# Tax Question re Endowments



## Kalekas (Mar 18, 2013)

Hello all,

... and apologies if this has already been asked and answered.

With the new reporting requirement to fill out Modelo 720 on assets held outside of Spain my mind's been turning to other tax-related issues.

Wifie and I moved here (Alcossebre, Castellón Province) in 2007 and, lazy ****** that I am, I haven't worked since then so I've never submitted a tax return to the Spanish authorities.

However in early 2012 a couple of our endowment policies matured. We'd used them as savings vehicles since we sold our house in the UK.

Here's the (possibly naive) question: are we liable for Spanish tax on the amount paid to us on maturity?

Btw we've just completed and sent off our completed 720 on '_bienes y derechos ... en el extranjero_' It wasn't as daunting as we thought it would be.

Regards


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## Stravinsky (Aug 12, 2007)

Kalekas said:


> Hello all,
> 
> ... and apologies if this has already been asked and answered.
> 
> ...


The simple answer to that is yes, you are
It wont be the full total as you have contributed to that over the years, but tax free maturities and tax free pension lump sums are all subject to tax here in sunny spain

You may be facing a fine of some kind also for past non declaration


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## Stravinsky (Aug 12, 2007)

Stravinsky said:


> The simple answer to that is yes, you are
> It wont be the full total as you have contributed to that over the years, but tax free maturities and tax free pension lump sums are all subject to tax here in sunny spain
> 
> You may be facing a fine of some kind also for past non declaration


I also ought to add that its one of the reasons I am becoming a non tax resident this year in Spain, because I have endowments and tax free pension lump sums coming out this year


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## Kalekas (Mar 18, 2013)

Oh ******! Thanks for the heads-up. However I thought as a non-earner, living on capital (mad, I know) that there was no requirement to submit a tax return. If so I stand corrected.

Regards


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## Stravinsky (Aug 12, 2007)

Kalekas said:


> Oh ******! Thanks for the heads-up. However I thought as a non-earner, living on capital (mad, I know) that there was no requirement to submit a tax return. If so I stand corrected.
> 
> Regards


You have to pay tax on your worldwide income I'm afraid
That involves interest from bank accounts, from investments, most pensions etc. As you know, this year you have to report it as well or face big fines


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## Kalekas (Mar 18, 2013)

Yes, this I know having spent more time than I wanted finding out about the reporting requirements, then getting a certificate to download the form and working out how to fill in the damn thing ...

Again, pleading naivety, as we pay UK tax on any income generated in the UK it seemed pointless to expose ourselves to an additional tax burden - double taxation agreements notwithstanding.

Oh well, slap on the darbies ...

Regards


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## Stravinsky (Aug 12, 2007)

Kalekas said:


> Yes, this I know having spent more time than I wanted finding out about the reporting requirements, then getting a certificate to download the form and working out how to fill in the damn thing ...
> 
> Again, pleading naivety, as we pay UK tax on any income generated in the UK it seemed pointless to expose ourselves to an additional tax burden - double taxation agreements notwithstanding.
> 
> ...


It is pointless, but then again you chose to live in Spain and thats they way they do it. You should have filled in form FD9 and de registered for tax in the UK. In that way there would have been no issue. As it is, when you make a tax return here you can make a deduction of the tax paid in the UK so you wont pay twice. The only real hit is the endowmwnts which would have been tax free in the UK. If you are coming up to pension age then you should watch out for that as well with the lump sum


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## Stravinsky (Aug 12, 2007)

You know, I was in Peniscola last week and decided to come down to Alcossebre via the coast road. But the road stopped at the national park and we had to turn back 

Then we missed the turn althogether when we got back on the main road

Is it nice?


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## Kalekas (Mar 18, 2013)

*Alcossebre Dreaming*



Stravinsky said:


> You know, I was in Peniscola last week and decided to come down to Alcossebre via the coast road. But the road stopped at the national park and we had to turn back
> 
> Then we missed the turn althogether when we got back on the main road
> 
> Is it nice?


I think so, but you can judge for yourself if'n you check my (photo-heavy) blog 'Alcossebre Dreaming' [http://scotofthealcossebre.blogspot.com.es/]

You _could_ have driven from Peñiscola to Alcossebre through the national park but in places it's a fairly rough road. Worthwhile though as there's a couple of lovely, fairly secluded beaches.


