In 2006 Spain signed a double tax treaty with the UK which means that you should not have to pay tax twice on the same income, and you should only pay tax in the UK or in Spain.

Income tax in Spain

At the most basic level, Spanish tax residents are liable for to pay income tax on their worldwide income, once personal allowances have been taken into account.

However, a non-resident of Spain is only required to pay tax on any Spanish income (such as rental income from a Spanish property). The income tax for non-residents is charged at a fixed rate and there are no personal allowances or deductions.

Spanish tax on income from savings

As previously stated, if you are a Spanish resident you will be taxed on your worldwide income from your savings, regardless where the savings are based.

Your savings income includes any income from:

• Interesting from savings
• Dividend payments
• Income from life assurance policies
• Income from annuities
• Gains made from the disposal or transfer of assets

Spanish General Income Tax

Currently the Spanish income tax rates are as follows:

• Spanish income tax for incomes up to €12,450: 19%
• Spanish income tax for incomes ranging from €12,451 to €20,200: 24%
• Spanish income tax for incomes ranging from €20,201 to €35,200: 30%
• Spanish income tax for incomes ranging from €35,201 to €60,000: 37%
• Spanish income tax for incomes over€60,000: 45%

Spanish tax personal allowance

For the 2018 Spanish tax year there is a basic personal allowance for people under 65 of €5,550. Once you reach 65, the allowance rises to €6,700 and from aged 75 this increases again to €8,100.

There are also a number of other allowances including married couple allowance, child allowance and disability allowance.

Spanish tax on UK pensions

As a destination for many retirees, it is wise to seek a tax consultation when wanting to withdraw your pension as a resident in Spain. Even though you might not be taxed in the UK for a lump-sum, it might be taxed under spanish law and therefore isn’t tax free. 

You will also be required to notify the HMRC once you are deemed a tax resident in Spain which will confirm you are paying Spanish tax on your income. To do this you need to complete a certificado de residencia fiscal NEN from your local tax office and send to the HMRC.

Until this certificate is filed, you will pay UK income tax under PAYE conditions at source. Any tax over payments can be subsequently reclaimed from the HMRC.

Typically public pensions will continue to be taxed in the UK, regardless of your tax status in Spain, with the possible exception of an NHS pension. 

Spanish Wealth Tax

The tax amount is calculated against the declared worldwide assets held after a tax-free allowance of €700,000 is applied whether resident or non-resident in Spain.

For residents, there is an additional €300,000 tax allowance for primary residence in Spain.

From 2015, the tax rate is scaled from 0.2% to 2.5% (rising to 3.03% in Andalucia) depending on the total value of the worldwide assets.

There are exemptions from the wealth tax, and assets can be structured tax efficiently.

Spanish Capital Gains Tax

 Typically Spanish tax residents are required to pay capital gains tax on the disposal of any worldwide assets. However, non-residents are required to pay Spanish capital gains tax on gains made by the sale of any Spanish property.

With specific regards to the sale of property, there are a number of deductions and calculations which are required to understand when calculating the final gain for tax purposes.

Residence and Work Visa (visado de trabajo y residencia): This visa allows you to live and work in Spain. It is intended for those who wish to relocate to Spain in order to work for a business located within the country. Good for duration of employment.

Residence Visa (visado residencia): Similar to the Residence and Work Visa, this documentation allows you to live long-term in Spain but does not allow you to work. Common among retirees. Must show at least € 27,600 of funds in savings.

Family Reunification Visa: Anyone who has legally lived in Spain for one year under a certain form of residency, and has successfully renewed their visa for a second year, can apply for a spouse, parent over 65, or dependent child under 18 to join them for the length of their stay in the country. Visiting family cannot work or study under this visa.

Investment “Golden” Visa: Foreigners who purchase property in Spain with a minimum value of € 500,000 can receive fast-tracked residency for themselves and their spouse and dependents. There are no minimum stay requirements in Spain to maintain the residency.

Expats will need to apply for a Foreigner’s Identity Number (Número de Identificación de Extranjero), or NIE, after receiving their desired form of long-stay visa. This will allow you to open a bank account, receive payment from an employer, pay taxes, get a driver’s license, and register with social services.

Permanent Residency

After five years of maintaining temporary residency through one of the methods above, expats living in Spain can apply for permanent residency. This allows you all the working and living rights of Spanish citizens, for an indefinite period of time with no stay requirements in the country.

SIPP

If you want to create your own pension pot which is based offshore in a strong currency, you can have access to if you leave the country, you can nominate a successor and keep all the capital gains from the market. Then it is something to consider. It is known as a Self Invested Personal Pension. 

This is where you put a monthly amount into a pension pot and you can choose the investments. 

