Financial Planning for Expats in Spain
Spain is a wonderful country where sun, sea and hearty food reign supreme. However, the tax and investment landscape here is markedly different to other Western nations. Care must be taken prior to making the move, and also once settled in Spain, to avoid mistakes.
On this page, we break down the key elements to bear in mind.
Getting set up in Spain
Are you moving to Spain, or live here already?
Continue reading to understand the basics, or book a free review with a qualified expert using the button below.
Before you arrive
When you move to Spain, your financial affairs (savings, pensions and investments) are taxed differently. It is therefore vitally important that you seek advice to ensure you avoid the many tax traps that exist. The process of moving can be time-consuming, confusing and stressful – as a result, many do not realise how best to structure their assets until it is too late. Be sure to speak to an adviser before making the move.
Avoiding Tax Traps
In my experience, there are 3 main areas where UK expats in Spain are most frequently stung by the Spanish tax authorities:
(1) ISAs and premium bonds: when you move to Spain, you are taxed as a Spanish resident. Whilst UK ISAs and premium bonds are tax efficient for UK residents, Spanish residents are liable to tax on all profits. It is usually advisable to move out of your ISA holdings and premium bonds before becoming resident in Spain.
(2) Property: selling your primary residence in the UK does not incur Capital Gains Tax, provided you are UK tax resident at the time of the sale. However, primary residence relief does not work in the same way in Spain. Selling up while UK resident, or seeking further advice if this isn’t possible, is usually the way to go to avoid a hefty bill.
(3) Other savings & investments: whereas UK residents benefit from the generous Capital Gains Tax Allowance and Personal Allowance on their (non-ISA) savings and investments, Spanish tax residents have no such allowance. It may, therefore, be worth maxing this out (through sale and repurchase) before making the move. An adviser can add tremendous value here.
Download our tax guide to learn more about the Spanish system.
Spanish Compliant Savings & Investments
Whilst tax traps may sound scary, Spanish residents do have several tools at their disposal to optimise their financial affairs and reduce their tax bill. This can be by making the most of the peculiarities of the Spanish tax system (particularly regarding the wealth tax) and by structuring their savings and investments in a tax compliant manner. These strategies are usually underpinned by the use of Spanish Compliant Bonds, a tax efficient investment wrapper for residents of Spain.
Spanish Compliant Bonds
Spanish Compliant Bonds are investment vehicles that allow residents of Spain to invest in financial securities. This includes funds, shares, ETFs, gilts, bonds, unit trusts, investment trusts, REITs and more.
Note that “bond” does not mean that we can only invest in fixed-income securities. It is simply the name of the vehicle that is used to hold your savings and investments (much like an ISA in the UK).
Spanish Compliant Bonds bring with them an array of taxation benefits, and are a highly versatile financial planning tool. Download our free guide “Tax Compliant Investing in Spain” to learn more.
Pensions & Retirement
The issue of pensions is a complex and nuanced one. Depending on the types of pensions you hold (and your own personal circumstances), you may stand to benefit from transferring your pension(s) into a dedicated Spanish compliant pensions vehicle. These are known as QROPS or International SIPPs. Take a look at our dedicated webinar on the subject to learn more.
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