Viewing posts categorised under: Spain

Spanish Tax on Personal Pensions

By John Hayward
This article is published on: 1st June 2022

01.06.22

Further to the recent article written by my colleague Charles Hutchinson regarding temporary annuities and their taxation of annuities in Spain, I am expanding on the tax treatment of personal pensions generally.

Depending on the type of retirement income that you are receiving, it will either be taxed as regular income, “work” income as the Spanish call it, or savings (passive) income with a different set of tax rates being applying to each type. It is generally understood that the income from pension plans that received tax relief (effectively where the contributions were deducted from income before tax was calculated) will be treated as work income.

The word “annuity” is used in a general sense in the UK as the regular payment which comes from a pension scheme. It is possible to convert a personal pension fund to an annuity, with a view to guaranteeing a fixed income for life albeit waiving the right to the capital value of the pension pot. Whether or not it is advisable to purchase an annuity is another matter. This will depend on personal circumstances.

As far as Spain is concerned, an annuity is a form of income that attracts favourable tax treatment. An annuity in Spain is either temporary or for the whole of life. The annuity is purchased. It is not income drawn from an existing pension fund unless that fund is encashed to buy the annuity. At that point though there is the possibility of a large tax bill on the encashment.

Yes, I want to book an initial call to discuss my penions in Spain

The key points here are that:

Not all pension income is treated the same way for tax
Declaring work income as an annuity is not correct and, if reported intentionally in this manner, it is possible that it will be treated as fraud. The Spanish tax office is making a special effort right now to check on this. They can go back at least 4 years with their investigations
Care should be taken when accessing retirement income to make certain that, not only is it being declared in a lawful way, but also that you do not leave yourself open to a nasty and unexpected tax bill

Contact me today for more information on how we can help you to protect your assets from unnecessary taxation and make more from your money, protecting your income streams against inflation and low interest rates, to talk about Spanish Tax on Personal Pensions or for any other financial and tax planning information contact me at:

john.hayward@spectrum-ifa.com or call (+34) 618 204 731 (WhatsApp).

Spanish Tax Guide 2022

By John Hayward
This article is published on: 24th May 2022

24.05.22

Over the past year or so, with Covid-19 restrictions being lifted and impact of Brexit becoming clearer, we have received many enquiries regarding taxation in Spain, not only from people who are looking to move to Spain but also from those who already live in Spain, in some cases for many years. There are areas of tax that are complex, not helped by the fact that you might receive different opinions on the same tax subject.

In countries such as England, Wales, and the United States of America, there is a Common Law code. Established in England in medieval times, it is based mainly on case law. A decision made many years ago could still apply today. This is a system which has allowed us to get used procedures which have been in place for a long time. This is not necessarily the case in Spain.

Spain, like other countries in Europe, have a Civil Law code. Within this system, rules can be updated regularly. As flexible as this system is, unless you are completely up to date with the latest rules, which may only have been recently altered, it makes it extremely difficult to know how exactly you should be declaring your income and gains in Spain.

Please click on the link below to download our latest Spanish tax guide which is designed to give you a better understanding of the different Spanish taxes, to whom they apply, and when they need to be paid. Spain is made up of autonomous regions and so there can be different rules and tax rates that apply.

Download your tax guide here

However, the general principles are the same or similar throughout the Spain. You will be subject to at least one of these.

Income Tax
Inheritance Tax
Gift Tax
Wealth Tax
Capital Gains Tax

If you have any questions, please get in contact. If we do not know the answer to your tax questions, we know someone that does.

Book a zoom or call with me now

Arts Society de La Frontera

By Charles Hutchinson
This article is published on: 24th May 2022

24.05.22

The Spectrum IFA Group again co-sponsored an excellent Arts Society de La Frontera lecture on the 18th May at the newly renovated San Roque Golf & Country Club on the Costa del Sol. We were represented by one of our local and long-serving advisers, Charles Hutchinson, who attended along with another Costa del Sol based partner Jeremy Ferguson and his wife Michelle in her role as his personal assistant.

The Arts Society is a leading global arts charity which opens up the world of the arts through a network of local societies and national events throughout the world.

With inspiring monthly lectures given by some of the UK’s top experts, together with days of special interest, educational visits and cultural holidays, the Arts Society is a great way to learn, have fun and make new and lasting friendships.

