Living in Spain – 10 FAQs Answered

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LIVING IN SPAIN
10 FAQS ANSWERED
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• Once we help individuals create a strategic plan
  for their visas, logistics and timings before
  moving to Spain these are the most common
  questions we tend to receive about their
  finances. They are also the same questions we
  receive from individuals already residing in
  Spain which is why we decided to collaborate
  these together.

• Private Wealth Managers Nicole Sandler and John
  Diking have worked with thousands of foreign
  nationals moving to and living in Spain, and have
  lived there for 20 years and 9 years
  respectively.
• Their focus is to help clients live in Spain in
  the most tax efficient way so they can enjoy
  peace of mind for themselves and their families.

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I am a Spanish Resident with a UK Property, where
do I pay Tax on the Rental Income I receive?

• UK rental income will be liable to tax in the UK
  because thats where the property is physically
  situated. You will also be subject to tax in
  Spain where you are a Spanish resident because
  youre subject to tax on your worldwide income
  and gains.
• However, there is a double taxation treaty (DTA)
  which ensures you dont pay tax twice. What
  happens is, any tax already paid in the UK will
  be credited against any tax liability due in
  Spain. So, you are subject to income tax in both
  jurisdictions of the UK and in Spain.
• Remember to declare the UK property on the Modelo
  720 in Spain which is the overseas asset
  reporting declaration due at the end of March
  each year.

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Im Resident in Spain but Selling a UK property.
Where do I pay Capital Gains Tax on the Sale
Profit?

• If youve owned the property prior to April 2015,
  when you sell the UK property you will be subject
  to capital gains tax (CGT) in the UK on the gain
  element since the 6th April 2015 until the sale
  date. You will also have your UK CGT allowance to
  use, even though youre Spanish resident.
• However, because you are Spanish resident, the
  sale of the UK property will also mean you will
  be subject to CGT in Spain. Again, there is a DTA
  for this so you wont pay tax twice. Any CGT paid
  in the UK, will be credited against the tax
  liability due in Spain.

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• As time goes on, potentially the UK tax liability
  may become greater if the value of the property
  there become higher. So, if you are a Spanish
  resident with a UK property and you are
  considering selling it, now may be a good time to
  consider your planning. As you can see, Spanish
  residents who hold UK property are really not tax
  efficient since you are subject to income tax,
  CGT and eventually death taxes in both Spain and
  the UK.
• It is important that you seek professional
  financial advice before you move to Spain as it
  can save you a lot of tax. If for example, this
  property was your main residence in the UK, you
  could potentially have sold it tax free before
  you became a Spanish tax resident.

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Can I Draft a Will in Spain to look after my
Worldwide Assets? Like an International Will?

• Typically, we would recommend that you draft a
  Will in any country where you hold assets to
  speed up the probate process and ensure they do
  not contradict one another. So, you can have
  several Wills if you have assets in several
  countries.
• A Spanish Will needs to be drafted at the Notary
  and a lawyer can ensure Wills do not contradict
  one another and are tailored to your situation.

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Does opting for British Law to Apply in my
Spanish Will mean UK Taxes will therefore apply?

• Several years ago there was a piece of European
  legislation that came through called Brussels IV.
  It states that as a resident of Spain, you can
  opt for your country of your nationality (e.g.
  British Common Law) to apply to your Spanish
  Will. This has nothing to do with taxes and is
  purely how your assets will be distributed on
  death.
• Spanish (Civil) law dictates how assets are
  distributed under forced heirship rules, whereas
  British law allows you to choose who the
  beneficiaries are and also to choose the
  percentage terms you wish each beneficiary
  receives.
• If your Will is not up to date or you dont have
  a Will in place, we would urge you to contact a
  lawyer or a Notary to draft one.

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Does UK Inheritance Tax apply now that I am
Living in Spain?
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• If you have UK assets they are always going to be
  subject to UK inheritance tax (IHT) because the
  assets are physically located in the UK. For
  example, if you hold UK property or a UK bank
  account that will attract UK IHT since they are
  UK situated assets.
• If you are also deemed to be UK domiciled when
  you pass away you are subject to UK IHT on your
  worldwide assets, irrespective of where you live.
  Keep in mind your domicile can be completely
  different to where you are tax resident and it
  can be different to your nationality.

