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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).

Comparison Element Standard Investment Account Spanish Compliant Bond
Withdrawal Amount (€) 60,000 60,000
Gain Ratio 100% (All withdrawal is gain) 16.67% (200,000/1,200,000)
Taxable Amount (€) 60,000 10,000
Tax Bands Applied 19% on first €6,000 (€1,140)
21% on next €44,000 (€9,240)
23% on remaining €10,000 (€2,300)
19% on first €6,000 (€1,140)
21% on next €4,000 (€840)
Total Tax Due (€) 1,140 + 9,240 + 2,300 = 12,680 1,140 + 840 = 1,980
Effective Tax Rate 21.1% (12,680/60,000) 3.3% (1,980/60,000)

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.
Note: Spanish compliant bonds also offer inheritance benefits and avoid Modelo 720 reporting, but tax efficiency is their primary advantage for withdrawals.

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 Financial Adviser
Patrick Macdonald ASCI
International Financial Adviser


Comparison on capital gains tax in Spain

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