At this event, over 180 attendees were entertained by a talk on the fabulous Spanish painter Joaquin Sorolla “Master of Light” by Arantxa Sardina from the Tate Gallery in London. She gave an impressive lecture, revealing what a true master he is amongst the other well known impressionists of the early 20th century.

The talk was followed by a drinks reception with a musician and youth art exhibition which included a free raffle for prizes including Charles´s gift of a book on the artist, champagne, orchids and Jeremy supplied liqueur.

It was the best turnout we have had for a few years, which was largely due to it being the last lecture of the season combined with the art exhibition and relaxation of Covid rules. A very successful event at a wonderful venue.

The Spectrum IFA Group was very proud to be involved with such a fantastic organization during its current global expansion and we hope to have the opportunity again in the next season.

Removing Confusion on Spain and UK Tax Situation Especially Pensions

By Barry Davys
This article is published on: 23rd May 2022

23.05.22

It is clear from calls and messages to me from people seeking advice there is much confusion regarding taxation when we live in Spain and have income or capital gains in the UK. Sometimes, these calls happen when people have received a letter from the Agencia Tributaria (Hacienda).

My wish is to clarify the situation so that there are no back taxes, fines nor interest to pay in Spain.

This framework will clarify the position and I include specifics regarding pensions. Tax can be, well taxing, so this framework is to help with understanding the overall situation, not to provide specific advice for your situation.

Who’s this for?
This article is for all British people who live in Spain.

Overview
A framework to help explain how do we pay tax on pensions from the UK when living in Spain?

Why to read this article?
This article is written in response to a very sad situation where a pensioner here has been hit by fines, back tax and interest from four years ago because of a mis-understanding on how to organise his tax on his UK pension. It is likely that further fines will follow for other years. The total amount of fines and interest could amount to €21,000

Your commitment
Taking the time to read the article and requesting an initial telephone or Zoom meeting below, if you want help for your specific situation.

Yes, I would like to arrange a conversation about my situation

Your Tax Framework

Top of the framework is to understand that when we have taxable events in more than one country, the country of our residency is the “controlling tax authority”. They have the final say on what tax must be paid.

If you live in Spain more than 183 days in a calendar year your controlling tax authority is Spain. It does not matter if you also pay tax in the UK.

How this works is as follows:

Declare your worldwide gross income and capital gains on our La Renta (M100) Remember it is a self assessment form and so it is our responsibility to do so
At the end of the La Renta form is a box for entering tax paid in a country with a double taxation agreement with Spain. Put the tax paid in this box or insist your gestor does so. Even post Brexit the double taxation agreement is still in force
UK pensions gross income all have to be reported in Spain

If you live outside the UK and provide a certificate of tax residency in Spain you can claim dividends, bank interest and even private pensions without paying UK tax (because you will pay tax in Spain).

Pensions, however, are a great source of confusion. The UK retains the right to tax state pensions, military pensions, civil service pensions and a number of others. Previously these did not have to be reported in Spain. They do now!

Tips on pension tax

On private pensions and most company pensions ask the provider to pay you gross
If you have a UK pension where it is automatically taxed or is a state pension, record all tax paid in the UK and get proof of payment from the pension provider
Report the gross figures in Spain
Your state pension is paid weekly, not 12 monthly so remember to include all payments in the calendar year
Ensure that any tax paid is listed in the La Renta box for countries with double taxation agreements. Result – no double taxation
If the tax paid is missed off this box, try to make a Refund of Tax using UK HMRC form R43 and or form R40. It may be possible depending on your circumstances
One word of warning. Do not use companies offering to reclaim your tax for you. They are expensive, some may be improper and you can easily send the form yourself

For an initial call to find out more, choose a time for a phone call or Zoom meeting that is convenient for you CLICK HERE

In my profession as a financial adviser for international people living in Spain I have a clear understanding of tax rules and recommend that you employ a good local tax adviser. This article is not tax advice as it may not reflect your personal circumstances. It is merely a framework to help with your understanding. I hope this article provides more clarity on the issue and helps when you do go to a tax adviser.

Temporary Annuities in Spain

By Charles Hutchinson
This article is published on: 19th May 2022

19.05.22

Over the last few years, there have been some well-known IFAs here in Spain advising their clients that they can save up to 88% on their income tax in Spain by stating that their pensions are temporary annuities. In some cases, this has caused serious problems for pensioners. There is no way the Hacienda would offer such benefits unless these annuities were such from outset. It would seem logical if this was to be set up as such from outset, the schemes would have to be domiciled here in Spain for the tax reasons I go on to explain. Similarly, the annuity status could not be applied to foreign pension schemes being exported by expatriates from their previous country of residence when they come to live here.