You can transfer an existing pension into a SIPP and this can make it more tax-efficient and allow your pot to grow more because you get to keep the gains from the market. If you want to see whether you can transfer your pension, please email me and I can advise you on the best course of action for you.

If you are an expat who wants to transfer their pension into a SIPP or ROPs, it is generally a good idea for several reasons. If you want to be outside the UK for a long time then you can transfer it all offshore and have it in one place. Even if you want to return to the UK it is not illegal to have an offshore bank or pension, it just resides in a different place and you can still access exactly the same as any pension in the UK. 

If you have a defined contribution pension (DC) then these are relatively easy to transfer. These are the newer type of pensions where your employer pays in a certain amount and so do you. If you are wanting to transfer a defined benefit (DB) pension, then this is much more time-consuming and complex. This is because of the regulations.

They were brought in to protect people from losing everything they had worked for.

As an expat, most go for an international SIPP because they can’t set up a SIPP in the UK. This isn’t a bad situation as at the same time you can mitigate tax and if you move in the future you can still continue to pay in to the SIPP.

Many transfer their frozen or redundant pensions into the SIPP so that they can consolidate all their pensions into one manageable space.

Due to the new transfer tax of 25% on ROPs it’s doesn’t make sense to transfer into one of these unless you are near the life time allowance (LTA) in which case there are some good benefits to having a ROPs.

However, a good point about ROP’s are, ROPS are in line with UK pension freedom rules which were introduced on 6th April 2015, permitting people to access their pension savings from Age 55.

With the pension transfer, our process is simple, we will need to speak to you and ascertain amounts (LOA) and complete a risk profile. After that, we can create your investments and choose a platform with you.

Once all the paperwork is complete we can then transfer the pensions over, this process usually takes a few weeks due to the paperwork but once done, you shouldn’t have to go through it all again!

Here are the reasons why some of my clients have transferred their pension:

• Consolidate all their pensions
• Their previous pensions were just sat there in company funds
• Tax efficiency 
• Listing a beneficiary 
• Potentially increasing their returns over leaving it where it is

If you are looking to transfer your pensions as an expat, then please email me at the bottom of this page and I can arrange a call!

As an expat, if you have disposable income and you would rather invest your money, then you can do this in any country and place it in an offshore account, the perks are:

• Fewer taxes – Dependent on where you are currently based and reside 
• Stronger currency – Dependent on where you are currently living
• Portable 
• The investment can be liquid
• It can be capital protected 
• It can be fixed interest 
• More secure than local banks as they are backed by bigger international banks
• Can be quicker to set up

These are just some of the advantages to offshore investments as an expat, what you invest in is the next question to be answered. This depends on your circumstances and the position you are in currently and what your long term plans and goals are. For example, for a young person who has monthly disposable cash and doesn’t want a pension, then placing them in a global fund and markets for long term growth and compounding might be a good idea. Each investment is unique and for us to give you a precise answer we need to know more information about you! 

If you would like to see what investments could help you, please email us and we will arrange a call and start preparing your answer. 

As an expat, you have a lot of options when you come to investing. Firstly, as a starting point, you are going to need a platform to invest through.

The platforms allow you to invest in different investments. You can have a DIY platform or an advisor platform – This is where you must have an advisor in order to create the platform.

With any platform, there are varying costs and functions. The cost is an important aspect, when searching for a platform you need to make sure that are aware of the full cost. Many will have hidden costs and this can eat away at returns if you don’t keep an eye on it.

If you are using an advisor make sure that they tell you the cost if the platform and their fees as well and make sure they’re reasonable.

Some good platforms for UK expats are:

Ardan International

Isle of Man- Advisor-based platform- good investment options cost around 0.5% without advisor fees. A branch of RL360 and a lowers cost (in my option better) than the RL360 PIMS and other high-cost bond options.

Capital Platforms

Luxembourg based. Founded in 2002 in Singapore originally as Boston Direct Management, they have expanded their global outreach across Asia, Europe, Africa and South America. Has a range of ETFs and funds and charges 0.2-1.2% a year.

DBS Securities

Singapore-based, good DIY platform low cost, but hard to navigate. Self-managed account.

Etrade

A low-cost option that is more for stock options. Fees are $6.95 a trade. It is U.S based so are subject to U.S taxes on death as it forms part of your estate.

iFast

A self-managed platform. The iFAST group of companies is licensed in Singapore through its Capital Market Services Licence and Financial Adviser Licence (also CPFIS registration), Hong Kong with an SFC Type 1 and Type 4, and Malaysia with a Capital Market Services License and FIMM registration. iFAST Financial India Pvt Ltd (India) is an AMFI- registered Mutual Fund Distributor.

No lock-in or early surrender penalties are applied, but in order to move wrappers from elsewhere, e.g. pensions, a wrap account is required. This incurs an undisclosed percentage fee and is tailored to advisers.

