the truth about taxes, property – and why you need a £ 357,000 pension
Obtaining the right to move: sorting your visa
Retirees are classified as “economically inactive”, which means that they have additional demands compared to people of working age.
There are new, stricter rules since Brexit. There are two types of visas to obtain the right to live in Spain: the “non-profit visa” and the “Spanish golden visa”.
The non-profit visa requires proof of your financial resources to pass the income check and then applies for one year. Upon renewal, this visa lasts another two years.
The visa costs £ 3,500 for a couple, Blevins Franks estimated. This will be split between an application fee of £ 516, with additional fees for a medical check, criminal check, legal stamps and document translations.
Golden visas are more expensive but allow Britons to obtain flexible residency rights in many EU countries in return for a substantial investment in local real estate or an investment in the economy. Requests cost between € 5,000 and € 6,000 each time.
To meet the requirements of real estate investment, it is necessary to buy one or more properties with a value of 500,000 €.
Other investment options for the golden visa include buying at least € 2million in Spanish government bonds, buying shares worth € 1million in a Spanish company or Spanish venture capital funds, or to have € 1 million in deposits with a Spanish bank.
It is crucial to get all the correct information when creating a request. Jason Porter, of Blevins Franks, said: “Apply for residency incorrectly and in most cases it is void and the application fee is forfeited. Not only will you have to start the process over from scratch, but you will also have to find more money for a new application.
Everything you need to know about Spanish tax rules
Anyone planning their move should consider their financial and fiscal situation before moving, otherwise they will face high bills.
UK tax-advantaged investments such as Isas and venture capital trusts do not enjoy the same overseas tax treatment. In Spain, all interest, dividends or capital gains generated by these investments will be taxable.
In terms of retirement, income from a kitty is taxable where the person lives, so in Spain rather than in the United Kingdom. The only exception is government employee pensions, which will only be taxable in the UK.
Importantly, the 25% tax-exempt retirement cash rule no longer applies, Porter said. Even the 25pc is taxable because Spain does not have a non-taxable element of a pension fund. Those who plan ahead may be better off taking the tax-free money before they move.
Anyone considering selling their family home in Britain after moving could also be stung by accusations. Mr Porter said: “Most countries have some form of primary domicile tax relief, so in the normal course of events no capital gains tax is levied on the sale, but UK rules are very different from Spain. Although the sale does not give rise to a UK tax liability, it can do so in Spain. “
Likewise, anyone planning to delay the sale of a UK business until they have left to avoid UK capital gains tax is likely to find it taxable in Spain, he said. added.
Spain, like other countries in Europe, has taxes that do not exist in Britain, such as an exit tax and a wealth tax. This means that expats have to fill out additional tax return forms. All assets in the world must be declared to the ISF when they exceed 2 M €.
Foreign assets exceeding € 50,000 must also be declared and failure to comply with this obligation may result in severe penalties.
Inheritance and wealth taxes vary from region to region in Spain. Some regions like Madrid enjoy 100% inheritance and wealth tax relief, while other regions may charge up to 34% inheritance tax.