For example, I have come across clients who have transferred their pension abroad under QROPS rules, they then instruct their trustees to pay them a set income for, say, 5 years. In some cases, the trustees would give them a certificate confirming that this income is a temporary annuity. Ironically this not only potentially makes the trustees as culpable as the pensioner but so too the gestor or accountant drawing up that tax return.

An annuity is something you buy from a financial institution (usually a life assurance company) for a certain sum. In return, the company will pay you an income for life or a fixed period. Once purchased, that money is no longer yours and it is irreversible.

However, the money in a pension scheme (although legally owned by the trustees) is for your benefit in your lifetime and can be passed to your beneficiaries or spouse, depending on the scheme T & Cs. The income can be stopped, restarted, raised, lowered, or even taken in lump sums (again depending on the scheme particulars). The capital remains at your disposal. Therefore it cannot be regarded in any way as an annuity, let alone a temporary one.

Those who promote these “loopholes” are tapping into one’s natural desire to lower one’s taxes. They are exploiting genuine tax benefits offered to those who have already paid income tax on their savings with which they purchase an annuity for a fixed period. The special low tax rates which go with these annuities are by way of partial compensation for having your tax-paid capital repaid to you. Whereas pension income is always taxed at your marginal rate, mainly because there is tax relief on monies you put into your pension scheme, with both money purchase and occupational pensions. Furthermore, pension “pots” are invested and will attract, if properly invested, investment growth.

Those companies who advise people to do this and those who file a tax return claiming their pension is an annuity (when it clearly is not) are committing tax fraud. And there are very heavy fines for doing such a thing. A tax audit can go back up to 5 years and the tax shortfalls can involve sizeable sums especially when the fines are included. At pension age, this can be very distressing and a very nasty shock to an elderly person.

Spectrum can help you avoid this situation by reviewing any previous advice given and offering an unbiased opinion. We research our products and taxation thoroughly before advising our clients. If you have any doubts about your pension and the advice you have already received, then please contact me for an initial meeting which carries no fee. We want you to have peace of mind so that you can tell others about us. Spectrum is not in the risk business but very much here to protect your wealth.

Inflation in Spain

By Jeremy Ferguson
This article is published on: 26th April 2022

26.04.22

Life just seems to be getting so much more expensive nowadays.

Over the last few years we have seen a quite incredible chain of events unfold. Covid reared its ugly head, and caused a massive change in the way in which we live and travel. During this period of lockdowns and people working from home, spending habits took a massive turn. No one had the chance to go out and spend money in bars and restaurants, go to the cinema, or take weekend city breaks to name but a few.

When things started to go back to normal, we saw big supply chain issues coming to light. Microchips for cars meant new car deliveries became more and more delayed, pushing up the price of second hand cars. Demand for consumer goods for the home, having gone through the roof, also meant the cost of these items started to rise.

Many companies wound down production during the covid period, and then all of a sudden were caught short by the sudden surge in demand. You can argue this happened in the fuel industry, as we saw panic buying and massive queues in the UK at petrol stations.

Then, just as we started to look for a hint of normality, with people slipping back into their old spending habits, the war in Ukraine started, immediately hitting the price of fuel, and the one that surprised me, sunflower oil!

All of these factors have meant that the cost of living for all households is increasing at an alarming rate, inflation is with us again, having been dormant for quiet a while. The one that has really hit most people here in Spain is the increasing cost of Electricity. In December the cost rose from its lowest point by almost 500%, something I have no living memory of happening before. For many people, that is creating a huge dent in their disposable income each month.

Most people I deal with are retired or semi-retired, with their income generated by drawing down from their pensions, and then normally substituting it with drawdowns from Investment Portfolios and cash savings. At this stage of their lives, I believe in most circumstances fear tends to be the driving factor behind their Investment decisions, as protecting the money far outweighs trying to get too high a return each year. That makes perfect sense as income streams during retirement have typically ceased, so the ‘pot’ needs to be looked after carefully. Making plans for how long your funds will last is easy to a degree, when the cost of living simply increases a little each year, but now, with the way things are, the plans that previously seemed sensible will certainly need a bit of a shake up.