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## Kalekas (Mar 18, 2013)

*More thoughts on Modelo 720*

Well ... smug goes before a fall as they might have said. Busily congratulating myself on successfully filling out the dreaded form 720 '_bienes y derechos_' until I suddenly realised that the acquisition value of the flat we maintain in the UK should have been reported in euros and not ... (pause for the full boneheadedness of the move to sink in) ... not in pounds sterling!

Damn, damn, damn.

Luckily you can submit a '_Declaración sustitutiva_' so long as you asked for confirmation of filing the form and supply the Id number of the previous declaration. 

So, profit from my mistake and, of course, make sure you ask for electronic confirmation of submission (it comes as a 'Bajada.pdf' or similar).

Regards


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## snikpoh (Nov 19, 2007)

Kalekas said:


> Well ... smug goes before a fall as they might have said. Busily congratulating myself on successfully filling out the dreaded form 720 '_bienes y derechos_' until I suddenly realised that the acquisition value of the flat we maintain in the UK should have been reported in euros and not ... (pause for the full boneheadedness of the move to sink in) ... not in pounds sterling!
> 
> Damn, damn, damn.
> 
> ...



I wouldn't worry about it - the difference can't be that great. Next year you will (probably) have to report the current value any way.


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## CapnBilly (Jun 7, 2011)

Stravinsky said:


> I also ought to add that its one of the reasons I am becoming a non tax resident this year in Spain, because I have endowments and tax free pension lump sums coming out this year


I did that a few years ago for the same reason. One of the best things I did was deregister using a modelo 30. I got a letter and had to go into denia with my passport etc. and they just stamped my letter, and I just made sure I submitted the non resident return on time. Interestingly, I had to obtain a certificate of fiscal residency from HMRC for my wife, before they would sign her off. It wasn't a problem to get the certificate, in fact you can apply online now - and they issue it within 15 days, although they post it via Malta, so then takes 28 days, but thats another story. I took this into Denia and they signed her off as non-resident. 

I would recommend this course of action, so there will be no subsequent problems.


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## Stravinsky (Aug 12, 2007)

Kalekas said:


> Well ... smug goes before a fall as they might have said. Busily congratulating myself on successfully filling out the dreaded form 720 '_bienes y derechos_' until I suddenly realised that the acquisition value of the flat we maintain in the UK should have been reported in euros and not ... (pause for the full boneheadedness of the move to sink in) ... not in pounds sterling!
> 
> Damn, damn, damn.
> 
> ...


and also its the aquision value, not the present value
(stupidly)


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## gus-lopez (Jan 4, 2010)

Stravinsky said:


> and also its the aquision value, not the present value
> (stupidly)


Yes but the reason for that is if you aquired it 40 years ago for 7/6d & you now sell it for 300k pounds you have to pay cgt on the difference. More money for the Hacienda. Same with iht , as it is not your main residence. 

& if you are really having a bad day & sell it & then die the inheritors will be lucky to get enough for a drink !


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## xabiaxica (Jun 23, 2009)

never before have I been glad to have next to nothing.............


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## Stravinsky (Aug 12, 2007)

gus-lopez said:


> Yes but the reason for that is if you aquired it 40 years ago for 7/6d & you now sell it for 300k pounds you have to pay cgt on the difference. More money for the Hacienda. Same with iht , as it is not your main residence.
> 
> & if you are really having a bad day & sell it & then die the inheritors will be lucky to get enough for a drink !


Read my post in the assets thread


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## extranjero (Nov 16, 2012)

Stravinsky said:


> I also ought to add that its one of the reasons I am becoming a non tax resident this year in Spain, because I have endowments and tax free pension lump sums coming out this year


How can you become non tax resident if living here, or
Does that mean you have to go back to the UK to live for more than 183 days?


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## Stravinsky (Aug 12, 2007)

extranjero said:


> How can you become non tax resident if living here, or
> Does that mean you have to go back to the UK to live for more than 183 days?


