# About to take the plunge!



## Ferryden (7 mo ago)

Hi guys,

I've read several great threads and been doing a bit of general research as my wife and I retired a year ago this month and decided in March that we were going to go for a NLV and move out to Mallorca where we rent (year-round) an apartment from Mallorquin family that we've known for many years. 

So it's all exciting but also pretty daunting!

I've read into the NLV process and reckon that I've got the basic visa process and am likely not to spend on one of the many advisors out there offering to help for a fee. Plenty to prepare on that front. I guess the main question I have is:

-is it true that I should already have an NIE to 'officially rent' my apartment in the first place? I've rented it annually on a rolling basis for the last 14 years but maybe Brexit means that I shouldn't be without the NIE already secured?

Mostly my questions are those relating to Spanish tax laws. I've read quite a lot and understand that because I'm not buying a property, my wife and I will have €700k allowance. While that seems a lot, we're in the process of selling our house and so will have that cash and all pensions are in personal SIPPS so will be treated as savings and hit by wealth tax accordingly. 

Most advice is to take my tax free 25% out before come out permanently. Am I right in assuming that this cash (or similar available savings) will only be subjected to Spanish wealth tax (albeit that any interest would be treated as additional income)?

I'm reluctant to commit to taking all my SIPP cash in one go as the markets have been crashing, so obviously completely the wrong timing, but recognise the benefit of such cash being virtually tax free, exc Wealth Tax.

Thanks for listening to my anxious ramblings guys!


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## Ferryden (7 mo ago)

One additional question... is there a 'perfect time' to relocate in terms of the Double Taxation complexities?
I was planning on coming out end Dec/Jan, to start the clock at a time to correspond with the Spanish Tax year and reduce the gap between the UK Tax Year and that in Spain.

But subsequently I've seen folks saying that our finances are only really assessed over the last quarter of the year or end of the year. Maybe I've got my thinking completely wrong here?


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## trotter58 (Feb 8, 2017)

Ferryden said:


> Hi guys,
> 
> I've read several great threads and been doing a bit of general research as my wife and I retired a year ago this month and decided in March that we were going to go for a NLV and move out to Mallorca where we rent (year-round) an apartment from Mallorquin family that we've known for many years.
> 
> ...


You can get your NIE as part of your NLV application. As you know the application needs to be made in the Spanish consulate nearest to your UK address. Have a look at someone's 1st hand experiences on another forum....Non Lucrative Visa application - Residency in Catral: padron, residencia and passport advice - Catral forum - Costa Blanca forum in the Alicante province of Spain

You're right to check the Spanish tax treatment for the "tax free" lump sum from pensions....It isn't tax free in Spain.

If your income if significantly higher than the basic state pension then you are likely to pay a lot more tax in Spain. The tax rate is higher and the personal allowances are significantly lower. You do not get the personal allowances for savings, dividends or ISA's

You will need to declare any worldwide assets over a certain amount for each class, shares, property, savings etc. The current tax rate for assets under a total of 700,000 euro is 0%

The Spanish tax year runs from January to December, so if you come over in June you will not be tax resident until the following year (183 days)

A bit of light reading.....Taxes in Spain for foreign nationals

Personal income tax - Taxation - Work and retirement - Citizens - Your rights and obligations in the EU - Tu espacio europeo - Punto de Acceso General

Spain - Individual - Taxes on personal income

Good luck.


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## Barriej (Jul 23, 2012)

Ferryden said:


> One additional question... is there a 'perfect time' to relocate in terms of the Double Taxation complexities?
> I was planning on coming out end Dec/Jan, to start the clock at a time to correspond with the Spanish Tax year and reduce the gap between the UK Tax Year and that in Spain.
> 
> But subsequently I've seen folks saying that our finances are only really assessed over the last quarter of the year or end of the year. Maybe I've got my thinking completely wrong here?


The tax year is Jan 1st to Dec 31st.
We were advised to take the 25% from my pension etc in the year before we moved. 
I got the transfer on 30th Dec 2019 and we moved out Aug 2020. 
Have put first tax return in for 2021 and informed the accountant (and independently checked with the tax office) and paid no tax as we didn't become resident until the end of 2020. 
Basically get rid of everything the year before you move. If you sell in Jan and move and become resident in March you will pass the 183 days to become tax resident and you will pay on the money you received in Jan..


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## Ferryden (7 mo ago)

trotter58 said:


> You can get your NIE as part of your NLV application. As you know the application needs to be made in the Spanish consulate nearest to your UK address. Have a look at someone's 1st hand experiences on another forum....Non Lucrative Visa application - Residency in Catral: padron, residencia and passport advice - Catral forum - Costa Blanca forum in the Alicante province of Spain
> 
> You're right to check the Spanish tax treatment for the "tax free" lump sum from pensions....It isn't tax free in Spain.
> 
> ...