If interest rates rise as predicted, then maybe people will be able to look for their cash in the bank to increase in value by earning some interest, but that is something none of us can predict at the moment. If inflation continues at today’s current levels, many people will either have to change their lifestyle, or look to try and increase the annual return on their savings, but by doing that, it typically involves taking more risk, which is completely against where people normally want to be at this stage of their lives.

With the changes we are seeing with outgoings, Investment returns, interest rates and inflation, it has never been more important to spend time regularly looking at financial plans, and adjusting assumptions to make sure you have a realistic handle of how things will look going forward. It’s not rocket science, and I am here to help if you find it all a little daunting, so please free to get in touch via the form below or please email: jeremy.ferguson@spectrum-ifa.com

Sustainable & Ethical Investment funds in Spain

By Chris Burke
This article is published on: 25th April 2022

25.04.22

More and more people are contacting me regarding sustainable investments in order to understand the choices available, whether they offer a good return on your investment and would you get any more return if you didn’t invest sustainably/ethically? We all know the planet needs our help but we also want to know that our hard-earned monies are working for us – it can be a difficult emotional trade off.

Sustainable & Ethical investing has hit the world by storm over the last few years. By the end of 2019, professionally managed assets using sustainable strategies grew to $17.1 trillion, a 42% increase compared to two years prior, according to the U.S. SIF Foundation (2021). The organization also estimated that $1 out of every $3 under professional management is now invested under ´´sustainable practices´´.

Recent studies have also shown that Sustainable Investment funds, as well as providing ways to invest responsibly, provide both financial performance and lower levels of risk. For this reason, in part, many deem including sustainable investments in their portfolio is a ‘no brainer’.

Let’s say for example that you are in the market to buy a new dishwasher. You’ve analysed several products and have narrowed your choice down to the last two. Both products cost the same amount and wash dishes equally as effectively, yet one of them uses less electricity and is considered safer due to the addition of extra safety features. Which one would you pick?

When comparing the returns of sustainable funds and traditional funds, is there a financial trade off?
A common belief held by investors when comparing mutual funds that are performing to a similar standard is that the one with a sustainable investing model may not perform as well. However, a Morgan Stanley (2019) report has debunked this myth. The report analysed the performance of 10,723 mutual funds from 2004 to 2018 and found that the returns of sustainable funds were in line with comparable traditional funds, stating that ‘there was no consistent and statistically significant difference in total returns’.

When comparing the levels of risk of sustainable funds and traditional funds, is there a trade off?
The Morgan Stanley (2019) report found that sustainable funds experienced a 20% smaller downside deviation than traditional funds, a consistent and statistically significant finding. In years of higher market volatility (such as 2008, 2009, 2015 and 2018), sustainable funds downside deviation was significantly smaller than that of traditional funds. The study took an in-depth dive into in the last quarter of 2018 during which we saw extreme volatility in the US equity markets. Despite negative returns for almost every fund, the median US Equity sustainable fund outperformed the median US Equity traditional fund by 1.39%, and also had a narrower dispersion.

These findings may come as a surprise to many. There is a general consensus amongst investors that by investing in sustainable funds, you will also miss out on financial gains. The research based on concrete evidence of market performance over the past few years suggests that this is not the case, and that there is in fact no financial trade off when investing sustainably. Over the forthcoming years, I believe that the adoption of sustainable investments will continue and that we will continue to see the opportunity gap between investor interest and adoption narrow.

If you would like to speak with an expert on Sustainable and ESG Investments, Chris Burke is able to discuss with you the new investments in this area. Chris is also able to review your current pensions, investments and other assets, with the potential to make them more sustainable moving forward.

If you would like to find out more or to talk through your situation and receive expert, factual advice, don’t hesitate to get in touch with Chris via the form below, or click the button below make a direct virtual appointment.

Yes, I'd like to book a virtual appointment

Sources:
“Sustainable Investing Basics, 2021,” US SIF Foundation: The Forum for Sustainable and Responsible Investment, https://www.ussif.org/sribasics. Accessed March 24, 2022
“Sustainable Reality – Analysing Risk and Return of Sustainable Funds, 2019,” Morgan Stanley, https://www.morganstanley.com/content/dam/msdotcom/ideas/sustainable-investing-offers-financial-performance-lowered-risk/Sustainable_Reality_Analyzing_Risk_and_Returns_of_Sustainable_Funds.pdf. Accessed March 24, 2022

Saving tax in Spain

By Pauline Bowden
This article is published on: 19th April 2022

19.04.22

Thank goodness for the Spanish compliant investment bond!

