☏ +34 93 665 85 96  |  ✑ info@spectrum-ifa.com
Viewing posts categorised under: Moving to Spain

How to avoid Spanish taxes on your UK property and investments

By John Hayward - Topics: Moving to Spain, Spain, Tax in Spain, tax tips, UK investments, UK property
This article is published on: 30th July 2020

30.07.20
Tax in Spain and the UK

Being tax resident in Spain is not your choice
once you have made the initial decision to move to Spain.

Generally, once you have spent 183 days (not necessarily consecutive) in Spain, you are deemed to be tax resident and have to declare income and assets to the Spanish tax office. The tax year in Spain runs from 1st January to 31st December. Unlike the UK, which works on a part tax year basis when someone leaves the UK, in Spain you are either tax resident for the whole year or you are not.

As soon as you know that you will be taking the step to eventually become tax resident in Spain, it is extremely important to make certain that you have arranged your investments and property(ies) in a way that isn´t going to open you up to unnecessary Spanish taxes.

A lot of people will be looking to become resident in Spain before Brexit on 31st December 2020, in case the process becomes more complicated after. However, for those who are worried that applying for a residence card will automatically make them tax resident, let me dispel this fear. It does not. Therefore, you have the opportunity to apply for a residence card whilst taking action to protect your assets free from Spanish tax for 2020, becoming tax resident in Spain in 2021.

UK Property & Tax in Spain

As a tax resident in Spain, a person has to declare all of their overseas assets (over certain levels) as well as the income from these assets. Anything sold, such as a property or investments (ISAs, shares, bonds, etc.), and even a lump sum from a pension which would be tax free in the UK, will be taxable in Spain and this is where there is a potential tax nightmare.

Our advice is usually to sell before becoming tax resident in Spain, if selling is feasible and practical. If you are eligible to take a tax free lump sum, do so before becoming tax resident in Spain. ISAs are also taxable in Spain and although there are ways to legally avoid taxes whilst holding this type of investment, things can become very complicated.

property investment Spain

Let me make this clearer with examples of someone who has a UK property and sells it after becoming tax resident in Spain.

Example 1 – Property Purchase 1986

  • You move to Spain and become a permanent resident, and thus a tax resident, in Spain.
  • You own a property in the UK which has been your primary residence since you bought it in 1986.
  • As you have now moved to Spain, it is now a secondary property.
  • You bought it for £48,000. You are selling it for £600,000. As this is no longer your primary residence, Spanish capital gains tax is due on the sale.
  • Even with indexation (which only applies to pre-1994 purchases), the tax bill is over €50,000.

Example 2 – Property Purchase 2004

    • You bought a property in the UK in 2004 for £150,000 and are selling it now for £250,000.
    • The Spanish capital gains tax on the sale would be over €20,000.
    • Unlike the UK, there are no capital gains tax allowances in Spain.

The same principle applies to shares, investment bonds, and ISAs.
You have to pay Spanish capital gains tax on the difference between what you paid for them and what you sell them for, again with some indexation for pre-1994 purchases.

Spanish Inheritance Tax

Plan early: Before you move to Spain to help avoid Spanish Tax

You need to draw a line under your asset values now so that you can take advantage of the more beneficial capital gains and property tax rules in the UK and start afresh in Spain without the fear of unavoidable Spanish taxes in the future.

Contact me today to find out how we can help you make more from your money, protecting your income streams against inflation and low interest rates, or for any other financial and tax planning information, at john.hayward@spectrum-ifa.com or call or WhatsApp (+34) 618 204 731.

What is the point of having money?

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

14.06.20

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

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

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

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

debt free home

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

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

freedom and lifestyle

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

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

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

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

invest in technology

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

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

7 Good Reasons to Retire in Andalucía

By Charles Hutchinson - Topics: Moving to Spain, Retirement, Spain
This article is published on: 13th June 2020

13.06.20

There is currently a noticeable increase in the number of enquiries to estate agents in this area from abroad, the majority of which are from the UK.

If you are looking ahead to retirement and wondering where you might like to live when the time comes, you should consider putting Andalucía somewhere at the top of your list.

Lifestyle
The Spanish lifestyle is one of the most open and friendly in the world where coastal areas, in particular Andalucía, are most welcoming. Locals are well aware that the international market is all important to the economy and growth of the region, bringing prosperity to what was once the poorest part of the country.

