scheme.

It is also intended that the above provisions will apply to transfers from one QROPS (or former QROPS) to another, if this is within five full tax years from the date of the original transfer of benefits from the UK pension scheme to the first QROPS arrangement.

Nevertheless, it is clear that taking professional regulated advice is essential. This includes if you have already transferred benefits to a QROPS and you are planning to move to another country of residence.

It is important to explore your options now while you still have the chance as who knows what changes will come with BREXIT. Contact you’re local adviser for a FREE consultation and to discuss your personal options

What can I do to minimise any potential impacts of a tough Brexit process?

By Chris Webb - Topics: BREXIT, Madrid, spain
This article is published on: 26th February 2018

26.02.18

This is a question many expatriates are mulling over, now positioning for the upcoming negotiations has started. First and foremost, I remind my customers that the process to leave the EU is widely anticipated to take the full two years set out in article 50, so the only immediate areas people should focus on are changes in the U.K. and Spanish budgets.

As the negotiations progress however, there are steps you can take which will ensure that any effects to you are minimised:

1. Does your adviser work for a Spanish registered company, regulated by the Spanish authorities?
Working with an adviser who operates and is regulated already under Spanish finance laws means that any change in the UK’s ability for financial passporting will not affect you.

2. Are your investments held in an EU country, not part of the U.K?
Again, any issues the U.K. may have to solve regarding passporting are negated by ensuring your investments are already domiciled in another EU country.

3. Have you reviewed any U.K. Company pension schemes you hold, which are due to mature in the future?
The recent U.K. Budget saw the government levy a new tax on people moving their pensions to countries outside the EU. There is no certainly that this tax will not be extended to EU countries once the U.K. has left the union. The process of leaving the EU is very much unchartered waters and whilst I certainly do not recommend anyone acts hastily, a review of your financial position in the next few months may avoid future headaches.

If you want to review your personal financial position please call or email me on the contacts below.

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

By Emeka Ajogbe - Topics: Belgium, BREXIT, EU Pension Transfer, United Kingdom
This article is published on: 16th January 2018

16.01.18

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

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

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

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

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

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

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

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