Contact

News & Insights

Brexit? What should I do about Tax and Residencia?

The questions you should be asking

If you have not been in Spain for long but intend to live here, enjoying the sun, for a significant time, then you may feel like a rabbit caught in the headlights when deciding what to do about Residencia and Spanish tax, especially now Brexit or No Brexit is amongst us. Specifically, should you become a resident and/or tax resident of Spain, what does this mean, and what should you be doing about it?

Spanish Residencia

Bearing in mind that tax authorities are not mind readers, all relevant authorities should be informed of your intentions regarding where you wish to live, even though you might not be absolutely sure about where you want to finally settle. This is because, if you are a UK Domicile (have a UK Passport and/or have lived in the UK for 15 out of 20 years), and you have not told the UK HMRC you are now living in Spain, for example, then the authority will want to continue to tax your income and any gains arising worldwide including any in Spain.

In addition, Spain’s tax authorities will want to know about your income and gains if you are considered a Spanish tax resident, wherever these arise in the world.  For example, anyone who stays in Spain for a commutative 183 days in the Spanish tax year (January 1st to the 31st of December each year) will be considered a Spanish fiscal resident for tax automatically. This means they should declare themselves to the Spanish tax authorities to pay tax in Spain.  In addition, under EU rules anyone who has been in Spain for longer than three months and is likely to stay in the country should declare themselves to the Oficina de Extrajaneros locally by applying for Spanish Residencia. Certain qualifying rules will apply for gaining residency.

Whilst there is a double taxation agreement between the UK and Spain, meaning you only pay income tax in one country, not letting the tax authorities know where you are living can cause confusion and possibly a penal tax situation later. This could also mean that income tax is paid twice until it is sorted out.  Consider where you might raise the money to pay it in the meantime.

Spanish Tax Reporting – Modelo 720

The other facet of Spanish tax reporting is the mandatory completion of a Modelo 720. This is a requirement for all expats who have in excess of €50,000 in offshore assets including joint offshore bank accounts.  Both the UK and Spain operate under common reporting standards, so tax authorities report all tax information about an individual’s or business’s income and tax affairs to the tax authorities in the country the individual is residing in.

Brexit aside, it is important to recognise that reporting of these items is mandatory, not least because the Spanish tax authorities can impose huge fines for non-disclosure.  Nobody knows yet what additional impact Brexit could have on the reporting requirements; however, it is unlikely the Spanish or UK tax authorities will see Brexit as an excuse for expats not meeting the rules and requirements.

My advice is not to leave matters of tax until later and to act now. Tax-compliant Investment Bonds can have major tax advantages and minimise the impact of the tax reporting mentioned above. So, by acting now, you can help yourself to be prepared for Brexit – whichever way it pans out.

It is important to seek professional advice so please act now and give Blacktower a call as soon as possible.

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

Other News

What is an unfunded pension and might you have one?

Those of you lucky enough (or so we thought) to have accumulated a pension pot over your working life time – with the promise  of a good pension upon reaching 60 (such as the equivalent of two thirds of your final salary) may be in for a shock. Just like endowments, when these arrangements were […]

Read More

Why use an IFA….

Blacktower Financial Management - Why Use An IFAWe believe that you need to do your homework before making any investment decision. That may include reading financial publications, researching online, and discussing options with your friends and family. Many people, however, find the task of selecting investments too daunting to undertake on their own. To invest responsibly, they do their homework, and they seek the professional guidance and advice of a financial adviser.

Benefit from the Experience of a Financial Adviser

We encourage investors to take a long-term view when they invest. By looking down the road, many people realise that they do not have the experience, time, training or patience to make informed investment decisions alone. That is where the value of an investment professional really makes a difference. 

Read More

Select your country

Please select your country of residence so we can provide you with the most relevant information:

You are currently viewing the Blacktower Financial Management EU website.

You may be looking for the Blacktower United States website.

Blacktower United States > X Stay on this site

Or choose your country.