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We provide a comprehensive wealth management and tax planning service to Expats living in Spain, those considering moving to Spain and Expatriates who are returning from Spain to their home country.

There are some very significant differences between the tax regime in Spain and the way your tax is levied in the UK and other countries and without professional help in understanding the differences there could be a serious negative effect on your wealth. There are even taxes in Spain that Expats will not have encountered before such as Wealth Tax and notional rent tax.

Tax in Spain

The tax you pay in Spain depends not only on the rates set by the government but also the autonomous region where you are resident. You will pay:

  • Income tax at a top of rate of 45% to 48%, depending on region
  • Up to 23% income tax on savings
  • Tax on capital gains made on property and investments
  • An annual wealth tax of between 0.2% and 3.5% on your worldwide assets
  • Non-residents could be liable for Spanish taxes, for example, when buying or selling property in Spain.

Tax Planning Advice For Expats Living in Spain is Essential

Without proper tax planning in Spain you could end up paying considerably more Spanish tax than necessary. The rules are complicated and there is a requirement to annually declare all overseas assets. With the introduction of Common Reporting Standards the Spanish tax authorities will also automatically receive information about your income and asset holdings elsewhere so it is important to ensure that your tax declarations are correct.

Although the regime sounds onerous with our help you should be able to enjoy favourable tax treatment.

Investments & Pensions

Our financial advisers are here to help you restructure your investments and pensions in Spain to ensure that you benefit from the tax efficient schemes available to Expats in Spain. It is really important that you recognize that tax efficiency means aligning your assets with your residential status. Holding onto UK investments when tax resident in Spain can be detrimental to your wealth and it is equally important to review your pension arrangements preferably before you move to Spain particularly if you intend to retire there.

Tax in Spain - Estate planning and Inheritance Tax Spain

Spanish succession tax works very differently from UK Inheritance tax and the effect on your heirs depends on their relationship to you and where they live. Succession tax rates go up to 34%, but with 'multipliers' can reach 82% in extreme cases. Living in Spain does not mean that your liability for UK Inheritance Tax disappears. UK domicile rules mean that your worldwide assets can be subject to IHT and despite a double taxation agreement between UK and Spain there could be situations where you could be paying death taxes in both countries. With careful planning our Expat experts will guide you through this complex area of planning to help minimise your liabilities in both jurisdictions.

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Frequently Asked Questions about Financial Planning Advice For British Expats In Spain

Welcome to our FAQ for British Expats in Spain seeking financial planning advice! If you're a British expat residing in Spain or planning to relocate there, this guide is designed to provide you with valuable insights and answers to common questions regarding tax in Spain and your financial planning needs.

Living abroad presents unique financial considerations, and as a British expat in Spain, you may have questions about various aspects of managing your finances, such as tax planning, investment strategies, pension transfers, and estate planning. Navigating these areas can be complex, which is why we've compiled this FAQ to address the most common queries and provide guidance tailored to your specific circumstances.

While we strive to provide accurate and up-to-date information, it's important to note that financial regulations and tax laws can change over time. Therefore, we highly recommend consulting with a qualified financial advisor or tax specialist who is experienced in working with British expats in Spain. They can provide personalized advice based on your unique situation and help you make informed decisions to secure your financial future.

Let's dive into our FAQ and empower you with the knowledge and resources you need to navigate the financial landscape as a British expat in Spain.

Moving to Spain can have various tax implications depending on your residency status, sources of income, and the specific tax regulations in Spain. Here are some key tax implications to consider:

Residency Status: If you become a tax resident in Spain, you will generally be subject to Spanish taxation on your worldwide income and assets. The determination of residency status is based on factors such as the number of days spent in Spain, family ties, and economic interests. It's important to understand the residency rules and consult with a tax professional to assess your specific situation.

Income Tax: As a Spanish tax resident, you will be liable for Spanish income tax on your employment income, self-employment income, rental income, and other sources of income. The income tax rates in Spain are progressive, meaning that higher income levels are subject to higher tax rates. It's crucial to understand the income tax brackets and rates applicable to your income level.

Wealth Tax: Spain also levies a wealth tax (Impuesto sobre el Patrimonio) on the net wealth of Spanish tax residents. The tax rates and exemptions vary by region, as regional governments have the authority to set their own rates within certain limits. It's important to be aware of the wealth tax regulations in the specific region where you reside.

