Reduce your tax liabilities in Spain with effective planning

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22.09.22
Tax liabilities in Spain

Tax liabilities in Spain needn’t be a cause of worry if you are planning to move or already living there. There are opportunities to legitimately reduce these tax liabilities for a life in Spain through effective planning.

Spain continues to be a favourite destination for retired British expatriates.  While Brexit may have changed the residence rules for newcomers, it is still generally still possible for most UK nationals to enjoy their retirement years in the Spanish sunshine.

Living in Spain offers many benefits, and the lifestyle is very conducive to a healthy and happy retirement.  Of course, like any country, there are some drawbacks, and a key concern for many people is the local tax regime.

How are taxes affected by being Spanish resident

It is really important to understand how being Spanish resident will affect your tax position.  Once you meet any of the criteria that make you tax resident there (you spend 183+ days in Spain, or your centre of economic or vital interests is there), you are liable for Spanish tax on your worldwide income, gains and wealth, and subject to the Spanish succession and gift tax regime.

Besides the expected income and capital gains taxes, Spain additionally imposes an annual wealth tax which generally affects those with net worldwide assets over €1,000,000.  Combined, this can result in a discouraging annual tax bill.

Should you fear tax liabilities in Spain?

We often come across people who would love to live in Spain, but are too worried about how much tax they will pay to actually make the move.  They are limited to spending short periods in their Spanish holiday home instead – which is now more of a minefield with the EU’s 90-day rule.

But you do not necessarily need to fear taxation in Spain – some people even find they improve their tax situation by becoming a Spanish resident.  While tax rates can look high, the Spanish tax regime does present tax mitigation opportunities – the way you hold your assets, and take income from them, can make a significant difference to how much tax you pay.   Many British expatriates continue to hold the same arrangements they had in the UK, but this can be a very costly mistake.

How we can help?

At Blevins Franks, we spend time getting to know each client’s personal situation – it is important for us to get a clear picture of their circumstances, family situation, objectives, long-term plans, and estate planning wishes.  We can then provide a strategic – and tax-efficient – financial plan to achieve their aims.

This involves carefully analysing their assets and income and spending time calculating the various tax planning options. We frequently surprise clients with how much tax restructuring their assets can save them.

Of course, everyone’s circumstances are different and the level of tax savings will vary, but it is certainly worth taking the time to take specialist advice and explore your options.

Download our free Spainish Tax Guide now.

The benefits of tax planning:

A reduced tax bill for you

Reducing your overall liability for income tax, capital gains tax and other taxes on your savings, investments, assets and pensions. If there is a more tax-efficient way to hold your capital and assets, shouldn’t you explore if it could work for you? Don’t miss out on structures available in Spain that can reduce your tax liability as well as providing other potential benefits.

Less taxation for your heirs

Of course, the less tax you pay in your lifetime, the more you have to either spend now or pass on to your chosen heirs. But with some investment structures you may also be able to lower the inheritance tax liability for your heirs. Ideally, you want a solution that will limit inheritance taxes while also providing tax-efficient income and investment growth throughout your lifetime.

More estate planning flexibility

Strategic tax planning can also help make things easier for your family when you are gone. Many investment arrangements that provide tax efficiency also offer more estate planning flexibility and control.

Maximising real returns

Effective tax planning also plays a part in helping returns outpace the cost of living.  Ultimately, what counts when assessing the value of investments are actual returns – after all tax, expenses and inflation are taken into account.

It is certainly worth asking a specialist adviser, like Blevins Franks, to review your investment portfolio, pensions and other assets. We will evaluate your current tax liabilities, consider your personal situation and objectives, look at what Spanish-compliant arrangements would work for you, and how much tax you could save. You may be very pleasantly surprised by your new tax bill in Spain.

Contact Blevins Franks today.

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; individuals should seek personalised advice.