Office Locations
Viewing posts categorised under: BREXIT

Living in Spain after BREXIT

By Chris Burke - Topics: Barcelona, BREXIT, National Insurance Contributions, Spain, UK Pensions
This article is published on: 7th January 2020

07.01.20

After the results from the UK’s General Election, it seems we are closer to Brexit than ever before, so are you prepared for it living in Spain?

Documentation to remain in Spain

There are many rumours among non-Spanish people of what you need to do to stay in Spain should Brexit happen. The response from the Council recently has been, should you hold a NIE and an Empadronamiento, you are proving you are resident in Spain, so for now these should suffice. However, if Brexit does go ahead, Spain could draw a ‘Stay in Spain’ line in the sand which would then need adhering to. In the worst case scenario, a renewable 90-day tourist visa would give you time to adhere to whatever the new rules are. Spain has said publicly it will reciprocate what the UK does, and the UK knows there are far more British people living in Spain than the other way around in the UK.

UK Private and Corporate Pensions

The current HMRC rules state that if you take advantage of moving your UK pension abroad it must be to either where you are resident OR in the EU (due to the UK being in the EU). If this is not the case, you would have to pay 25% tax on the pension amount. Therefore, it is very likely that as the UK would be leaving the EU, these rules would not be met and the 25% tax charge would start to apply to pension movements outside of the UK. This could be the last chance to evaluate whether it’s better for you to move your pension or not and take advantage of the potential benefits, including being outside of UK law and taxes.

National Insurance Contributions

If you were to start receiving your State pension now, you would approach the Spanish authorities and they would contact the UK for their part of the contribution, taking both into account. Before the UK joined the EU, you would contact each country individually and receive what they were due to pay you. If this becomes the case again, for many British people the UK part of their State pension would potentially be more important, as it is likely to be the bulk of what you receive. We don’t know how Spain will act with regard to state pension benefits to foreigners; therefore it would make sense to manage the UK element well if this is your largest subscription.

I recommend two things here; firstly check what you have in the UK so you know where you are. You can do that here:

www.gov.uk/check-national-insurance-record

You can contact the HMRC about contributing overseas voluntary contributions at a greatly discounted rate, from £11 a month: you can even buy ‘years’ to catch up:

www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions

I have mentioned this in Newsletters before, but it really is a great thing to do, both mathematically and for peace of mind. Many people I meet living away from the UK have ‘broken’ years of contributions which is leaving themselves open to problems in retirement.

TIP: If you have an NI number, you do not necessarily have to be British to do this.

Investments/stocks/shares/savings

Time apportionment relief

Statistically, in 75% of British expat couples living abroad, at least one of them will return to live in the UK. It remains to be seen whether this changes if the UK leaves the EU, however, you can easily save yourself some serious tax if you have this in your plan of eventualities.

You can, in effect, give yourself 5% tax relief for every year you spend outside the UK by positioning your investments/savings correctly. Then, upon your return, you can take this tax relief when you are ready, such as in the following example:

Mr and Mrs Brown invested £200,000 ten years ago when they were living in Spain.
After this time, it is now worth £300,000
They returned to the UK and have been resident there for the last year (365 days)

They decide, after being back in the UK for 1 year (365 days) to cash in the investment, taking advantage of ‘Time Apportionment Relief’ which will be calculated the following way:

£100,000 (total gain)
multiplied by the number of days in the UK (365)
divided by total number of days the investments have been running i.e. 10 years (3650 days)

Resulting in a £10,000 chargeable gain (that is what you declare, not the tax you pay).

There are other potential tax savings as well, but they depend on other circumstances. If you have your savings/investments set up the right way you can take advantage of this.

If you have any questions or would like to book a financial review, don’t hesitate to get in touch.

2020, here we come…

By Gareth Horsfall - Topics: BREXIT, Italy
This article is published on: 6th January 2020

06.01.20

This is the start of a new decade and it will surely bring fresh challenges for all of us, but there is much to look forward to as well.

Climate change is constantly being talked about, we can look forward to a reduction in single use plastics from 2021 in the EU, electric car sales are showing the highest growth in numbers, our current model of economic growth is under question and more focus is being placed on corporate welfare of customers, employees and ecological footprint. In addition, technology is bringing about massive disruptive change to old industries who have had their feet under the table for too long. This is not all without serious challenges but if we work together we can get the results that we need for the benefit of everyone, no matter which side of the political spectrum we might sit on.