Capital Gains Tax: Capital gains realized from the sale of assets, such as property or investments, may be subject to capital gains tax in Spain. The tax rates and exemptions depend on various factors, including the nature of the asset and the holding period. Some specific exemptions or reductions may apply in certain cases, such as the sale of a primary residence.

Inheritance and Gift Tax: Spain imposes inheritance and gift tax (Impuesto sobre Sucesiones y Donaciones) on transfers of assets through inheritance or gifts. The tax rates and exemptions vary by region, and there may be tax reliefs or exemptions available for certain categories of beneficiaries, such as spouses and close relatives.

Double Taxation Treaties: If you are moving from the UK to Spain, it's important to consider the double taxation treaty between the two countries. These treaties aim to avoid double taxation by determining which country has the primary taxing rights for specific types of income. The treaty may provide mechanisms for tax relief, such as tax credits or exemptions, to prevent or mitigate double taxation.

It's essential to consult with a tax professional who specializes in international taxation and is familiar with the tax laws of both Spain and your home country. They can assess your specific circumstances, provide guidance on the tax implications of your move to Spain, and help you navigate the complexities of cross-border taxation.

The tax implications for individuals living in Spain but paying taxes in the UK can be complex and depend on various factors. Generally, if you are a tax resident in Spain, you are required to pay taxes in Spain on your worldwide income. However, if you are a UK resident for tax purposes and can claim the status of a non-resident in Spain, you may be able to continue paying taxes in the UK. It is crucial to seek professional advice from a tax expert who is knowledgeable about both UK and Spanish tax regulations to understand your specific situation and ensure compliance with the relevant tax laws.

Tax residency rules in Spain determine whether you are considered a tax resident in the country and, consequently, impact your tax obligations. Here's an overview of the tax residency rules for an individual with residency in Spain and their implications:

Residency Test: In Spain, tax residency is primarily determined by the "183-day rule." If you spend 183 days or more in Spain within a calendar year, you are generally considered a tax resident. However, even if you spend fewer than 183 days in Spain, you may still be deemed a tax resident if your primary or economic interests are located in Spain, such as your family, employment, or business activities.

Worldwide Income Taxation: As a tax resident in Spain, you are subject to taxation on your worldwide income. This includes income earned from employment, self-employment, rental properties, capital gains, dividends, and other sources. It's important to declare and pay taxes on all relevant income, regardless of whether it originates in Spain or abroad.

Tax Treaty Considerations: If you are a tax resident in Spain and also have income or assets in another country, you may be eligible for certain tax benefits under a tax treaty between Spain and that country. Tax treaties aim to avoid double taxation and determine the taxing rights between countries. They typically provide mechanisms to prevent or mitigate double taxation, such as tax credits or exemptions. Understanding the provisions of any applicable tax treaties is crucial to ensure you benefit from any available tax relief.

Wealth and Gift Tax: Spain has a wealth tax (Impuesto sobre el Patrimonio) and a gift and inheritance tax (Impuesto sobre Sucesiones y Donaciones). The wealth tax applies to the net worth of individuals, including worldwide assets, exceeding a certain threshold. The gift and inheritance tax is levied on the transfer of assets by gift or inheritance. The rates and exemptions for these taxes can vary between autonomous communities in Spain.

It's important to note that tax laws and regulations can change, and individual circumstances may vary. Therefore, it's highly recommended to consult with a tax advisor or specialist who is knowledgeable about Spanish tax laws. They can help you determine your tax residency status, understand your tax obligations in Spain, and ensure compliance with the applicable tax laws. They can also provide guidance on any tax treaty considerations, exemptions, or deductions that may be applicable to your specific situation.

Yes, it is possible for expats to obtain a mortgage in Spain. Many Spanish banks and financial institutions offer mortgage products specifically tailored for non-Spanish residents. The requirements and conditions may vary depending on the lender, but typically you will need to provide proof of income, employment status, and financial stability. It is also common for lenders to require a deposit of around 20-30% of the property's value. It is advisable to consult with several banks or mortgage brokers to compare offers and find the best terms and conditions for your specific circumstances. Working with local financial advisors in Spain who are familiar with the Spanish mortgage process can also be beneficial to ensure a smooth application process and understanding of all legal aspects.

