Posted on: 03 May 18
Woodbrook Group – Wealth Division – May 2018
If you are from the United Kingdom, and you are moving to Spain, then it is not unusual for you to have some expectations regarding the taxes that will be charged on your savings, which, in turn, is supposed to give you an income or serve as something to fall back on. Expectedly, you may have already been conversant with the use of ISAs in developing valuable holding that will not be taxed in the United Kingdom, and you might be wondering if there is anything resembling an ISA in Spain?
As a result, it is imperative that you recognise how the system works in Spain and to have an insight into how much you will be paying in tax and using this information to make your financial plans. Given that residents in Spain are legally responsible for paying tax on income and gains built all around the world, this article takes a look at the differences in tax between both countries and examines what could pass as an ISA in Europe. Indeed, the significant difference is in the way Wealth, Inheritance and savings are taxed.
Wealth Tax in Spain
Presently, there is no wealth tax in the United Kingdom, while individuals in Spain worth above €700,000 are liable to pay 0.2–2.5% on net assets. In places like Catalonia, the rate is within a band of 0.21-2.75%.
In Spain, the imposed tax on the individuals getting an inheritance is reliant on the amount they get from the estate, while in the United Kingdom the entire estate of the deceased is taxed. Also, there is a clear distinction in the taxation system and allowances. It is pertinent to note that the inheritance tax rates differ across Spain, from Barcelona to Andalucía, etc.
Tax-Free Savings in Spain
The Personal Equity Plans (PEPS) which was introduced in 1987 that have now metamorphosed into ISAs is entirely tax-free but is limited to £20,000 for each year. But if you are resident in Spain, then all your income and gains obtained from share sales and premium bonds (wholly taxed as general income) are liable to savings income tax.
Presumed you would have become really worried by now, but you don’t have any reason to fret because Spain has its own version of the ISA, a similar investment and often regarded as the “European ISA,” with some essential features and benefits such as:
- It is slightly more restrictive than the UK’s ISA but worth the effort in general. Should you rely on your investment for income, then you are likely to enjoy some useful and fantastic tax breaks.
- It has no limit and is moveable to other countries
- You may enjoy up to 80% in tax savings if you go back to the UK having spent some years in Spain
- You can invest up to 10 millions Euros in a single year
In conclusion, this article has been able to take a cursory look at the fundamental difference in taxation between the United Kingdom and Spain, while taking a look at Spain’s version of the ISA, the European ISA.