Pain in Spain !!

I have taken up full residence status in Spain ( near to Alicante ).
I have an existing Isle of Man Life Investment Bond.

A firm called DeVere have told me to cash this in and to start
a plan with an Irish firm called SEB.

But my original advisor in Switzerland says that there is a real
danger that all of my gain on my IOM Bond could be taxed
with the top level being at 27% !  The Bond has been in force
for 11 years but I have only been a tax resident in Spain for
one year.

Can the Spain tax man really do this to me !?

I have also been told that the tax man might even view the
proceeds as an 'add on' to my pension income and will tax
all of the cash in sum rather than just the gain….this seems preposterous !

Can anyone advise any solution s.v.p ?

Can the Spain tax man really do this to me !?

Yes

You need to know if you pay tax on the accured interest annually or not until maturity.

Get a second or even a third opinion

If your bond is worth more than 50,000€ you will have to report it on a modelo 720 filed by the end of March 2016

If your bond is worth more than 50,000€ you will have to report it on a modelo 720 filed by the end of March 2016.

 That applies to all assets located outside Spain if they exceed 50,000€ in total in any of the three groups. Example:  6 bank / savings/ investment accounts if they exceed 50,000€ in total,  then all must be declared.  Or say a property or properties worth more than that, in total.   

There is no tax to pay for just having bank assets but of course any income from them must be declared as income (as qualified by any Double Taxation Agreement) and when one dies the taxman will of course know all the assets one held.

For info :   A Spaniard who failed to declare assets in Switzerland  has recently been fined 460,000€ for not declaring 350,000€ in savings (NB these figure are about right).

A tax resident in Spain must also pay ‘second home tax’ on any property which is in addition to their principle home, no matter where in the world it  is.    We pay that tax on a property owned by my wife in The Philippines, albeit that her family live in it rent free,  and on a lockup garage, which is separate from my principle home,  in Spain.

Can you tell me whether this 'second home tax' applies to a tax resident in Spain if they own a UK property but rent one in Spain please?

My other question about the tax system in Spain is regarding an income protection policy. In the UK one doesn't pay tax on income protection payouts but is this the case for a tax resident in Spain. I can't find any information to answer this question. 

Can you tell me whether this 'second home tax' applies to a tax resident in Spain if they own a UK property but rent one in Spain please?

Simple answer is yes.

I cannot help re the other question

If you are a resident in Spain all you're investments out side of Spain become taxable in Spain including you're pensions.

This message was last edited by windtalker on 02/08/2015.

Your income protection policy payouts are, to my astonishment, still tax free in the UK.   This unexpected boost was only brought in in the mid 1990s, and could change at any time.   I am certain that this income will be taxable in Spain. It is simply an oddity of our tax system that the relief was given and even odder that is has been  maintained.  

We have two friends who are retired head teachers, they are pension rich and cash/investments poor. We are the complete opposite having current joint pensions of £25K p/a with considerable cash/property and equity investments. I have taken note of other forum member's posts on this subject and have concluded that Spain is not the place to make our tax declarations, I invite your comment.  

......................and have concluded that Spain is not the place to make our tax declarations,

Then you need to make sure you do become tax resident in Spain.

If you are then you do not have choice where you pay your taxes.

With the exception of former government employee pensions (and that is changing) and rental income in say UK, (which is liable to tax in both countries) if you are resident in Spain it is in Spain where you pay your taxes

What I actually meant john is that it is my opinion that it would be safer/easier for our two retired head teacher friends to live and pay their taxes in Spain than it would for us. They have joint pensions exceeding £100K p/a, very little in savings and a UK property worth circa £250K, whilst our portfolio is somewhat more complicated.

I should have asked the question rhetorically as I was just thinking that well pensioned folk with little actual wealth would fare better in Spain than folk like us.

I believe the pensions paid to teachers, who worked in the public sector, are Crown Pensions (http://www.hmrc.gov.uk/manuals/intmanual/INTM343040.htm) and thus they are taxable ONLY in UK.    

Until the declarations made in 2015, they would have enjoyed two free tax allowance. One in UK on their Crown Pensions and one in Spain on the rest of their income. Including OAP.  As from next year the Crown Pension income will be taken into account by Hacienda to determine the tax band for those liable to income tax in Spain. It will remain taxable only in UK, but as one's tax band will increase that will I believe mean more tax to pay in Spain on the other assets.   Which in effect means paying increased tax on their Crown Pension, albeit in another guise.

Having a property in UK which is not making any income would be taxed in Spain as a second home only. I understand that would be 50% of the purchase price   x    1.1%   x  24.75%  =   tax due. Two owners would each make a declaration with regard to their share.

Assets, excluding property,  not producing income, outside Spain are not generally taxed.  (720 declaration)

However `well pensioned folk’ who have any pensions other that Crown Pension, or any income worldwide,  do not get any tax concessions in Spain.

In your situation it would appear you would declare in UK any rental income and then declare in Spain where you might have further tax to pay.  I suspect you would pay less tax if you live in UK than if you become resident in Spain.