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La Isla de Las Calmas (mostly!).

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.

Expat in Spain or Moving to Spain?
27 April 2016 @ 19:24

by Sandy Paterson

Expat in Spain or Moving to Spain?

Austerity measures introduced as a result of the financial crisis in Spain have given rise to the Spanish Tax Authorities (Hacienda) looking to “top up the pot”, with Expat’s seen as a “soft target”. Sound familiar?

However, there are legitimate Spanish tax compliant solutions from internationally recognised companies which can be used to protect much of your savings and wealth from taxation.


As always with taxation the need to establish residency is key, so are you a Spanish Tax Resident?

Establishing residency in Spain is relatively simple. You are a Spanish resident if you:

  • Live in Spain more than 183 days (not necessarily in one sitting). Or;
  • Have your “centre of vital interest” in Spain. These rules have been tightened to catch those who deliberately spend less than 183 days a year in Spain to avoid tax.

How do you avoid this?

Solutions are available such as Spanish Compliant Investment Bonds, these are very useful because they:

  • Do not need to be declared on Modelo 720
  • Are structured to be “compliant” for Spanish tax
  • Allow tax liabilities to be calculated by the bond provider and paid directly to the Hacienda
  • Avoid probate on death
  • Are Inheritance tax efficient
  • Have very favourable tax treatment in Spain, although still taxable to a small extent
  • Can access a large range of investments to suit different risk profiles, including low risk capital protected funds 

Using compliant investment bonds created specifically for Expats in Spain saves tax and keeps the Hacienda at arms-length.

Other questions I’m asked by Expats:

What happens when I die?

For Spanish residents succession law applies to worldwide assets and when assets are passed between spouses either during life or on death. Since August 2015 the EU has allowed you to choose your native country or country of residence with regards to Inheritance Tax. Which should you choose?

Are my current investments tax efficient?

Your UK & Offshore (Isle of Man, Jersey etc.) bank accounts and investments including ISA's and National Savings are not recognised under Spanish Law and are liable to Spanish tax at the highest rate. They need to be declared (Modelo 720) above a certain sum. Have you declared yet?

UK pension or QROPS?

Given the importance of your pension, ensuring the tax efficiency and safety of your pension fund needs careful planning. Should the pension remain in the UK or is it better elsewhere, in a QROPS for example? How can Income be structured to pay the lowest possible tax?

Advice is Crucial

Professional, Independent Financial Advice combined with locally compliant products will help you reach your financial goals tax-efficiently, and without being tripped up by the Hacienda.

Get in touch with us now to discuss your options. In the meantime you could request one of our FREE Financial Guides.

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