E13. Do I really need to plan my finances when I move to Spain?

Fiduciary Wealth Team

Well that depends on you.

 The danger of course is that if you do nothing you could end up paying a lot of tax unnecessarily and be considerably worse off. By doing nothing you run the risk of paying more tax on your savings and investments as well as exposing your estate to greater levels of inheritance tax and if you don’t register with the authorities as a tax resident which is a mandatory requirement and you spend more than 183 days in Spain you are effectively breaking the law and can suffer significant penalties.  This last point is very important, we have all heard stories about the expat who has spent the last 20 years in Spain and has not paid taxes anywhere; well all that is changing. The Spanish authorities are no longer a soft touch when it comes to residency, they want taxes to go into their coffers and are employing various means to ensure that they do. It is so easy for them now to determine how many days are spent in Spain using customs information and details supplied by electricity companies. It is also possible that your bank whether in the UK or the Channel Islands or some other offshore jurisdiction, will be sharing information with the Spanish authorities or even worse might be withholding 35% tax on your investments.

Did you know that if you hold money in a UK onshore or offshore bond and you have been happily taking a 5% per annum tax free income from this or if you have ISA investments and think that you can carry on investing or drawing income tax free then we have bad news for you. As a Spanish tax resident these are no longer tax efficient products and continuing in the same old way could mean a hefty tax bill. The good news is that there are tax efficient alternatives available that are legitimate in Spain.

What about pensions? Have you been sitting back paying tax at 20% or 40% in the UK on any income you have drawn? Would you not prefer to pay significantly lower tax here in Spain by investing in a secure, properly managed pension scheme with the likelihood that when you die your beneficiaries can receive the proceeds free of inheritance tax unlike the UK where your beneficiaries might suffer a 55% tax charge.

But inheritance tax that’s the clincher. You’ve heard that this is exorbitant in Spain so by keeping quiet you might avoid it all together. Wrong again I’m afraid. Firstly the longer you wait to declare your Spanish residency the more likely your estate will suffer tax in both UK and Spain. Second the longer you leave it the more expensive it might be to put in place an effective scheme and some options will likely be unavailable if you have done nothing by the time you reach age 75.

So you still think a financial planning consultation is not for you?

For your free private consultation contact Fiduciary Wealth Management on Tel: 956 796 911 or email