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Musings from Mallorca. Some on Financial Advice. Some on how to legitimately reduce your Spanish tax bill. Plus some Life Stories from our fabulous Island.

Offshore Bonds - Are they efficient in Spain?
27 April 2016 @ 18:59

Resident in Spain with money in the Isle of Man? Caught on the merry-go-round of disclosure?

by Sandy Paterson

Resident in Spain with money in the Isle of Man? Caught on the merry-go-round of disclosure?

The Treasury Minister of the Isle of Man – Eddie Teare and José Manuel Gutiérrez Delgado, Financial Counsellor of the Embassy of Spain to the UK have jointly signed the Tax Information Exchange Agreement (TIEA) between the two governments effectively ending Spain’s 2006 “blacklisting” of the island as a financial jurisdiction.

Once heralded as “redundant” by the Isle of Man Chief Minister Allan Bell, the TIEA between the Isle of Man and Spain is the first entered into by the Island since the 2013 agreement with Luxembourg. Spain has not signed a double taxation agreement since 2011 with the Czech Replublic.

Both Spain and the Isle of Man were early adopters of the OECD Common Reporting Standard where financial information is shared between jurisdictions in an effort to root out tax evasion and financial crime.

Teare stated: “This recognition of our shared values and goals makes the TIEA a very significant addition to the Isle of Man’s network of international tax agreements.”

What does this mean if you have money on the Isle of Man?

Declared foreign assets as a Spanish resident including those on the Isle of Man (via Modelo 720) will already be accounted for and taxed accordingly by the Hacienda. For those assets which have not yet been declared or are being deliberately hidden then the net is closing in. For more on this subject read our previous articles “No place left to hide” and "Huge non-disclosure fine for Spanish resident"

How can you invest compliantly?

Spanish tax compliant bonds which are recognised by the Hacienda and afforded very preferential treatment for tax are available for Spanish resident investors.

Taxation comparison between non-compliant investments and Spanish compliant investments

Non-compliant taxation

Mr Expat invests 100000€ in a non-compliant offshore investment bond on 1st Jan 2014 and a year later the bond has grown by 10% to 110000€. Good news so far until the taxation is considered as followed:

  • No withdrawals have been taken at all.
  • The Gain is 110000€ - 100000€ original investment = 10000€.
  • The first 6000€ is taxed at 19.5% and the remaining 4000€ is taxed at 21.5%. The calculation needs to be made by Mr Expat (or he could pay a Gestor or Accountant to do it) and the appropriate tax withheld for payment to the Hacienda on his tax return.
  • The total investment tax bill would be 1170€ + 860€ = 2030€ which would reduce the value of the bond to 107970€.

Had Mr Expat invested in a Spanish Tax Compliant Bond instead, no investment tax would be payable and he would not even need to declare the plan to the Hacienda, read more here...

Take a look at our FREE Guide on Spanish Compliant Investments. If you need to discuss your situation now then get in touch with one of our Independent Financial Advisers in Mallorca today.



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