Thanks for the response. I have actually read most of the linked articles. Still digesting it all! 👍 My wife is 62 and I’m 59 so we won’t have any income for several years before retirement, we’re going to be burning cash. Hence my query on tax treatment of cash savings. We intend to buy something in the UK but probably not for a couple of years (feel UK housing currently overheated). This means the house-money will artificially inflate our “savings” for that period.

I should’ve said since retiring we’ve been maximising our time out in Majorca as much as we can, so spent our 90 days there in first 6 months this year..😉😀

many thanks! 👍


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## Ferryden (7 mo ago)

Barriej said:


> The tax year is Jan 1st to Dec 31st.
> We were advised to take the 25% from my pension etc in the year before we moved.
> I got the transfer on 30th Dec 2019 and we moved out Aug 2020.
> Have put first tax return in for 2021 and informed the accountant (and independently checked with the tax office) and paid no tax as we didn't become resident until the end of 2020.
> Basically get rid of everything the year before you move. If you sell in Jan and move and become resident in March you will pass the 183 days to become tax resident and you will pay on the money you received in Jan..


We’ve another two months holiday booked for the summer so will probably only be able to enter for another month this calendar year under Schengen but can do 90 days in Jan to secure residency. 👍

🤷‍♂️ I was going to cash the 25% & small ISAs in Sept to try to see if the stocks recover a little (but could get worst of course! ☹)

… so as with uK, no income tax is payable on personal cash savings used to fund early years?

Gracias Barriej!


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## Ferryden (7 mo ago)

… other than on interest etc.


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## Barriej (Jul 23, 2012)

Ferryden said:


> … other than on interest etc.


Yep. Interest is taxed. 
We have a small amount in premium bonds and the winnings from that had to go on the tax return... 

We cut all ties with the uk and will get the form from the spanish taxman to send to the uk to make my private pension tax free in the UK.


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## Ferryden (7 mo ago)

Just cashed in our Premium Bonds! 😀

SIPP pensions are already held tax free in the UK. I assume the form you refer to is the Spanish Tax Authority’s official confirmation of Spanish tax payment, to ensure your private pension is taxed (as savings) in Spain? 

I’ve got to admit that annually reporting every individual stock/fund performance within my portfolio sounds a real chore ..😢).


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## MataMata (Nov 30, 2008)

Regarding renting out your property, you'll surely have an NIE as I'm not sure how you could buy a property without it.

Additionally I'd expect it to be required for your tourist licence - you do have one don't you?


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## Ferryden (7 mo ago)

MataMata said:


> Regarding renting out your property, you'll surely have an NIE as I'm not sure how you could buy a property without it.
> 
> Additionally I'd expect it to be required for your tourist licence - you do have one don't you?


… apologies if not clear.. we have rented a beachfront apartment for 14 years. Never had an NIE , but ready recently that you should get one before getting a long term rental. We pay annual rent but are only using within Schengen limits at present…


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## kaipa (Aug 3, 2013)

Given that you can still have around 6 months in Spain ( two separate blocks) I would suggest splitting your time between the two countries until maybe you reach retirement . 59 is young to retire in Spain and given you arent allowed to work and are going to end up paying alot more tax on your savings it doesn't sound financially great. Plus if you return to uk ( many do as health becomes a primary issue) you will have ended up paying lots of tax to Spain with no real benefits ( you wont even qualify for free healthcare) and then find in uk you have considerably reduced your hard earned savings. Unfortunately the two systems do not align so that Brits who have spent the working lives saving in respect to the uk system basically loose all that as soon as they move to spain. In Spain people have a completely different system for effectively saving with money being shifted around between family members to escape individual taxes and probably alot of cash floating around.


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## Barriej (Jul 23, 2012)

Ferryden said:


> Just cashed in our Premium Bonds! 😀
> 
> SIPP pensions are already held tax free in the UK. I assume the form you refer to is the Spanish Tax Authority’s official confirmation of Spanish tax payment, to ensure your private pension is taxed (as savings) in Spain?
> 
> *I’ve got to admit that annually reporting every individual stock/fund performance within my portfolio sounds a real chore ..😢).*


Nope pensions are not taxed until you take them and then the monthly amount is taxed as income, the fund until then is just a fund. Growth and loss are not taxed (or thats what the accountant we used told me)
Just give the accountant the annual report and let them do it. Im lucky as my pension is held in a group account (was my work pension) and the investments cannot be changed, mine are spread over around 12 companies/mines/property/investments and so its easy to report. 
Thats why everyone should be taking the 25% tax free lump in the Uk before moving over, cash etc savings are tax free. 
I own a classic and when (ha if and over my dead body)I sell it, the sale and subsequent profit is not taxable either..

