Many people moving to Spain will have UK based investments such as ISAs, general investment accounts and
Premium Bonds. They are often managed by UK based wealth management firms or independent financial advisers, and as everyone
knows these can offer a range of tax benefits to the UK resident. Now that's all well and good, but what happens when you
become a resident of Spain? Can you keep these investments? Is it even legal? And what about the advisory firms managing
your money? Can't you just stay with them? Well firstly let's deal with investments. Essentially, UK tax free investments are
NOT tax free nor tax compliant in Spain. Their benefits are simply not recognised by the tax authority here. Indeed,
they may be looked upon even more unfavourably in Spain as they are not EU based investments. Furthermore, once you have a
Spanish address the UK provider may no longer allow you to contribute to their product and often encourage you to close
your account altogether.
So what options are open to you once you've decided to move or indeed already live in Spain?
You should consider utilising EU based investment vehicles that are tax compliant in Spain. And it's not just the investment
platforms - the underlying investments should also be EU based and regulated. Why? Because this way, you'll benefit from no
year on year tax being paid out (allowing your investments to grow more efficiently) AND further tax benefits when you come
to make withdrawals, as well as ticking all the boxes with the Spanish tax authority in terms of reporting and legality.
You can check out more details on this subject in my previous videos on
Spanish compliant investment bonds.
What about my UK based financial advisor?
Well for better or for worse, Brexit has significantly changed the relationship between Spain and
the UK in terms of financial services. Having left the EU Britain is now regarded as a third country. This means that
financial advisors and wealth managers can no longer passport their advice services into EU countries unless they have
registered with the relevant authorities in each of those EU territories. And for most that would be far too expensive and
a huge administrative burden - so they don`t, and THAT has left those moving to OR already living in Spain, high and dry as
it were.
Furthermore, it's not just general UK investments where this is an issue - UK advisers managing UK pensions have also fallen
fowl of the same problem. So not only are the pension providers being difficult with expatriates but their UK advisers can
no longer help either.
This, of course, is where we come in. We are part of a regulated wealth management group authorised within the EU to give
individual qualified financial advice to clients living here, in Spain. Our licence covers investment advice as well as life
assurance related products for example. I myself have lived and worked in Spain as a financial adviser for many years - so I
have excellent knowledge of the local system as well as that in the UK - essential when I am speaking to British clients who
are making the move here.
Don't forget about the Modelo 720
This is the form that needs completing to declare your overseas assets once you are a Spanish tax resident.
I've covered this in another video
(Modelo 720)
but it's important to remember that this declaration is a dip sample of your non Spanish based assets as at the 31st of
December in the year you become tax resident AND is then reportable before the 31st of March the following year.
How is the 25% pension lump sum treated in Spain?
Another point to remember is related to UK pensions. If you've reached the age of 55 you'll know
that you can access your pension benefits. One of these is the 25% pension commencement lump sum - or PCLS for short. As we
know, this is tax free in the UK. However it is not tax free in Spain and therefore careful planning needs to be undertaken
to make sure you take the PCLS before becoming a tax resident here - if at all possible. If you don't intend to take the
PCLS then this is obviously not an issue. However it's also important to look at the options available to you in terms of
your pension as a whole, and whether it may be appropriate to transfer to an international scheme or EU based plan that is
more likely to be recognised in Spain and have further tax benefits.
Should I have a Spanish Will?
Absolutely. You should set up a Spanish Will as soon as you can, after you've arrived. Why?
Well we know how important Wills are in general, but here, you need to make sure your estate is not caught in the forced
heirship rules existing in Spain. This is where, upon your death, your assets are divided according to THOSE rules and NOT
what your preferences may be. In order to avoid this you must have a Spanish Will which clearly states that you wish for
your assets to be treated as they would in your home country. This will also help avoid the lengthy and often expensive
probate process.
If you have a Spanish compliant investment bond it can be used as a effective succession and estate
planning tool. This type of policy can be set up in joint names - spouses for example - and in these circumstances - Upon
the death of the first policy holder or Spouse, 100% of the policy ownership seamlessly passes to the surviving policy
holder. And then on the death of that policy holder you can elect to have the assets distributed to your named beneficiaries.
