How you’re taxed in Spain
Blevins Franks Tax & Wealth Management Specialists
If you’re a UK national living in or thinking about moving to Spain, it’s important to review your financial planning. This should look at tax efficiency and how your estate planning, investment strategies and pensions can work most favourably for you and your new life in Spain.
With personalised financial advice from Blevins Franks, you can make the most of what you have while keeping up with the complex tax rules in both Spain and the UK.
How you’re taxed in Spain
The Spanish tax regime is quite different from the UK’s, and currently includes an annual wealth tax that doesn’t exist in most other countries. You’ll need to understand how the Spanish tax system works and how it will affect you, as well as how you can take advantage of the rules.
As the regional governments in Spain can amend some of the tax rules and rates, what you’ll pay in tax can vary depending on where you live. Once resident, you could potentially pay:
- Income tax at a top of rate of 45% to 48%, depending on region
- Up to 23% income tax on savings
- Tax on capital gains made on property and investments
- An annual wealth tax of between 0.2% and 3.5% on your worldwide assets
Even if you’re not resident, you could be liable for Spanish taxes, for example, when buying or selling property in Spain.
Although Spanish taxes can look relatively high, with personalised advice, Spain can be a very tax-efficient place to live. This is especially the case for retirees.
The importance of tax planning
If you don’t review your tax planning once you are living in Spain, you could end up paying more tax than necessary. It’s important to take personalised, professional tax advice, particularly with the Spanish government’s stringent approach to tax evasion. It’s easy to get it wrong without realising it and face costly consequences.
Since 2012, it’s the law that everyone resident in Spain must report any overseas assets worth over €50,000 to the authorities by completing the Modelo 720 form. There are severe penalties for failing to declare assets correctly.
The tax office will receive information on all your overseas financial assets under the new ‘global automatic exchange of information’ regime. It’s also able to analyse information from hundreds of sources to assess if your declared residency status and tax returns are correct.
With our guidance, our clients living in Spain are able to use compliant arrangements to enjoy favourable tax treatment and make sure they’re meeting all their tax declaration obligations.
Estate planning and inheritance tax
Spanish succession tax works very differently from UK inheritance tax and the effect on your heirs depends on their relationship to you and where they live. Stepchildren, for example, may not be classed as close relatives and could face much higher rates than other family members. Succession tax rates go up to 34%, but with ‘multipliers’ can reach 82% in extreme cases.
You should also be aware that Spain’s ‘forced heirship’ succession law defines how your legacy is divided. This means that your spouse and children would automatically inherit a pre-defined proportion of your estate, regardless of whether that’s your intention. However, you can override this by opting for UK law to apply under the ‘Brussels IV’ EU regulation. Take personalised advice to clarify how this works for you.
Our advisers can present legitimate options to ensure your estate is distributed according to your exact wishes while protecting your heirs from paying more tax than necessary.
Help with your UK pension planning
There’s more choice than ever for accessing your UK pension savings. Blevins Franks can advise you on the pros and cons of each option, including QROPS, as well as the local tax implications in Spain, so you can make a fully informed decision on the best solution for you.
Investment advice tailored for you
Our specialist expertise can make sure your finances are structured as tax efficiently as possible with an investment strategy tailor-made for you.
We start with an objective assessment of your risk profile so that we can recommend portfolios designed around your personal situation and objectives. We have access to some of the world’s best investment managers to make sure your money works as hard as it can for you.
Speak to Blevins Franks to take full advantage of the tax and investment opportunities available to British expatriates living in Spain.
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.