Setting up home in Menorca – the financial essentials

Moving to or living in Menorca? Understand how Spanish tax will affect you and seek advice on estate planning and effective investment strategies.

Living in Menorca is always a pleasure; the island has so much to offer. You may have a list of jobs as you settle into the island, but it is important to include reviewing your financial planning. You need to establish how the Spanish tax and succession law regime affects you and ensure your investments and pensions are designed around your current circumstances.

First of all, you need to understand how you become resident for tax purposes – tax residency in Spain is not just about day counting. UK nationals also need to follow the UK Statutory Residence Test and UK/Spain double tax treaty.

Income tax rates in the Balearics Islands range from 19% to 47.5%. Savings income (including capital gains) is taxed separately at 19%, 21% and 23%. Spain also currently imposes an annual wealth tax, which generally hits those with worldwide assets worth over €700,000 (or €1 million if you own your main home).

Once you have a thorough understanding of the Spanish tax system you can establish what tax planning steps you should take. With specialist financial and tax advice there are often ways to lower taxes on your investment income, assets, pensions and estate. Ask your adviser in Menorca for information on tax efficient investments in Spain.

It is very important to review your estate planning. In Spain, the succession and gift tax rates and allowances depend on who the beneficiary is, where the deceased and the beneficiary are resident and where the assets are located. Rates, allowances, reductions and exemptions vary across regions – and this is another advantage of living in Menorca! Spanish succession law imposes forced heirship, but under the EU succession regulation ‘Brussels IV’, foreign nationals can elect, via their will, for the law of their country of nationality to apply instead.

You also need to review your investments to make sure they are structured in the most suitable way for your current circumstances, objectives, and risk profile. You also want them to be structured in the most tax efficient way for Spain, as well as to meet your estate planning wishes. Speak to an investment adviser in the Balearics who can recommend personalised strategies and provide holistic advice to include all aspects of your wealth management.

The sooner you carry out your tax and wealth management planning, the sooner you can get on with enjoying your new life in Menorca.

Blevins Franks have a long established office in the Balearics, and 40 years’ experience advising UK expatriates in Menorca and Mallorca. Contact us to find out how we can help you.

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.