My biggest lesson over the last decade

We can’t expect everyone to agree with us about everything. Brexit has been an exponentially steep learning curve for me, one which I have learnt alot from: Tolerance more than anything, but also challenging norms and preconceived ideas. I also learnt that illness is the most democratic thing of all: it spreads regardless of money, age, sex or political views.

My resolutions for 2020

(I make them once a decade)

I aim to reduce my use of social media massively to avoid any influence from fake news (If Sig. Zuckerberg won’t regulate it, then I am afraid I won’t use his platform as much), to read alot more books, try and understand more the people who have differing views from myself, attend a Salvini rally at some point (this is a strange one, but I attended a Sardine manifestazione in December 2019 and I wanted to get a balanced view, so committed myself to attending a political rally of Salvini – watch this space), continue to reduce plastic (Oh my god, how hard is that in Italy), eat less meat and maintain a healthy lifestyle.

And on those bombshells, I would like to wish you first and foremost the best health, and also happiness for the next decade.

Happy New Year 2020

My next article ‘8 reasons to be wary of yourself in 2020’ will be released shortly.

Brexit – What now?

By Katriona Murray-Platon - Topics: BREXIT, France, UK Pensions, United Kingdom
This article is published on: 18th December 2019

18.12.19

Some of you, like me, might have woken up on Friday and after hearing the election result felt utterly depressed. Irrespective of how the vote could or should have gone, or who you may have voted or wanted to vote for, this result will seriously affect the Brits living in Europe. Brexit is now more likely than ever, so what does this mean for us? Well luckily, there is someone who is somewhat of an expert on the matter, Professor Sébastien Platon, Professor in European Law at the University of Bordeaux and incidentally my husband! Over breakfast I asked him a few questions.

So, what now?
The British parliament must first pass the EU (Withdrawal Agreement) Bill, and then they have to agree on the Withdrawal Agreement itself. Given that the Conservatives now have a majority it is likely to be passed. Either later or at the same time, the European Parliament also has to agree on the withdrawal agreement. If all of this gets done by the 31st January, Brexit will happen as planned. If not, the UK will have to request ANOTHER extension which would have to be agreed by the other 27 member states.

During the transition period are all European rights maintained?
Apart from the right to vote and run as a candidate in EU elections and municipal elections, the right to participate in European citizens’ initiatives and the UK’s right to vote on EU laws, all rights, including the right to free movement, are maintained during the transition period.

Does a British citizen who has not yet settled in France still have the right to do so after 31st January?
Yes. Up until 31st December 2020 all British citizens can come and settle in the EU. After the transition period, those who have established residency in the EU and wish to bring their family members (spouses, partners, direct descendants under 21 or dependent, direct relatives in the ascending line) to live with them can still do so.

Can the transition period be extended?
Yes, if the UK and EU agree to extend the transition period. But, unlike the Brexit extensions, they cannot ask for an extension the night before the 31st December 2020. A decision has to be made before 1st July 2020 extending the transition period for up to 1 OR 2 years. British citizens would therefore have until the end of the transition period (or extended period) to settle in the EU.

What about healthcare?
During the transition period, the EU social security coordination rules will continue to apply. The British who reside in France (or any other member state) and are in the UK health system but not the French health system can continue to benefit from this health cover as normal. After the end of the transition period, these rules will continue to apply to:

• UK nationals subject to the legislation of a Member State at the end of the transition period,
• UK nationals who reside in a Member State while being subject to the legislation of the UK at the end of the transition period,
• UK nationals who pursue an activity as an employed or self-employed person in one or more Member States at the end of the transition period and who are subject to the legislation of the UK,
• Their family members and survivors
These persons will be covered as long as they continue, without interruption, to be in one of these situations involving both a Member State and the UK at the same time.

What about pensions?
For the persons I’ve just mentioned, the time worked in the UK will count towards an EU pension and inversely any time spent working in France would contribute towards entitlement for a UK pension should they wish to return to the UK when they retire.

Do we need to apply for cartes de séjour?
During the transition period you do not need them. After the transition period each member state has the right to require UK citizens to apply for a new residence status, the sole purpose of which is to verify whether the applicants meet the conditions set in the withdrawal agreement. If they do, they have a right to be granted the residence status and the document evidencing that status (which will NOT be a “carte de séjour”). The French administration cannot refuse this status if you meet the conditions. The deadline for submitting the application shall not be less than 6 months from the end of the transition period. The host State has to ensure that any administrative procedures for applications are “smooth, transparent and simple, and that any unnecessary burden are avoided” with applications being “short, simple, user friendly and adapted to the context of” the agreement. Only once the agreement has been ratified will we know if and how the French Government wants to proceed on the matter.