Managing your pension and retirement planning as a British expat in Spain requires careful consideration of various factors. Here are some strategies to help you effectively manage your pension and plan for retirement:

Understand Your UK Pension Options: Start by understanding the types of pensions you hold in the UK, such as defined benefit (final salary) or defined contribution (personal or workplace) pensions. Determine whether it is more beneficial to keep your pension in the UK or transfer it to a suitable pension scheme in Spain.

Consider UK Pension Transfers: Transferring your UK pension to a Qualifying Recognized Overseas Pension Scheme (QROPS) to a country with a double taxation treaty with Spain may offer advantages such as increased flexibility, potential tax benefits, and the ability to manage your pension in the local currency. However, pension transfers involve complex considerations, so seek professional advice from a qualified financial advisor or pension specialist who can assess the suitability and implications of a transfer for your specific circumstances.

Seek Expert Financial Advice: Engage the services of a financial advisor or wealth manager who specializes in working with expatriates in Spain. They can provide personalized advice based on your retirement goals, risk tolerance, and tax considerations. A professional can help you develop a comprehensive retirement plan, optimize your pension strategy, and align your investments with your long-term objectives.

Understand Tax in Spain: Familiarize yourself with the tax laws and regulations in Spain, particularly as they pertain to retirement income and pensions. Consider the tax implications of different pension options, as well as any tax treaties between the UK and Spain that may impact your pension income. A tax advisor with expertise in both countries can provide guidance on optimizing your tax situation.

Review Retirement Income Sources: Evaluate your various income sources in retirement, including your pension(s), investment income, rental income, and potential Social Security benefits. Determine how these income sources align with your desired retirement lifestyle and consider strategies to maximize and sustain your retirement income.

Plan for Currency Exchange: If you receive your pension income in British pounds (GBP) and reside in Spain, you will need to convert it into euros (EUR) for your day-to-day living expenses. Consider the impact of currency exchange rates on your income and explore strategies to minimize exchange rate risks, such as using currency exchange services or setting up regular transfers at favourable rates.

Regularly Review and Adjust Your Retirement Plan: Regularly assess your retirement plan to ensure it remains aligned with your financial goals and changing circumstances. Monitor investment performance, adjust your asset allocation as needed, and stay informed about any changes in pension regulations, tax laws, or retirement policies that may impact your plan.

Consider Healthcare and Long-Term Care: Evaluate your healthcare and long-term care needs in retirement. Familiarize yourself with the healthcare system in Spain, including public and private options, and ensure you have appropriate health insurance coverage to meet your needs.

Retirement planning is a long-term endeavour, and individual circumstances vary. Working with professionals who are well-versed in pension regulations, tax laws, and retirement planning in both the UK and Spain is crucial. They can provide personalized guidance, help you navigate the complexities of cross-border retirement planning, and ensure your pension and retirement strategy align with your goals in Spain.

Inheritance tax implications for British expats in Spain can vary depending on several factors, including your residency status, the location of your assets, and any applicable tax treaties between the UK and Spain. Here are some key considerations:

Residency in Spain Status: If you are a tax resident in Spain, your worldwide assets, including inheritance, may be subject to Spanish inheritance tax. The tax rates and exemptions can vary depending on the autonomous community where you reside in Spain.

Domicile vs. Residence: Inheritance tax in Spain is primarily based on residence rather than domicile. This means that even if you are not domiciled in Spain, your Spanish assets may still be subject to inheritance tax in Spain if you are a tax resident. (Note: You are also likely to be liable to UK IHT due to UK Domicile.)

Double Taxation Treaties: The UK and Spain have a double taxation treaty that aims to avoid double taxation on assets subject to inheritance tax. This treaty may provide mechanisms to reduce or eliminate double taxation by determining which country has the primary taxing rights for specific assets.

Tax Exemptions and Deductions: In Spain, there are certain exemptions and deductions available for inheritance tax purposes. These can vary depending on factors such as the relationship between the deceased and the beneficiary, the value of the inherited assets, and the specific regulations of the autonomous community. It's essential to understand the local rules and consult with a tax advisor to identify any applicable exemptions or deductions.

Lifetime Planning: British expats with residency in Spain may consider estate planning strategies to mitigate the impact of inheritance tax. These may include making lifetime gifts, setting up trusts, or structuring assets in a tax-efficient manner. Seeking advice from an estate planning specialist who understands the laws and regulations in both the UK and Spain is recommended.

