How Spanish Compliant Bonds are taxed

Standard Investment Account vs Spanish Compliant Bond

Example: Initial investment: €1,000,000; Over time the portfolio has grown to €1.200,000; Unrealised gain: €200,000. Withdrawal: €60,000 (Other Currencies are available).

The Spanish compliant bond provides a much lower effective tax rate on withdrawals, as only the gain portion is taxed. This results in significant tax savings and a higher net withdrawal amount for the investor.

Key Differences Explained

• Standard Account: The entire €60,000 withdrawal is taxed at Spain's progressive capital gains rates:
• 19% on first €6,000 = €1,140
• 21% on next €44,000 = €9,240
• 23% on next €10,000 = €2,300
• Total tax: €12,680

Compliant Bond: Only the gain portion of the withdrawal is taxed. With total gains of €200,000 (from €1M to €1.2M), the gain percentage is:
Gain % = 200,000 / 1,200,000 = 16.67%
So, only €10,000 (€60,000 × 16.67%) is taxable. Applying the same progressive rates:

• 19% on €6,000 = €1,140
• 21% on remaining €4,000 = €840
• Total tax: €1,980

Why Compliant Bonds Are Tax-Efficient

• Tax Deferral: Gains compound tax-free until withdrawal.
• Partial Taxation: Only the profit portion of withdrawals is taxed, not the principal.
• Progressive Rate Optimization: Smaller taxable amounts stay in lower tax brackets.

Summary: The Spanish compliant bond provides €10,700 more after-tax income (€58,020 vs €47,320) for this €60,000 withdrawal, demonstrating significant tax savings.

Patrick Macdonald ASCI
International Financial Adviser