You become a non tax resident by not fulfilling the requirement to become one as regards period of time spent in Spain, yes

In reality, how can anyone actually tell if you are in Spain or not, if you don't use your bank account or Spanish credit card


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## 213979 (Apr 11, 2013)

...or go to the doctor, buy prescriptions, or sign any documents... That could be a tough year, Stravinsky!

EDIT: Or fly.


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## extranjero (Nov 16, 2012)

Stravinsky said:


> You become a non tax resident by not fulfilling the requirement to become one as regards period of time spent in Spain, yes
> 
> In reality, how can anyone actually tell if you are in Spain or not, if you don't use your bank account or Spanish credit card


It sounds dodgy to me!


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## Stravinsky (Aug 12, 2007)

extranjero said:


> It sounds dodgy to me!



Err ... how can it sound dodgy

If I live in the UK for more than 6 months of the year then I am not a Spanish tax resident. There's nothing illegal about that, its the system!


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## Stravinsky (Aug 12, 2007)

elenetxu said:


> ...or go to the doctor, buy prescriptions, or sign any documents... That could be a tough year, Stravinsky!
> 
> EDIT: Or fly.


Heh heh, I wasn't suggesting that's what you do .... I was making the point that the authorities would find it difficult to keep tabs on someone doing that, especially Brits because its easier to travel than popping back to the States


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## 213979 (Apr 11, 2013)

Stravinsky said:


> Heh heh, I wasn't suggesting that's what you do .... I was making the point that the authorities would find it difficult to keep tabs on someone doing that, especially Brits because its easier to travel than popping back to the States


Hey, I could row my way back.


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## Stravinsky (Aug 12, 2007)

elenetxu said:


> Hey, I could row my way back.


Row, row, row your boat,
Gently down the stream.
Merrily, merrily, merrily, merrily,
Life is but a dream.


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## extranjero (Nov 16, 2012)

Stravinsky said:


> Err ... how can it sound dodgy
> 
> If I live in the UK for more than 6 months of the year then I am not a Spanish tax resident. There's nothing illegal about that, its the system!


Actually I did ask whether you would go back to the UK for more than 183 days and in your first answer you didn't actually say that's what you would do, so from your answer about not using bank etc, I assumed it was the other option, lying low etc. 
Anyway, it seems such a drastic and disruptive thing to do, especially if someone has to find somewhere to live, and all that bother getting on to the system again.


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## extranjero (Nov 16, 2012)

Since my last post, and doing a little research it appears that matured endowment policies are treated as being received in UK with tax already paid, and due to double taxation treaty will therefore not be taxed in Spain, so no need for drastic measures!


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## snikpoh (Nov 19, 2007)

extranjero said:


> Since my last post, and doing a little research it appears that matured endowment policies are treated as being received in UK with tax already paid, and due to double taxation treaty will therefore not be taxed in Spain, so no need for drastic measures!


That's NOT what I've been advised. I have been told that they are treated as income.


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## Stravinsky (Aug 12, 2007)

extranjero said:


> Actually I did ask whether you would go back to the UK for more than 183 days and in your first answer you didn't actually say that's what you would do, so from your answer about not using bank etc, I assumed it was the other option, lying low etc.
> Anyway, it seems such a drastic and disruptive thing to do, especially if someone has to find somewhere to live, and all that bother getting on to the system again.


In answer to your question I said:

You become a non tax resident by not fulfilling the requirement to become one as regards period of time spent in Spain, yes.

And that's exactly what I mean. I don't really understand why you are making a big thing about it  ... you either do it, or you don't. I personally know a number of people who live in the UK and spend protracted amounts of time in Spain. I also know a number of people who have a home in Spain, and one in the UK. It's neither regarded a disruptive or drastic, it's just a different perspective


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## Stravinsky (Aug 12, 2007)

extranjero said:


> Since my last post, and doing a little research it appears that matured endowment policies are treated as being received in UK with tax already paid, and due to double taxation treaty will therefore not be taxed in Spain, so no need for drastic measures!



I appreciate that all circumstances are different, but that is actually not always the case as it depends if the endowment is qualifying or non qualifying, and as always one can only recommend that professional advice be taken when making such a decision

Also the tax gestor I use advised that such things as pension lump sums, endowments are treated as taxable in Spain.