It's important to note tax in Spain can change, and individual circumstances may vary. Therefore, it's highly recommended to consult with a tax advisor or financial advisor who is knowledgeable about Spanish tax and UK tax laws, as well as any relevant tax treaties. They can assess your specific situation, provide guidance on the inheritance tax implications, and help you develop an estate plan that aligns with your goals while considering the applicable tax regulations in Spain.

Yes, wealth tax, also known as Patrimonio, is applicable in Spain. However, it's important to note that the tax regulations and exemptions related to wealth tax can vary between regions in Spain, as it is a regional tax. This means that the specific requirements and thresholds may differ depending on the autonomous community where you reside.

In general, Spanish residents, including British expats living in Spain, are subject to wealth tax on their worldwide assets if the total value exceeds the minimum threshold set by the regional government. The taxable assets may include properties, investments, bank accounts, vehicles, and more.

It's worth noting that each autonomous community has the authority to establish its own wealth tax rates, deductions, and exemptions. As a result, the tax liability and applicable rates can differ depending on your specific location in Spain.

To understand the specific wealth tax regulations and rates in your region, it is advisable to consult with a tax advisor or professional who is familiar with the tax laws of the autonomous community where you reside. They can provide accurate information tailored to your circumstances and guide you through the process of fulfilling your tax obligations in Spain.

Spain has recently introduced a solidarity tax for high-net-worth individuals at a national level. There is an ongoing debate about its legality as it may not be compatible with the Spanish Constitution and the law which grants the autonomous regions the power to charge a wealth tax in their territories.

The taxation of your UK property as an expat living in Spain depends on various factors. Generally, if you own a property in the UK, it may be subject to taxes such as income tax, capital gains tax (CGT), and potentially inheritance tax (IHT).

Income Tax: If you rent out your UK property, the rental income generated is typically subject to UK income tax. As a Spanish tax resident, you may also need to declare and pay taxes on this rental income in Spain, based on the double tax treaty between the two countries.

Capital Gains Tax (CGT): If you sell your UK property, you may be liable for UK CGT on the profit made from the sale. However, as a Spanish tax resident, you may also need to consider the potential taxation of the capital gains in Spain. It is important to understand the tax rules and exemptions in both countries to assess any potential tax liabilities.

Inheritance Tax Spain (IHT): In the event of your passing, your UK property may be subject to UK inheritance tax. However, as a Spanish tax resident, you may also need to consider the potential application of Spanish inheritance tax laws, which could affect the value of your estate.

To ensure compliance with tax regulations in both countries and to optimize your tax position, it is advisable to seek advice from a tax professional who is familiar with the tax laws in both Spain and the UK. They can provide personalized guidance based on your specific circumstances and help you navigate the complexities of cross-border property taxation.

In most cases it is not possible to continue using your UK financial adviser while living in Spain. Firstly, check if your financial adviser is authorized to provide services to clients residing outside of the UK. Some advisers may have the necessary qualifications or licenses to offer international services. Secondly, be aware that there may be limitations in terms of their knowledge of Spanish tax laws and regulations. It's recommended to work with a financial adviser who has expertise in both UK and Spanish tax matters or consider seeking the assistance of a local financial adviser who can provide guidance specific to your situation in Spain. This will ensure that you receive comprehensive advice and take into account any applicable tax implications or other factors relevant to your expatriate status.

No, our services are not restricted to British nationals. We provide assistance and support to expats from various countries, including but not limited to British nationals, who are living in Spain or planning to relocate there. Our services are designed to cater to the needs of a diverse range of expatriates, irrespective of their nationality. Whether you require guidance on legal matters, advice on tax in Spain, or general information about living in Spain as an expat, our team is here to help you navigate the complexities and provide valuable assistance regardless of your nationality.

Summary

In conclusion, financial planning plays a vital role in ensuring a secure financial future for British expats in Spain. Whether you're concerned about tax planning, retirement savings, wealth management, or other financial aspects, seeking professional advice is crucial. By working with experienced financial advisors who understand the Spanish tax landscape, you can make informed decisions and optimize your financial situation. Consider factors such as residency requirements, tax obligations, investment opportunities, and healthcare provisions. With the right financial planning advice, you can navigate the Spanish tax system confidently and take steps towards achieving your financial goals as a British expat in Spain.

Talk To Us

Whether you are moving to Spain or already living in Spain you should speak directly to a locally based, professionally qualified, personal financial advisor, specialising in Expats in Spain, about your personal financial planning needs.

Please contact us on Tel: +44 207 998 0570 or email connect@fwm.gi