If you are moving to Spain or have recently relocated, you have made an excellent choice. Aside from its obvious appeal, Spain can offer real tax- efficient opportunities – if you are well prepared.
To make the most of these opportunities and avoid costly mistakes, we have asked Ben Noifeld and Simon Baker, both Senior Wealth Managers at Abbey Wealth,to answer the most common questions you as an expat might have concerning tax obligations, currency, pension options, will, estate planning, savings and investments.
Ben and Simon specialise in providing compliant tax-efficient savings, investment and pension solutions for people living in the EU.
How long do I need to be in Spain to be considered a Spanish tax resident?
Your tax residency status determines which country’s laws are used to tax your worldwide income and gains.
Spain does not allow split year treatment for tax status. You are considered a tax resident if you live in Spain for more than 183 days of the calendar year (January to December) or if your major sources of income or economic activity occur within Spain.
Is there a Double Tax Treaty between Spain and the UK?
Yes, there is a Double Tax Treaty between Spain and the UK, but it is only possible to be a tax resident in one of the two countries at any given time.
The treaty includes rules to help you establish your tax residency. However, your circumstances may change and so it is important for you to take regular advice in order to ensure your circumstances continue to align with the rules necessary for your status.
Are my UK or other investments tax-free in Spain?
What is tax-efficient in the UK may not be tax efficient in Spain.
For example, both premium bond winnings and Individual Savings Accounts (ISAs) are tax-free in the UK but not in Spain.
Dividends are taxable in Spain.
Although it is possible to hold on to an ISA once you have left the UK for Spain, you will be unable to make any further contributions to the account. Also, all income and gains derived from an ISA are liable for tax in Spain.
What is a Modelo 720 and do I need to file one?
All residents of Spain are required by law to declare all assets they hold outside Spain that are worth more than €50,000, regardless of the holder’s nationality. Spanish tax authorities can issue large fines for any nondisclosure of assets.
You do this using the 720 Asset Declaration Form (Modelo 720). The deadline for filing is the 31st of March. You only have to submit the 720 form once. However, if your circumstances change, you will have to do it again.
So, if you have become a Spanish resident and it’s your first year, or if there’s a change in the value of your offshore assets, you must file the 720 form between 1st January and 31st March of the same year.
Taxes In Spain For Residents & Non-Residents – find out about declaring offshore assets to the Spanish Tax Authorities