It is a very efficient way that we can legitimately avoid taxation in Spain, as long as we purchase the correct financial products.

In the UK most people are well aware of the tax-saving nature of pension plans and ISA’s. The Spanish compliant investment bond is a tax-efficient investment solution that can be used to invest in a wide range of fully licensed and regulated investment funds while also reducing or negating your Capital Gains Tax liability.

Spain has a reputation for being a relatively ‘high-tax’ country. As a result, many UK Expats manage their affairs in such a way as to ensure the continuation of UK tax residence. The situation is becoming a greater challenge for those that find themselves spending more time in Spain each year. The Spanish tax authorities now require individuals to show concrete proof of time spent outside the country. Brexit has exacerbated the issue further; anyone who finds themselves in an ambiguous position should take professional advice to clarify their status.

Those that have chosen to take up permanent residency in Spain may find that their UK investment platforms, though tax efficient in the UK, are not so in Spain. Meeting a fully licensed Financial Adviser here in Spain could help review your current investment holdings and advise on their suitability for tax efficiency in Spain.

Based on our expectation that most people are looking for a positive return from investment markets over the medium to long term, our recommendation is that the investment product is held for a period of 5 to10 years. Whilst the appropriate holding period for each individual client will be determined by their personal investment objectives the term should be sufficient to recover from short term volatility in investment markets.

Download our guide to Tax in Spain

Wealth Tax in Catalonia

By Chris Burke
This article is published on: 7th April 2022

07.04.22

How to reduce it and know how it works

Catalonia is a great place to live for so many reasons. However, like the majority of places in the world, there are taxes to pay too. Although nobody likes to pay taxes, there is a societal need for them. They help fund the public health system, providing care for our families and for ourselves in later life, schools, so our children can receive a formal education and roads, so we can safely and effectively travel. However, in spite of this there are ways in which we can organise our taxes in an efficient manner to ensure that we are paying no more than the amount that we need to pay.

The Wealth Tax (known as ‘El Impuesto de Patrimonio’ in Spanish) is an example of a tax which is an additional tax in Catalonia that many people deem to perhaps be unfair. I mean, why should you pay tax just because you have done well in life, or your parents have and passed this wealth onto you? In summary, it is a tax that you pay on your net wealth (assets owned minus liabilities). The tax is paid on the assets that you hold which fall over a certain threshold. The threshold in Catalonia is €500,000 whilst the threshold throughout the rest of Spain is €700,000. There is a €300,000 exemption for your main residence, meaning that you will not pay tax on your main residence if it is valued under this amount. If your main residence is worth more, you can deduct €300,000 from the valuation and you will only be liable to wealth tax on the excess amount.

Here is a list of the assets that are and aren’t liable to Wealth Tax in Catalonia:

Assets that Wealth Tax is applicable to	Assets that Wealth Tax is not applicable to
Real estate	Household contents (except for Art)
Savings	Shareholdings in family companies
Shares	Commercial Assets
Cars	Intellectual Property and Pension Rights
Boats
Jewellery
Art

Source: Balcell’s Group

The rate of wealth tax depends on the amount by which you are over the threshold. The general rule is that it ranges from 0.20% to 2.50% in Spain. However, in Catalonia the rate is slightly higher, ranging from 0.21% to 2.75%. You are required to declare your wealth as part of your annual declaration (in Spanish, ‘Declaración de la Renta’) on form 714 at the end of the calendar year, making any payment by 30th June the following year. The below tables display the Wealth Tax rates for Spain as a whole and the variation of the wealth tax to pay depending on the autonomous community (Communidad Autonomo) in which you reside. However, this is an overview to what is a complex calculation, so if you require personalised information, please get in contact with Chris.

Yes, I would like to arrange a call to discuss my personal situation

Settlement basis up to (euros)	Fee (Euros)	Other net base up to (euros)	Applicable Rate %
0.00	0.00	167,129.45	0.20%
167,129.45	334.26	167,123.43	0.30%
334,252.88	835.63	334,246.87	0.50%
668,499.75	2,506.86	668,499.76	0.90%
1,336,999.51	8,523.36	1,336,999.50	1.30%
2,673,999.01	25,904.35	2,673,999.02	1.70%
5,347,998.03	71,362.33	5,347,998.03	2.10%
10,695,996.06	183,670.29	Thereafter	2.50%

