News & Insights

Residence or domicile? That is the question

As a rule of thumb, as a Brit living in Spain you will be considered resident if you remain in Spain for 183 days or more in any tax year. On top of this, if you leave Spain to work abroad for more than one year, you must not be back in the UK for more than 91 days, on average, in any 365 day period, during your time abroad. Basically, if you are a Spanish resident, you will need to pay income tax on all of your income, no matter where in the world you earn it. However, a non-resident of Spain is only required to pay tax on any Spanish income.

For many retired Brits living here, your country of domicile is particularly important when considering your liabilities under inheritance tax law. A person’s domicile is usually where you were born, or can be the same domicile as your parents (usually your father’s).  Your domicile can be changed in exceptional circumstances to be the country that you have chosen to make your permanent home, but this involves severing all ties with your domicile country.

Changing your domicile is not an easy thing, however, and can prove to be particularly troublesome. One of the most famous examples of someone falling foul of inheritance tax due to domicile status is that of Richard Burton. Although born in the UK, Burton had lived in the US for 27 years and died in Geneva, where he had taken residence for tax purposes. Upon his death, HMRC pursued a claim for inheritance tax. This may seem unreasonable, as he had not lived in the UK for many years and did not pay UK taxes.

However, under UK law, a person’s domicile is considered to be the place where, although it may not be their home, they have the intention of returning. And this is where Burton’s estate came unstuck. Although he had not lived in the UK for decades, did not have a property there and was buried in Switzerland, during his first marriage to Elizabeth Taylor, Burton had bought burial plots in his home town of Pontrhydyfen in Wales. As such, HMRC successfully argued that he was still domiciled in the UK as he had the intention of returning there, consequently reaping £2.4m in inheritance tax.

Although you may not have the same wealth as Richard Burton, it is nonetheless important to understand the implications your residential status has on your inheritance tax liabilities both here in Spain and in your country of domicile, which for most of us is the UK.

If you want to discuss your financial situation, you can contact us here.

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London – July 2019: Leading wealth management provider, Blacktower Financial Management Group has announced value of £100m under its Nexus Global Solutions Portfolio. 

Launched in 2013 and managed by industry heavyweight, Quilter Cheviot, the funds, Nexus Global Dynamic Portfolio and Nexus Global Solutions Portfolio, were originally conceived by Blacktower Group as means to provide its clients with access to award-winning investment DFM solutions.

The Nexus Solutions Portfolio is managed by David Miller, Investment Director of Quilter Cheviot.

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The good news is that the Index’s ranking had a few standouts. Near the top of the table, coming in at number two (beaten only by Denmark), was the Dutch system, which is great for any expats in the Netherlands who are eligible to receive the country’s state pension. If you’ve lived or worked in Netherlands, then you would have built up a Dutch state pension. The longer you have lived in the country, the larger your Dutch pension will be (you can combine it with a state pension accumulated in another EU and EEA member country).

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