Whilst I do not agree with Brexit and wish things had happened differently, at least after four years of uncertainty there may now be some progress. The pound bounced back up on Friday and this election result is likely to have a positive impact on the markets and portfolios.

Sterling after Brexit

By Gareth Horsfall - Topics: BREXIT, Currencies, Elections, Italy, UK General Elections
This article is published on: 3rd December 2019

03.12.19

In this article I want to look at what has happened to sterling since Brexit and the outlook. In 2015, when the world seemed a lot more secure, GBP v EUR was trading over 1.40 and life seemed good. Anyone holding GBP based assets and incomes would find that their money went a long way. Today it is trading at 1.17.

With all this confusion it inevitably causes some uncertainty. This seed of uncertainty has shown itself nowhere better than in the continued daily swings of GBP v EUR.

It has been a while since my last E-zine. I am sure that it won’t go unnoticed that this E-zine is coinciding with the UK general election on December 12th. At the present time the Conservatives are polling for a small majority, but it would seem to be anyone’s guess as to the ultimate result.

A RECENT HISTORY OF STERLING
Around the start of 2016, after the Brexit fuse had been lit, sterling started to fall as the Leave campaign gained ground and the markets reacted nervously to a potential Leave outcome.

sterling history

Immediately after the Referendum, June 24th 2016, when the result was announced, GBP fell the most against a world basket of currencies since the introduction of free floating currencies in 1970. On June 24th 2016 it had it’s largest ever one day fall of 13%. To put this into context, when George Soros famously ‘broke the Bank of England’, and made billions by betting against sterling in 1992, resulting in its subsequent ejection from the exchange rate mechanism, sterling only fell by 4.3%. In 2009 at the height of the financial crisis sterling lost 16% but over an 11 trading day period between 8-23 September 2009. The Brexit effect was huge.

I remember calling some currency brokers in the City of London early in the morning of June 24th 2016 and asking what was happening on the trading floor. The only responses I got were “fortunes have been made this morning!” and “it’s chaos over here”.

Roll on 2019 and as you will see from the charts below, since 2017, after the drop, sterling has traded within a range of values and has only experienced a ‘relative’ peak around the middle of this year.

STERLING CHART 2015 TO 2019

STERLING CHART 2015 TO 2019

STERLING CHART 2017 TO 2019

WHAT DOES THE FUTURE HOLD FOR GBP V EUR?
In my travels around Italy to talk to clients this is the most asked question. Since the highs of 2015, there has been an approximate 20% loss in the value of your GBP assets and incomes. For anyone living on a fixed income, i.e. pensions or living from assets, this is starting to have an effect. In the past year the number of clients asking to top up their income from their assets has increased. This withdrawal effect represents a net reduction in your overall asset base, when that money might have been spent on future medical needs, inheritance for children, or just for future living costs.

Therefore, it is no surprise to me that I am asked frequently for my opinion on the matter, and additionally whether you should be thinking about converting assets into euro, to hedge against further falls.

MY RESPONSE
I have been speaking to asset managers in London and currency specialists over the last year about this subject to try and get a feel for the ‘word on the street’. I can tell you that the theme has always been the same and nearly all asset managers say the same thing. Sterling is desperately undervalued if we measure it against the fundamentals such as productivity of the economy, GDP v debt etc. Very simply, this means that when compared against all measures, sterling should be trading quite a bit higher against the Euro. The uncertainty surrounding Brexit is depressing the value more than anything else, rather than the actual event itself.

The rational thinking is that the currency markets, at this point in time: 3 years after the vote, are desperate for an outcome, whether that be a deal or remain (we cannot exclude no-deal, but for now it appears to have been put to rest). If we are to assume that the Conservatives win a majority (no matter how small) then there could be a bounce in sterling in anticipation that Boris Johnson’s deal is likely to be passed in parliament and provide the certainty that the financial markets are desperately searching for. The deal being passed ‘could’ create conditions for ‘another rimbalzo’ in the price of sterling. My guess is that it would bounce quickly after any decision was taken, although these are only educated guesses.

caution

You may now be thinking, ‘how much would it likely rise?’. Well, if I knew that then I would be a very rich man indeed. In all honesty, no one can say for sure. I am not a betting man but I wouldn’t be looking to place any sizeable bets on it even if I were.

I remember that at The Spectrum IFA Group annual conference in January this year in Portugal, we had a speaker, David Coombes from Rathbones Asset Managers. He gave his outlook for sterling based on the 2 parameters he had set for the fund he manages. In the event of no deal he had GBP/EUR at 0.9 and in the event of a return to remain he placed GBP/EUR at 1.4. He went on to say that for any scenario in between you can pick your own point.