Neither the Prestige nor the basic platform are available outside of Singapore, Hong Kong, Malaysia, or India.

Interactive Brokers

Interactive Brokers was founded as a Broker-Dealer in 1977. Consolidated equity capital is at approximately $6 billion, and the firm’s founder, Thomas Peterffy, continues as chairman and CEO. The firm and its affiliates execute nearly 1,000,000 trades per day.

Interactive Brokers Group and LLC are rated investment grade by Standard & Poor’s (BBB+). The platform charges a complex commission structure, with trade costs dependent on your country of residence. Broadly, ETFs and stocks can be traded at a minimum of $4-$8 under the fixed pricing structure.

High volumes of trades are rewarded, but on average, the occasional trader is likely to pay $20 per month according to the site.

Intermaxx

The platform provides access to 900 funds and thousands of ETFs.

Exchange rates on cash are fairly competitive, and there is a low minimum. However, it does not allow for you to hold existing wrappers or bonds on the platform, and can therefore trigger unpleasant tax charges.

Although a wide range of funds is offered free of the initial charge, many contain high total expense ratios, which can eat into your returns. Costs of dealing with stocks and ETFs (5,000 available) are good.

Useful tools such as the ‘Portfolio X-Ray tool’ and Morningstar equity research are included in the platform.

Internaxx can take up to 55% of annual fund management fees in retrocessions, which has been criticised for lack of transparency. Costs of stocks and ETF trades are between €14.95 to €50 (US/CA vs. less traded markets) and up to 0.09% commission. Trading over the phone costs an extra €20.

The most significant cost to expat users seeking a long-term investment platform is the flat fee (replacing the 0.2% pa custody charge). This is €45 if you don’t trade during the quarter, but free if you trade regularly

Investors Trust

A Cayman based platform with locations in Labuan, Portico, it is an advisor based with a range of options their cheapest platforms being the access that can be brought down to 0.5% plus admin fees of 7 USD per month, a good online system.

Novia Global

Novia Global launched to market in October 2015, with a stated aim of bringing the benefits of the latest in online wealth management technology to the key international markets.

The service provides financial advisers, private banks, discretionary fund managers, and trust companies with the tools required to provide their offshore investors with the same high levels of service and choice available in the UK.

Platform One

A UK and international investment platform service. It has been designed to deliver a secure, high-quality investment platform for the UK and international marketplace. Via Platform One, advisers and their clients from around the world can access the benefits of a UK regulated wrap platform.

The service enables financial advisers to consolidate and manage all their high net worth clients’ investments in one place – hence the term ‘wrap’ platform. Platform One offers what looks to be three core services, each providing access to a wide range of products, funds, and services via the platform.

Praemium

Established in Australia in 2001, Praemium is used by financial advisers and investment managers to manage or administer over A$100 billion, or £59 billion worth of investments across 300,000 accounts.

Praemium provides investment platforms, portfolio administration, and CRM solutions. The company has offices in Australia, the UK, Jersey, Armenia, and Hong Kong.

Praemium launched its services into the UK market in 2008, where it is now one of the fastest-growing discretionary platforms available. In the UK the Praemium group is regulated by the Financial Conduct Authority.

Platform costs start at 0.35% and tier down for larger amounts, offering exceptional value for money for the end client.

Raymond James

Raymond James Financial is an American diversified holding company. It provides financial services to individuals, corporations, and municipalities through its subsidiary companies that engage primarily in investment and financial planning.

Additionally, it offers investment banking and asset management services. The holding company was incorporated in 1962 and listed on the NYSE in 1983. Raymond James’ 3 million client accounts (via nearly 7,200 financial advisers) are focused in the US and Canada, although a portion are also worldwide.

Total assets under management amount to approximately $643 billion. Raymond James is an LSE member firm with direct market access. The Financial Services Compensation Scheme (‘FSCS’) currently covers 100% of the first £50,000 of UK investments on the platform. The platform is targeted at financial advisers where management fees, brokerage charges and initial fees are decided by the adviser. If the client no longer has an adviser, dealing charges are high (£27 – £52) and the flat custody charge of 0.5% applies.

For expat investors, costs of transfer of restricted stock (£200 per transfer) to the UK based platform may be significant given the nature of underlying assets within some offshore products.

Saxo Bank’s Platform

Saxo Bank facilitates online trading of over 30,000 instruments, including bonds, futures, FX, CFDs, and stocks.

In terms of the stocks available, Saxo includes over 3,000 ETFs. Prices for exchange-traded products are delayed unless the investor subscribes to the live feed, however, this is of less relevance to long-term investors.

The minimum investment is $10,000. Saxo Bank charges commissions on trades – normally about $15 equivalent, which is where it generates most of its revenue.