Culture
The region is littered with places of historical interest and beautiful world heritage sites. The Arts play an important role in life here with great classical concerts and popular music shows. Every town and village in Andalucía has at least two ferias (festivals) a year and talented street performers are found everywhere. Every city has important galleries and museums reflecting its historical artistic contributions to the world.

Climate
Andalucía enjoys one of the mildest climates in Europe, especially in coastal regions where temperatures are not as extreme as in the interior. Having said that, the climate in the interior is dry, making the upper and lower temperatures more tolerable. The climate, outdoor life, healthy Mediterranean diet and generally relaxed atmosphere of the region can be counted among the many reasons why Andalucía enjoys the highest life expectancy in Europe.

Cost of Living
The benign climate makes for reduced heating, food and clothing expenses. It encourages outdoor living through more months of the year than you might enjoy in northern Europe or parts of the US. Spain is one of the largest producers of fruit and vegetables in Europe with much of these coming from Huelva and Almería and not far away, Murcia which is known as the vegetable garden of Spain. Eating out can also be very inexpensive and extremely good. In coastal areas and a little further inland there is no shortage of good places to eat. Spain is also one of the most important wine producers of the world and Spanish wines have come a long way, standing alongside some of the best in the world.

Sports & Outdoor leisure
There is a large variety of sporting activities to be enjoyed here. Apart from a huge number of golf courses and tennis clubs, there are excellent beaches, water sports, Whale/Dolphin watching, etc. You can snow ski and water ski within two hours of each other. We have the highest ski resort in Spain. Trekking and rambling is a pure joy through spectacular scenery.

Health Care
The state health care system in Spain is excellent and some of the best doctors and specialists can be found in this country, especially in Andalucia for they too want to live a good lifestyle! Health Insurance, if you do not qualify for state health care, is cheap when compared to northern Europe and many countries farther afield.

Communications
The larger cities in the region are very well connected with Madrid and other main Spanish cities. There are excellent coach and train services which are a joy to experience. Coach travel is inexpensive and always provides the bonus of being able to enjoy the view. Train travel also offers you the chance to enjoy the scenery and if you want added comfort and speed, the AVE is an excellent example of high-speed train travel with one of the best networks in Europe, which has halved train travel time around many parts of the country. It also compares favourably against air travel if, for example, you are travelling to Madrid, as you will be taken right to the city centre and you do not have to be at the station two hours before departure.

Capital cities in Andalucía also provide excellent connections by air with direct flights to 129 European cities as well as to numerous destinations elsewhere in the world. If you have family and friends back home, in the US or somewhere in northern Europe there are plenty of options when it comes to getting back to see them or having them come over to Spain for visits.

moving-to-spain

Things to consider before moving here

  • You will need to decide where you want to live. This is best achieved by renting short term somewhere first. Consideration should be given to any medical care needs, sporting facilities, schools (if you a younger retiree) and convenient distances to an international airport
  • You will need to decide how much time you want to spend here and whether to become tax resident. This is where I can give you in depth assistance with residency, permits and tax advice
  • Regarding tax, we would need to review any existing investments you may have to ensure they are tax efficient here in Spain. UK tax efficient investments are usually not tax efficient here
  • We would need to review your income situation in retirement and how best to achieve the required level with the least tax
  • We can assist you with a choice of medical insurance, if needed. Wills might have to be adjusted and Spanish ones drawn up

Please remember that if you already have a UK Financial Adviser, they will not be qualified or knowledgeable to give advice here.
By the same token, if one of our clients moves back to the UK or another country, it is essential they contact a local adviser there.

WISH YOU WERE HERE?
CONTACT ME NOW FOR FURTHER INFORMATION

Retire in Andalucía

The results are in…

By Chris Webb - Topics: Investment Risk, Moving to Spain, Spain, Tax, Tax Efficient Savings, Tax Relief, UK investments
This article is published on: 10th June 2020

10.06.20
Spectrum IFA Survey

I trust you are all safe and well and enjoying the additional bit of freedom that moving into Phase 1 has afforded us herein Spain. By the time you read this there is every chance we are into Phase 2 allowing even more freedom. It’s been a long haul for Madrid to get there and there are mixed feelings about how long it has taken…

Personally, I´d rather be safe than sorry, so whilst there have been frustrating times over the last few months, it is probably for the best. Recently I sent a survey out to my clients, who are based all over the community of Madrid. The survey was twofold:

Secondly, being in lockdown has given us all the time and opportunity to evaluate our personal situations. To address administrative tasks we had put on the back burner and to look at all aspects of our financial wellbeing, whether that be assessing emergency cash reserves, job security or even making sure an up to date will was in place.