Going further in my own assessment of things, I personally think that if a deal is passed, or remain wins (in my dreams), then sterling is going to rise, but by how much I wouldn’t like to say. However, we must remember that ‘getting Brexit done’ is a illusion in itself. Passing a deal in parliament is only the start. The UK then has to formally leave the EU and start negotiating trade deals around the world. Some will likely fall in place very quickly, Canada, Australia, South Africa, maybe even the USA, but the deal with the EU and important future trade deals with India, China etc will likely take years and may not be as good as Brexiteers might hope for.

To give you an example of how difficult these trade deal negotiations might be, let’s take the example of Switzerland versus China and their trade deal which they struck in 2013. Everyone is aware of the rapid growth of the Chinese economy and how almost every nation in the world would like to strike a free trade deal with China to access the billions of growing middle class individuals and a rapidly growing consumerist economy. Switzerland is one of very few countries outside the Asia Pacific region to do so. However, Switzerland had to make some large sacrifices to get that deal, mainly that the Chinese negotiated FULL and free access to the Swiss economy for a period of 10 years during which time Switzerland would have only very LIMITED access to certain sections of the Chinese economy. The Swiss deemed this to be a good deal! It just goes to prove that deal making around the world is not going to be as easy as the Leave campaign would like us to believe.

Any protracted deal making phase may well be a negative effect for sterling and after any initial bounce on the back of some certainty, you might see sterling enter a volatile period once again, certainly as the unravelling from the EU also takes effect. I don’t buy into Project Fear and think that the UK will find its way in the world outside the EU, but like any divorce it will get messy for some time. The question is for how long and what impact will this have on the currency.

MY ADVICE
In summary, if you have money in sterling and ask me for advice, I will say that you should not convert it into euro right now. I will caveat that with the fact that neither I nor the best currency expert in the world can tell you what will happen, but it is a reasonable assumption that sterling will rise when the next steps of Brexit are resolved one way or the other. What happens after that is anyone’s guess. If you need to convert to euro then I would suggest doing so in tranches, or holding on until after Dec 12th to see what happens. Then pick your time, keep an eye on the rate and convert on the peaks.

(I am adding this note after having completed this E-zine. Our rep from Currencies Direct, our preferred currency exchange partner, called me about 5 minutes after completing this text and we had a chat about GBP expected movements in relation to the elections. She said that they are thinking that GBP v EUR could bounce to the mid 1.20’s if Boris Johnson wins the election with a majority. This is not a prediction, merely a hypothesis!)

Your right to vote and the risk of doing nothing

By John Hayward - Topics: BREXIT, Spain, UK General Elections
This article is published on: 31st October 2019

31.10.19

So we pass another Brexit date with 31st January 2020 the next one. I have some questions:

  • Will there be a (another) referendum before?
  • Who will win the General Election on 12th December?
  • Does anyone in a position of power really care?
  • What will I get for Christmas?

These are all unknowns, to me at least, but there are two that I can have an influence on. If I´m good, I could get something nice for Christmas. Perhaps a matching sock for last year´s. I could also have an effect on who gets elected in the UK on 12th December.

The 15 year rule
It is generally known that one has up to 15 years to register to vote in General Elections in the UK having moved abroad. Although there has been talk about abolishing this rule, it still exists. One aspect generally unknown is that you have the right to vote if you registered within the last 15 years after moving abroad. Therefore, this means that you can vote in the upcoming election if you registered on or after 12th December 2004. In my case, after leaving the UK in late 2004, I believed that I had missed the opportunity by a month or so. In fact, and because I registered to vote in the 2005 election, I have been told by my last constituency office that I have until 2020 to continue voting.

If you left the UK within the last 15 years then you simply register now. I believe that you have up until 25th November to do so. If you have registered to vote within the last 15 years, after leaving the UK, I suggest that you get confirmation from your last constituency office and then register to vote in the coming election at www.gov.uk/register-to-vote.

Unfortunately, this could be an election based purely on Brexit. We know more now than we did in June 2016 and so, hopefully, whoever wins, there will be clear direction and they get on with leaving or staying.

