Investing and Tax efficiency in Spain. Blacktower Financial Management

Expats from the UK coming to live in Spain often have investments such as ISA’s, Tessa’s, PEP’s or
some form of National Savings. Whilst living in the UK these investments offered excellent tax efficiency helping towards the growth of their investment.

Once you live in Spain the tax benefits offered by these tax efficient investments disappears and any growth becomes subject to the savings tax rates applied by the Hacienda. This means when doing
your tax returns in Spain, you may face an unwelcome surprise in the form of a tax bill derived from the growth that these UK investments have made and where no tax has been previously deducted.

This is because the double taxation treaty that exists means that you will be taxed at a rate of the difference you would have paid in Spain compared to what has already been paid by the relevant UK institution on your behalf. The amount is usually 19% in Spain so if your ISA has increased in value by £1000 then you can expect an extra tax bill of £190 (approx. €220) dropping in your post. If you have made more than €6000 in the year then the tax rate increase even more so you could be paying as much as 22%.

There are investments available to UK expats in Spain that do have tax efficient benefits which can help you control and plan the tax payable and with careful planning tax can be avoided or at least deferred. These Investments are called Spanish Compliant Bonds and are provided by large institutions such as The Prudential, SEB or Old Mutual but can only be obtained through an intermediary or Financial Adviser to make sure the most suitable type is recommended.

The Spanish Compliant Bond providers also have a fiscal representative to the Hacienda which means you do not have to complete a Modelo 720 (asset declaration) if you hold these investments which can also save you time and money when doing your tax returns each year and also help you avoid fines for
non-declaration. If you hold in excess of €50,000 combined in all UK cash investments like ISA’s etc then you must complete the Modelo 720.

In today’s financial climate it is essential you do everything you can to make sure your money is safe and secure and what you want to transpire in the future has the best chance happening and helping
your own family members.

The local Blacktower office address is: 120 Avenida Dr. Artero Guirao 2C. San Pedro Del Pinatar, 30740, Murcia, Spain. Our office suite is easy to find on the main N332 through road of San Pedro del Pinatar with easy parking.
 
The above information was correct at the time of preparation and does not constitute investment advice and you should seek advice from a professional adviser before embarking on any financial planning activity. Blacktower Financial Management (Int) Ltd is licensed in Gibraltar by the Financial Services Commission (FSC) and is registered with both the DGS and CNMV in Spain.