The response to my survey was fantastic with many responses. Some just answered the questions but the majority also wrote additional comments, which gave a greater insight into their situation. It was interesting for me to read the results and compare the answers to how my family have felt and what we had looked at changing or updating.

Spectrum IFA Survey Results

I´d like to share some of the results from the survey, but I won’t detail all the questions as this Ezine would be never ending.

It might be beneficial for you to compare the data with your own situation or feelings.

1. Only 30% felt that lockdown was a struggle; the vast majority were not concerned by the restrictions.
2. 80% were comfortable with the transition to online communication, whether that be email or video calling.
3. 100% were concerned about their investments – completely natural when you were watching the fall out on the news.
4. 42% were concerned for their jobs.
5. 95% had sufficient emergency cash reserves to see them through – something we always encourage when dealing with our clients.
6. 50% had excess cash reserves sitting idle in the bank.
7. 62% believed that NOW was a great time to get invested and put more money into the markets. Of that number 55% proceeded and bought in at the discounted prices available.
8. 57% had an up to date will in place. Some admitting to doing it recently after my article titled “The Folder”.
9. 80% felt that their insurance policies were sufficient for their situation; however 40% of these people have requested further information and alternative quotes.

The results made for interesting reading and it was great to see that a lot of people had reviewed things and were keen to look at alternative options.

Tax in Spain and the UK

As a company we have a huge network of 3rd party companies that can assist our clients with all the points raised in the survey.

In Madrid I can recommend teams of lawyers who will offer a free initial

consultation and discounted rates, providing they come from me as a direct referral. This is great for anybody that needs to review their will – you can have the initial conversation at no cost and then pay for the will upon completion.I can recommend teams of accountants or gestors to assist with tax returns, inheritance, and other administrative issues.

During lockdown I also set up a collaboration with an expat insurance broker, which allows us to assist with health insurance, life insurance, car insurance, house insurance and more. The great thing about this relationship is that ALL quotations and policy documentation are in English. Whilst most of you will speak and understand Spanish perfectly well, there are times when something is easier “to get” when it’s in English.

If you want to review your insurances, or just obtain alternative quotes to compare with what you already have, get in touch – there is no charge for a quotation.

Do not delay reviewing your will, insurances, or investments.

Planning yesterday is better than today, which is better than tomorrow.

PS. If you did not receive the survey and want to complete it, send me an email and I´d be happy to share it with you.

In for the long haul

By Susan Worthington - Topics: Investments, Mallorca, menorca, Moving to Spain, Spain
This article is published on: 4th June 2020

04.06.20

As a financial adviser, during lockdown I had the luxury of time to keep in touch with clients, albeit remotely.

In the first few weeks, the mission was to send out some facts and reassurance so that my clients all knew I was still there, whatever the current circumstances. But as the weeks went by, I had time to learn about how clients were reacting and whether they might feel their situation was under threat in any way. Was anything I was saying, helping them; was I missing any vital signals where help was needed?

My first experience with a major stock market crash was in 1987 and from that I learnt that the priority, when investing money, is to ensure you have a sufficient emergency reserve. Doing so will allow the upheaval to resolve itself without the desperate need to draw on investments during the most unfavourable times. Those needing income from their investments worry the most, but as long as everyone remains invested they have better potential to recover from sharp falls. March presented the toughest time.

At The Spectrum IFA Group we maintained weekly Zoom meetings with fellow advisers in Spain and from this came the concept of a questionnaire to send out, which I adopted to become The Lockdown Questionnaire.

in for the long haul

The results were reassuring and informative, giving me the opportunity to provide additional support where it was needed. It is still ongoing as not everyone has yet responded, although have told me they will do soon.

In brief, the results so far revealed the following:
8% only, had found lockdown difficult.
70% were very comfortable talking over the phone, on video chat or email.
78% were worried about their investments but understood that sitting tight was the key.
31% only, felt that now was a good investment opportunity.
78% have saved on their spending and felt in control financially.
31% felt their priorities with money had changed through lockdown.
92% which was reassuring, had enough emergency money set aside for the short term.
100% which was an excellent result, have an up to date will.