Lost benefits waiting for Brexit
Many people have delayed making decisions due to Brexit uncertainty, especially when it comes to buying property or investing. On the property side, this has meant missing out on property value gains, lost rental revenues, or simply a delay in the dream move. From our side, in the investment world, those who have been invested in the types of cautious fund that we promote have seen their money grow by over 20% since the referendum in June 2016. At the same time, for those people who have left their money in the bank in readiness for what they didn´t really know, have seen their money reduce in real value by around 11% through inflation. In simple terms, £100,000 invested in a low risk fund would now be worth £120,000, £107,000 when allowing for 11% inflation. Left in the bank, with no interest, £89,000. People would be up in arms if they were told that their bank was charging them 2% (£2,000 in this example) a year in charges but this is effectively what inflation has caused and has been the consequence of ‘playing safe’.

There´s probably another ‘Brexit’ around the corner, but life goes on. I look forward to receiving my sock regardless of who is Prime Minister on 25th December.

To find out more about how you could benefit from quality financial planning advice and years of experience both in Spain and the UK, contact me today on +34 618 204 731 (call or WhatsApp) or at john.hayward@spectrum-ifa.com

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 2019

20.08.19

*UPDATED 1st January 2020

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:

Tips on Moving to Spain before Brexit

By Chris Burke - Topics: BREXIT, Spain
This article is published on: 24th July 2019

24.07.19

*UPDATED 1st January 2020

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.

Whatever will be, will be

By Dennis Radford - Topics: BREXIT, Costa Blanca, Investments, Spain
This article is published on: 3rd June 2019

03.06.19

It was announced last week that Doris Day had passed. She died on May 13, 2019, at the age of 97, after having contracted pneumonia. Doris Mary Kappelhoff was born on April 3, 1922. Just imagine the changes Miss Day witnessed during her lifetime.

Don’t waste your time trying to second guess.
Whilst the ongoing saga of Brexit and the numerous delays can be frustrating, we really should make the best of the additional time this gives us.

Do you remember the panic across the Expatriate community on the initial Brexit announcement?

  • You must ensure you residency application is processed in time!
  • You must ensure your Social Security and Health Care are in place!
  • You must change your driving license!

We are likely to have until 31st October 2019 before we leave the EU, which means you have additional time to put these things in place.

There are, of course, other areas where we may want to use the extra time positively.

Did you know?
In the 2017 Spring Budget, HMRC announced a new 25% charge on overseas pension transfers. Most expats living in Spain were unconcerned by this as it did not apply to pension transfers within the EU.

This is likely to change post Brexit. It is widely thought that HMRC in the UK will apply this 25% charge to your pension transfer post Brexit.

Use this time wisely. If transferring your pension is suitable for your situation, you should act now and save the charge being applied to your pension.

Since the day 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 three years, life has continued in the financial world and investment markets have risen significantly. At the same time, inflation hasn´t disappeared just because Brexit is on the menu.

With dividends reinvested, £100,000 would be worth around £136,000 as at 18th February 2019. If we allow for inflation, this would be more like £128,000 but still 28% up. If the £100,000 had been left in a bank account, with no interest, which is commonplace these days, the true value would now be more like £91,000. Waiting for Brexit has cost the wait and see person £9,000.

Brexit proof your investments using top UK financial institutions
If you are living in France, Spain, Luxembourg or Belgium, did you know that certain large, household name UK financial institutions offer products locally from
Dublin based sister organisations?

These products are both EU regulated and tax efficient in the country where you live.
For example, one of the largest Insurance companies in the UK offers a fully French compliant (Dublin based) Assurance Vie. Another offers a Branch 23 product, which is tax efficient in Belgium. Both companies offer a tax efficient solution for Spanish residents.

As a result, should the UK leave the EU, you can still invest with companies whose names you know and trust, in a tax efficient manner, in the country you call home.

Please feel free to contact me if you would like to discuss any of these points in more detail.

The danger of waiting for Brexit

By John Hayward - Topics: BREXIT, Interest rates, Investment Risk, Investments, Spain
This article is published on: 22nd February 2019

22.02.19

There are many questions that we don´t know the answers to regarding Brexit. There are also 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 three years, life has continued in the financial world 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 be worth around £136,000 as at 18th February 2019. If we allow for inflation, this would be more like £128,000 but still 28% up. If the £100,000 had been left in a bank account, with no interest which is commonplace these days, the true 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 illustrates 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 in this type of investment on 20th February 2016 would have seen an increase of around 23%.

Taking inflation into consideration, it would still have produced growth of around 14%; a lot better than “losing” 9% by leaving the money in the bank.

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 11% over the same period, the need to receive more in income has become even more important. Losing 20% or so in real spending power has proven to be a tough pill to swallow. Get in contact so that the possible “Never Ending Story” of the Brexit can being kicked down the road doesn´t lose you even more over the coming years.

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

* Source: Financial Express

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: JC&A Abogados (Santiago Lapausa)