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• Domicile is a complex part of financial planning
  and whether you are UK domiciled or not depends
  on how long youve lived abroad and any ties you
  still retain with the U.K. We can guide you
  further on this particular point if necessary.
• If you have Spanish assets or if you live in
  Spain and receive an inheritance from anyone,
  anywhere in the world youre also going to be
  subject to Spanish IHT.
• With death taxes there are no DTAs between the
  UK and Spain, however any taxes paid in the UK
  will be credited against taxes due in Spain, so
  it does work in a similar way to having a tax
  treaty in place.

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If one of us passes away, is our Joint Investment
frozen as happens with some Spanish bank accounts?

• Whilst Spanish sited assets would typically be
  frozen, we specialise in is setting up
  international Spanish tax compliant investments
  for our clients.
• Tax compliant means they are liked and approved
  by the Spanish tax authorities. Such investments
  will continue in the survivors name and nothing
  is frozen, the surviving spouse will then be the
  sole owner of that policy and can continue to
  take withdrawals as and when they need to.

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Are my UK ISAs and Premium Bonds Tax Efficient
in Spain?

• The short answer here is no.
• Whilst premium bonds and ISAs are very tax
  efficient in the UK, they are fully subject to
  income tax in Spain. In fact, they are not tax
  efficient investments to hold in Spain at all.
• It is best to make use of these investments
  whilst you are still a UK resident.
• If the value of these investments is greater
  than 50,000 dont forget you will need to
  declare these on the Modelo 720 overseas asset
  reporting form.

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Can I take my Pension Lump Sum Tax Free in Spain,
like I can in the UK?
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• In the UK you can draw up to 25 as a tax-free
  lump sum on most pensions, once you reach
  pensionable age. Whilst it is tax free in the UK,
  that 25 is fully subject to income tax in Spain.
  
• So, if you are still a UK resident and are
  thinking of moving to Spain with a pension its
  really important that you seek financial advice
  on your pension before moving to Spain.

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I have a long-standing relationship with my
Financial Adviser in the UK, can they continue to
advise me on my Investments/Pensions?

• UK based financial advisers no longer have
  passporting rights in the European Union (EU)
  post Brexit. This means that unless the UK firm
  have sought passporting rights in the EU (and
  most of them havent), unfortunately they can no
  longer provide you with financial advice once you
  are no longer resident in the UK.
• It is something that could have a huge impact on
  your policies going forwards.

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• Basic administration such as withdrawals,
  updating your details or more importantly, fund
  changes cant take place without advice. These
  Brexit-related changes have applied since 1st
  January 2021 however we still receive a lot of
  enquiries on this topic. A lot of people still
  arent aware of this fact.
• If you havent yet left the UK, we would advise
  you to update your financial planner that you
  will soon move abroad.
• We would also recommend that you engage an
  adviser based in Spain who is regulated under the
  relevant European directives (MIFID II and IDD)
  who possesses qualifications, experience and
  knowledge necessary to give professional wealth
  management advice, relevant specifically to Spain
  and with vast knowledge of regional tax laws in
  the area where you will live.

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I have Pension Pots in the UK, do I need to take
any action when I Move To Spain?

• The pension landscape has changed dramatically
  over recent years. In addition to consideration
  over the tax-free lump sum, understanding what
  your pension options are once you move is very
  important.
• Factors such as whether you should keep your
  pension where it is or transfer it to something
  more suitable once you live in Europe should be
  discussed.

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• Individuals who have pensions that were close to
  the UK lifetime allowance potentially have a
  window of opportunity right now to act. This is
  because Labour have claimed they will reinstate
  the allowance if they gain power. Therefore,
  understanding whether a pension transfer out of
  the UK is suitable, is a very worthwhile
  discussion right now.
• Pensions are highly complex and involve a lot of
  analysis to make the right decision for you. We
  can help guide you on these points to see what is
  the most suitable option for you.
• For more information regarding moving to and
  living in Spain, contact the Chase Buchanan
  Wealth Management Marbella and Javea offices
  directly.

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