Underlying this, custody charges of 0.12% p.a. with a monthly minimum fee of EUR 5.00 will apply. Transfers of stocks to your account outside Saxo Bank incur a €100-€160 exit charge, and no trades for 6 months will mean you incur a $100 equivalent inactivity charge.

Swissquote Ltd

Swissquote Ltd Is the London-based subsidiary of Swissquote Bank and provides forex, index, commodities, and bond CFDs to traders in the European Union.

The company is regulated in the UK by the Financial Conduct Authority (FCA). In addition: Swissquote Financial Services, based in Malta, is an investment services company regulated by the Malta Financial Services Authority. Swissquote Bank MEA Ltd is regulated by the Dubai Financial Services Authority (DFSA).

With these platforms, you can invest a lump sum or you can top them up monthly with some of the disposable cash you have. Clients I have all have various methods, some prefer the monthly options because they have a set salary and job and then there are others who are on contract work and do lump sums at each quarter of the year if they have a surplus.

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UK Inheritance tax (IHT) is the tax that is paid on an estate when the owner of that estate dies. Depending on certain criteria, the tax may also be payable on gifts or trusts made during that person’s life.

Typically, UK Inheritance Tax is paid by the executor using funds from the estate of the deceased. Trustees with assets in a trust are usually responsible for the payment on IHT in that trust and sometimes people may have to pay IHT on gifts received. However, the payee of IHT is dependent on a number of factors, and each circumstance may affect who should pay the IHT owed.

Even if you are an expat living outside of the UK, you will still be subject to IHT in the UK if you are deemed to be of a UK domicile status.

If you are UK domiciled and your estate is valued at over £325,000 your estate will be subject to IHT – either 40% or 36% on the amount over the threshold. Since 2007, this threshold has increased to £650,000 for married couples and civil partners, providing the executors transfer the first spouse/partners unused IHT threshold to the second partner when they die.

It is essential to understand that being classed as non-resident in the UK for tax purposes, as your domicile is unlikely to have changed, you will still be liable for UK IHT.

If you’ve got a non-domicile status in the UK, only UK based assets will be liable to IHT in the UK. However, “living outside of UK” is not a qualification for this status alone.

If you are non-UK domiciled and non-UK resident at the date of death, then rather than your worldwide assets being subject to UK IHT, it will only be your UK assets that will form part of your estate which will be subject to UK IHT.

Any Non-UK assets (although not subject to UK IHT) may well be subject to taxes in the county in which you reside and therefore we recommend you seek professional advice as required.

Mitigating UK IHT as an Expat

In a nutshell, there are two primary methods for expats to legitimately avoid UK IHT and ensure you can pass on as much as your estate to your heirs as possible.

Firstly, and most difficult, is to change your country of domicile away from the UK which is almost impossible unless certain steps are taken. Secondly, and this is where planning can help, you can protect your estate from IHT by moving them into tax-efficient financial structures.

Changing Your Country of Domicile

While there is no single legal definition of your country of domicile, it will often be established according to three factors: where you were born, if you have assets in that location and where your father was born. When it comes to determining your country of domicile, the taxman will interpret the conditions and draw their own conclusion about whether you are still domiciled in the UK.

Due to IHT being such a major revenue earner for the UK government (they collect over 5.4 billion a year GBP) changing your domicile can be a difficult and stressful process – and even then your efforts may not be considered enough.

Changing your domicile tax status requires much more than simply showing that you now live abroad, you also have to be able to prove that you have no intention of returning to your original country of residence. You can attempt this in a number of ways, including:

•     Relinquishing your UK passport
•     Severing all links with social organisations and join new organisations in your country of residence
•     Purchase property in your country of residence and selling all your UK based property
•     Closing UK bank accounts
•     Many more actions

https://www.gov.uk/government/consultations/reforms-to-the-taxation-of-non-domiciles/reforms-to-the-taxation-of-non-domiciles – Details of the changes in taxation for those deemed non-domicile

However, as it is the preserve of the UK taxman when it comes to determining whether your country of domicile has changed, this is the least recommended of the two approaches. Of course, you may also then be subject to IHT in your new country of domicile. Before beginning on this path, ensure that you have spoken to an adviser to have all the facts and information.

Protecting Your Assets From IHT

Avoiding IHT can be a very complex process if you decide to proceed without any advice or assistance and therefore you should always seek advice from an independent financial adviser who will be able to talk you through each of your options.

If you believe your estate is worth more than the Nil rate band through the use of a number of tax-efficient financial structures you can not only avoid IHT but also potentially increase the final value as well.

For example, setting up trusts for life assurance pay-outs, payment of gifts (one-off or regular), and transferring your pension pot can help you avoid IHT. Please read my full guide on IHT and trust for more information on this topic or get in touch on the form below.