This is evidence to me that health comes first, but knowing that their money was doing the best it could under the circumstances and having regular contact does help to give peace of mind.

There is much ongoing activity for me now to follow up with. Some more hand holding, some more reviewing of income requirements, without any need to recommend a will!

If you would like to discuss managing your money in these volatile times, don’t hesitate to contact me with the details below.

Atypical expat family living in Spain

By Charles Hutchinson - Topics: Moving to Spain, Spain
This article is published on: 15th May 2020

15.05.20

Once upon a time there lived a British family in Southern Spain. I say British but in fact the wife had dual nationality, being both American and British. In fact they are still here.

They have 3 children, one adult son from her previous marriage living in the Middle East, their second son in boarding school in England and the youngest, their daughter, with them in Spain. His last position had been as an eminent surgeon in a well known teaching hospital in London. She had been a very successful realtor (estate agent) on the East coast of the USA. They had met through mutual friends when he was at medical conference in Boston. She brought with her to the marriage a respectably sized share portfolio which she had accumulated over the years.

They have a large five bedroom house in leafy suburbia in Surrey, UK. They have owned it since the arrival of their first child, several years after marrying. He sold his flat in central London a couple of years after their wedding and commuted to work every day from Dorking. Summer after summer brought nothing but rain and unpredictable weather. They finally decided to throw in the towel and move, lock, stock and barrel to Andalucia where they purchased a lovely house with gorgeous views over the Mediterranean. There in their retirement they play golf and have grown a circle of good friends, enjoying the lifestyle they had dreamt of in the UK. They rent out their Surrey home to visiting foreign film crews and have it managed by a competent agent.

They have a fair sized investment portfolio with a UK stockbroker who has underperformed their peers over the previous decade, which he learnt from talking to fellow golfers in the 19th hole at the club. He has become keen to change his broker and the portfolio, but is very concerned about the potential Capital Gains Tax.

estate planning

Relations with their eldest son have become increasingly strained due to his stepfather’s disapproval of her son’s lifestyle in Dubai. It has reached a point whereby he has changed his English Will to exclude him from his half of the joint estate. The parents do not have Spanish Wills.

Also growing is the worry about their house in the UK with rising maintenance costs and property taxes. The decision has been made to sell it. In any event, over the years they have owned it they are sitting on a very fine profit. But it seems that they can no longer label it as their prime home. After all, they have been resident in Spain for some considerable years.

Brexit arrived rather suddenly and they have become aware of their potential position as non EU citizens after the final deadline in December 2020.

While they have appointed a UK estate agent to handle the sale of their UK home, Covid-19 has arrived on the global scene. They watch with horror as their portfolios tumble in value. Before the arrival of the virus, they had a sale agreed and their lawyer has taken a large deposit on exchange of contracts. Now the property market is falling away.

Several of their acquaintances both in the UK and in Spain have contracted the virus and they are getting nervous of their own position, their children’s and what to do if they catch it. He is over 65 and becoming more vulnerable as time passes.

UK share portfolio

This couple faces several significant problems:

  • She has a US share and bond portfolio which is fully exposed to US taxes
  • He wants to sell out their UK portfolio and change holdings. It still shows a considerable gain
  • They want to sell their UK home which is still showing a considerable gain
  • They have no Spanish Wills which would cause problems in the event of first death, not least if the eldest son invoked Spanish Succession Law, to inherit his share
  • Although resident in Spain from several angles, they are not actually tax resident here but still tax resident in the UK
  • Apart from tax considerations, their residence status would become questionable in December 2020 (if the Brexit negotiations deadline is realised)
  • They need to complete the sale of their UK home as soon as possible before the market falls much further and their buyer pulls out (despite the hefty deposit he has made)

You might think this is just a story, but with only a few changes this was the reality of two of my longest held clients. Not all of the above may apply to you, but I’m sure certain elements of this brief bio resonate with many of you. The important thing to remember is that every element of this situation has a solution. As advisers here in Spain, we are expats too, and over the past years we have come across all (and more) of these situations. And we have always delivered a solution.

Do you relate to, or are you faced, with any of these issues? Do you know someone who does? They all have a solution. Why not call me for a chat over a coffee? If we are still in lockdown, we can talk about it on the telephone, all in the strictest confidence, of course.