Source: Balcell’s Group

Autonomous Community	Wealth Tax % Variation
Catalonia	Between 0.21% and 2.75%
Asturias	Between 0.22% and 3%
Region of Murcia	Between 0.24% and 3%
Adalusia	Between 0.24% and 3.03%
Community of Valencia	Between 0.25% and 3.12%
Balearics	Between 0.28% and 3.45%
Extremadura	Between 0.30% and 3.75%

Source: Balcell’s Group

There are ways in which you can mitigate the wealth tax you are required to pay, as noted in the above table, some assets are exempt. Therefore, if you transfer your wealth into these assets then they will not be included as part of your wealth tax calculation. For example, you may not be liable to wealth tax on assets that you transfer to shareholdings in family businesses or certain household or commercial assets.

However, this is not a straightforward process and certain criteria must be met. For example, if you transfer your capital to a ‘family business’, then there are strict regulations on what constitutes a family business, which assets qualify and how you do this. And if you were to utilise your capital to purchase household contents, certain items such as art are not exempt.

Another way to mitigate wealth tax is by relocating. There are a few countries in Europe in which you would not have to pay the wealth tax such as Sweden, Luxembourg, Denmark, Germany and Austria or France. In the UK, they are considering implementing a wealth tax. If you prefer to stay in Spain, then residents of Madrid are exempt from wealth tax so it may be beneficial relocating there.

Finally, you can effectively double your wealth tax exemption threshold by getting married! The wealth tax exemption threshold will then be increased as everyone person is entitled to it. This also counts for the main residence allowance; therefore you may not be liable on wealth tax on your main residence up to €600,000.

Being efficient with your monies/assets from a tax perspective is almost as important as making your money grow. If you would like to seek specialist advice, Chris Burke is able to review your pensions, investments and other assets and evaluate your current tax liabilities, with the potential to make them more tax effective moving forward. If you would like to find out more or to talk through your situation and receive expert, factual advice, don’t hesitate to get in touch with Chris via the form below, or make a direct virtual appointment here.

Disclaimer: Spectrum IFA do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Yes, I would like to arrange a call to discuss my personal situation

Spanish tax on UK property

By John Hayward
This article is published on: 29th March 2022

29.03.22

In February I wrote about the impact on investments with Russia’s invasion of Ukraine and inflation rearing its ugly head. For the last month or so, the movement of global stock markets has attracted comparisons to a violin player’s arm joint and the undergarments of a professional lady. This is possibly the future for investments for a while although there appears to be more positive than negative movement (at the time of writing in case there has been a sudden catastrophe).

In the meantime, away from the uncertainty of how much a tank of fuel will cost in 6 months’ time, I want to mention something regarding Spanish tax on UK property.

31st March 2022. The end of the declaration period for everyone’s favourite, the Modelo 720. Although this is not a tax declaration, it does highlight assets and how these might be taxed in the future, whether this be capital gains tax, wealth tax, inheritance tax, or income tax. Focusing on the latter, I believe that it is generally not appreciated that a tax resident in Spain has to pay income tax on a UK property, even if it is not rented out.

Download your guide to tax in Spain here

It is (fairly) well known that, if you are a not tax resident in Spain, and you own a property in Spain, and you receive rental income, you have to pay Non-Resident Income Tax (NRIT) or Non-Resident Imputed Income Tax (NRIIT) if you do not receive rental income, perhaps both depending on how much of the tax year (1st January to 31st December) it is rented out. Imputed rent is a fictional amount of rent that the Spanish tax office decides is what you are receiving based on the cadastral value. It works the other way around. That is, if you are a tax resident in Spain with a UK property, and you do not rent it out, you still have to pay tax on the imputed rent.

How is the tax calculated? UK properties do not have a thing called a cadastral value. Some have said on the (not always reliable) worldwide web that it would be the rateable value that would be used. The actual rule is that, if there is no cadastral value, the tax is based on 50% of the original purchase price with the application of a rate of 1.1%. That gives you the imputed rent. It is this figure that would be used for income tax purposes.

For some people, this may not introduce a problem, especially when considering the double tax treaty between the UK and Spain. It is the fact that those who should have been declaring this “income” have not been and my message could prompt a chat with their tax agent. The Spanish tax office is regularly sweeping up what they (or their computer) see as outstanding items, often up to 4 years old in line with Spain’s statute of limitations.

Contact me today for more information on how we can help you to protect your assets from unnecessary taxation and 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.