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## gus-lopez (Jan 4, 2010)

Stravinsky said:


> Also the tax gestor I use advised that such things as pension lump sums, endowments are treated as taxable in Spain.


Now I'm in the process of moving 2 small private pensions from the UK , under the QRops scheme, & have been assured that if I take the lump sum ( which I won't be doing it will just be rolling up) that I personally do not have any tax liability on it under the spanish system . & I'm using a well regarded company from up your way. i'll worry about it more when I'm thinking of taking the lump sum.


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## Stravinsky (Aug 12, 2007)

gus-lopez said:


> Now I'm in the process of moving 2 small private pensions from the UK , under the QRops scheme, & have been assured that if I take the lump sum ( which I won't be doing it will just be rolling up) that I personally do not have any tax liability on it under the spanish system . & I'm using a well regarded company from up your way. i'll worry about it more when I'm thinking of taking the lump sum.


Who knows mate, theres been so much bad press about qrops, its enough to put people off. I dont really know, but the theory of it is that you get your cash out of your pension pot tax free isnt it. Then you stash it away offshore somewhere. Logic tells you that it would be taxable here, but then if its done properly and stuck in the right place I hope its not


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## CapnBilly (Jun 7, 2011)

extranjero said:


> Since my last post, and doing a little research it appears that matured endowment policies are treated as being received in UK with tax already paid, and due to double taxation treaty will therefore not be taxed in Spain, so no need for drastic measures!


Hope your research isn't relying on that dodgy post on another forum. If so, you really need to read the double taxation agreement.


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## gus-lopez (Jan 4, 2010)

Stravinsky said:


> Who knows mate, theres been so much bad press about qrops, its enough to put people off. I dont really know, but the theory of it is that you get your cash out of your pension pot tax free isnt it. Then you stash it away offshore somewhere. Logic tells you that it would be taxable here, but then if its done properly and stuck in the right place I hope its not


Basically I moved mine due to the fact that if I die & it stayed in the UK my wife would receive the pot less 55% whereas by bringing it out , if I then die she will receive the lot. 
By bringing it out I am actually losing in terms of yearly interest as with the company
I used to work for it has been growing at the rate of 8%/year since 1984 . ( I never believed it when they stated it was guaranteed.) It is now 8.5%, wheres now out, it will only average around 6.5% . I thought that the overall benefit to my wife was better though. Time will tell.


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## Stravinsky (Aug 12, 2007)

gus-lopez said:


> Basically I moved mine due to the fact that if I die & it stayed in the UK my wife would receive the pot less 55% whereas by bringing it out , if I then die she will receive the lot.
> By bringing it out I am actually losing in terms of yearly interest as with the company
> I used to work for it has been growing at the rate of 8%/year since 1984 . ( I never believed it when they stated it was guaranteed.) It is now 8.5%, wheres now out, it will only average around 6.5% . I thought that the overall benefit to my wife was better though. Time will tell.


For sure, but you can take out 25% anyway cant you. With an annuity you can do a 10 year guarantee ... but you are right, they are a crap way of dealing with a pension (OK for the insurance companies though)


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## gus-lopez (Jan 4, 2010)

Stravinsky said:


> For sure, but you can take out 25% anyway cant you. With an annuity you can do a 10 year guarantee ... but you are right, they are a crap way of dealing with a pension (OK for the insurance companies though)


Yes 25% is the norm ,although I believe that 30% is the absolute max.


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## Stravinsky (Aug 12, 2007)

gus-lopez said:


> Yes 25% is the norm ,although I believe that 30% is the absolute max.


Thats interesting. I have a couple of pensions about to come out. I was going to leave the main fund and just take the cash for the moment. So I dont have all my eggs in one basket, and they seem to be doing fairly well at the moment. I was working on just 25% though ... you reckon it can go to 30%?


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## IanB (Feb 11, 2013)

gus-lopez said:


> Yes 25% is the norm ,although I believe that 30% is the absolute max.


Sorry but no unless the rules changed this year it is 25%. I had one of those old section 33 pensions, only a small one which supposedly guaranteed a 33% tax free lump sum IN THE CONTRACT! 

HMRC would not allow it and I had to settle for the current figure of 25% Sorry guys.

regards


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