Moving to Spain – When should I take financial advice?

By David Hattersley - Topics: Financial Planning, Financial Review, Moving to Spain, Spain
This article is published on: 2nd March 2020

02.03.20

For the majority of those who move to Spain, speaking to a qualified financial adviser, who is regulated where you plan to live, is something which happens after you have made the move. But, talking to one before you embark on the journey can help avoid some of the issues that expatriates can find themselves encountering.

Many UK based advisers are not fully regulated to offer advice for Spain and may not be aware of the most current regulations or tax efficient solutions for your needs. A Spanish regulated adviser can ensure you are financially prepared for your move in terms of any investments, savings and taxes which can be due on both income and windfalls you may be expecting after your move. A local adviser will also be able to clarify the potential impact of Spanish succession tax.

An additional complication in Spain is the variety of laws in each autonomous area. The classic example is the differing laws between Andalucia, Murcia & Valencia, so it makes sense to deal with a regulated adviser who is based in or near the autonomous area you are moving to.

Many people buy in Spain with plans of using their new Spanish property to retire to, either now or eventually. If it is the latter, in the interim period the property may be used to produce rental income, either via summer rentals or long term rentals, so there will be tax considerations. Depending on how long you are planning on living in Spain each year, residency may also become an issue. When holding property both here and in the UK, “Cross Border” regulations and differing types of tax are applicable to each country. Having a “Partner“ relationship brings its own complications.

Everyone’s situation is unique and there is no single ‘recipe’ that we can give to navigate buying a property in Spain. A regulated local adviser has no vested interest in which property you buy, yet will have a long history of experience of the path you are undertaking and will be able to help you create a plan to fit your own specific circumstances.

Investing an hour of two of your time to go over your project with an adviser before you make the move to Spain can provide direction, peace of mind and financial comfort when planning your new adventure. Rules and regulations can change. The potential impact of Brexit provides an example of how quickly this can happen, so consider taking action sooner rather than later.

Why don’t you contact me to arrange a free, no obligation discussion of your plans – either you will get confirmation that everything is in order, or perhaps some points will come up that you hadn’t thought about. Please call or email me on the contacts below & I will be glad to help you. We do not charge for reviews, reports or recommendations that we provide.

Advice before you arrive in Spain

By John Hayward - Topics: Moving to Spain, Spain
This article is published on: 21st February 2020

21.02.20

For the majority of those who move to a Spain, speaking to a qualified financial planning adviser, who is regulated and licensed in Spain, is something which generally happens after you have moved to Spain. It makes sense to understand the implications of moving to Spain in relation to existing investments and the taxes that come with those. Positioning one´s wealth correctly prior to moving can save thousands in unnecessary taxes.

Therefore, by talking to an adviser, especially one that has lived in Spain for more than 15 years and has experienced the life with his own family, before you embark on the journey can help avoid some issues which expatriates can find themselves encountering:

Many UK based advisers are not fully regulated to offer advice for those in Spain.

They are almost certainly of the most current regulations or tax efficient solutions for your needs, especially as the rules differ from one autonomous region to another.

A Spanish regulated adviser can ensure you are financially prepared for your move, in terms of any investments, savings and taxes which can become due on both income and windfalls you may be expecting after your move.

Tax free and favoured investments such as ISA´s, lump sums from pension funds, and Premium Bonds, are not tax free in Spain.

For those planning on using a property as the main source of income, an understanding of the overall cost and the Spanish taxes that property attracts is essential.

Making a Spanish Will, even if one has an English Will, is vital in order to make certain that wealth is distributed correctly.

Organising a funeral in Spain is a much quicker process than in the UK. For many the funeral is very traumatic if only for what needs to be organised, in Spanish. We can help you arrange a plan for you and your children to escape this trauma.

People overpay when it comes to currency exchange, many using their bank. What appears to be a free deal actually can cost you a lot of money. The exchange rate banks give can be way off the commercial rate. We can save you potentially thousands on your currency especially when you purchase or sell a property.

Investing an hour of two of your time before you make the move to Spain can provide peace of mind and financial comfort when planning a new adventure. We can help with all of the above, and much more.

Please contact me today to find out how we can help you. We do not charge for reviews, reports, or recommendations we provide.