Spanish Tax Facts
The Good, The Bad and The Ugly
By using our tax led wealth management services we can ensure that as a Spanish resident you legitimately minimise the tax payable on your investments and pensions and structure them in such a way that your estate and beneficiaries will pay as little tax as legally possible when you die.
If you live in Spain for more than 183 days in one calendar year you are legally liable to be charged Spanish Income Tax as a resident. The 183 days do not have to be consecutive.
As a Spanish Tax Resident you need to declare and pay tax on your worldwide income.
The Spanish tax authorities are closing in on the many non resident property owners who are not completing the mandatory annual tax return.
The tax authority has linked up with the Land Registry and now knows who owns every property.
Since February 2011, electricity companies are obliged to provide data to the tax authorities to establish which homes are continuously occupied by owners or tenants.
Holding money discreetly in an offshore bank account is no longer an option. Banks and other institutions are required to provide information to your tax authority and will write to you (we have seen the letters) requesting details of your residency status and tax office. If you do not respond an embargo can be placed on your account. This now applies to accounts held in Isle of Man and the Channel Islands where previously there was an option for tax to be withheld rather than the information be exchanged.
Deposit interest is taxed at your highest rate in the UK.
If you hold money in an offshore company, trust or other structure, the EU Savings Directive is being reviewed with the likelihood that these will come under the scope of a wider ranging Directive which will also include many other investment products as well as deposits.
Inheritance Tax is payable on your worldwide assets unless you “lose” your UK domicile which is very hard to do. Your estate will pay UK inheritance tax on your worldwide assets above the threshold and your beneficiaries will be liable for Spanish tax on assets held in Spain. Whilst there is an adjustment to ensure assets are not taxed twice, inheritance tax can significantly reduce the amount of wealth you are able to pass to your beneficiaries.
Private pensions held in the UK are exposed to a 55% tax charge on death if a tax free lump sum has been taken.
Pension drawdown income is taxed in the UK at your highest rate potentially 40% or even 50%.
Spanish Wealth Tax has resurfaced. You cannot claim a main home exemption if you are non resident.
What do you want to do? The recession has made the Spanish tax authorities extremely vigilant and expatriates are a soft and politically acceptable target for the authorities to pursue. Do you want to sleep easy at night or continue to remain below the radar, do nothing and mistakenly hope that the problem will go away?
The choice is yours.
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