There are two systems. The Modelo 720 which is used for all investments, property, insurances, premium bonds and cash held anywhere in the world over €50,000 per type, but its a reporting tool only. (it was introduced to stop Spanish people salting money away overseas) And Spain knows about the money anyway, because the accountant who did our 720 told me (via an interpreter) that he already had the figures for my pension (which is held and can only be paid in the Uk) before I confirmed it.
This only has to be filled once as long as the amount the holdings change is less than €20,000 in either direction. The accountant didn't put our Premium bonds down as we had less than the €50,000.
My pension had to be broken into its holdings, even though none were over the minimum limit, together they were. 

They inputted the original cost when I took the plan (for me 2017) and the gains or losses since then.
I will for the €125.00 it cost, make them do it annually anyway as I've seen what an ivestigation by the tax mani in the Uk is like and I can only imagine that here its far, far more invasive.

The other is the general tax return. You have to file, if you are not employed its like Uk self assessment.
So I only have my private pension, interest on Building society account, premium bond winnings. OH and Santander Spain gave us a €100 'bonus' last year for keeping our bank accounts in perfect order (this has to be declared). 
We filed as a couple because my wife has no private pension and you benefit from increased allowances. 
The tax return I recieved from the accountant was nine pages long, but most of the boxes were blank. I doubt i could have filled this in without making a mistake so the €85.00 was a bargain in my eyes. 
I will continue to use them as my 'income' from pensions and the odd bit generated in the UK for a small business that pays me irregular sums means it wont be a simple box ticking exercise.


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## Ferryden (7 mo ago)

Thanks kaipa. I do get your point completely, having been a little bit taken aback by the relative difference in tax environments, however I’m currently paying for two properties- UK home and Spain rental, which I’m not getting most use from. Hence plan to sell UK home.

My thought was if I am mainly using cash savings for the next 4-5 bridge-years I would be paying very little tax at all (relating to interest and wealth tax) if it’s primarily not income related. That would cost me c£180-£200k before wife’s pension arrives.

Other option is to buy a UK rental property to help bridge the gap.

🤔


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## The Skipper (Nov 26, 2014)

kaipa said:


> Given that you can still have around 6 months in Spain ( two separate blocks) I would suggest splitting your time between the two countries until maybe you reach retirement . 59 is young to retire in Spain and given you arent allowed to work and are going to end up paying alot more tax on your savings it doesn't sound financially great. Plus if you return to uk ( many do as health becomes a primary issue) you will have ended up paying lots of tax to Spain with no real benefits ( you wont even qualify for free healthcare) and then find in uk you have considerably reduced your hard earned savings. Unfortunately the two systems do not align so that Brits who have spent the working lives saving in respect to the uk system basically loose all that as soon as they move to spain. In Spain people have a completely different system for effectively saving with money being shifted around between family members to escape individual taxes and probably alot of cash floating around.


It's not necessarily true to say "and are going to end up paying a lot more tax on your savings." Spain offers a very tax-efficient means of investing through a Hacienda-approved tax compliant wrapper. This link explains how it works: Spectacular Tax Savings for Expats using Spanish Compliant Investments! - Blacktower Financial Management EU
Any reputable financial advisor in Spain will be able to set this up for you and the other advantage is that the investment company will handle all of the tax reporting arrangements for you.


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## Ferryden (7 mo ago)

Barriej said:


> Nope pensions are not taxed until you take them and then the monthly amount is taxed as income, the fund until then is just a fund. Growth and loss are not taxed (or thats what the accountant we used told me)
> Just give the accountant the annual report and let them do it. Im lucky as my pension is held in a group account (was my work pension) and the investments cannot be changed, mine are spread over around 12 companies/mines/property/investments and so its easy to report.
> Thats why everyone should be taking the 25% tax free lump in the Uk before moving over, cash etc savings are tax free.
> I own a classic and when (ha if and over my dead body)I sell it, the sale and subsequent profit is not taxable either..
> ...


…thanks very much for such a detailed and helpful personal response barriej! 👏 … really insightful and at a level of specific detail that is missing from many of the generalist articles!

I’ve also been looking at different accountants. Doing reviews etc, it seems a complete minefield, with many semi-qualified snakeoil salesmen out there, looking for ways to get you to shift your pension fund across into their shady mitts! ☹ 
Can I ask how you found your man, as you’re obviously happy and these fees seem realistic. 👍


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## xabiaxica (Jun 23, 2009)

Ferryden said:


> We’ve another two months holiday booked for the summer so will probably only be able to enter for another month this calendar year under Schengen but can do 90 days in Jan to secure residency. 👍
> 
> 🤷‍♂️ I was going to cash the 25% & small ISAs in Sept to try to see if the stocks recover a little (but could get worst of course! ☹)
> 
> ...


Once you have your Visa in place, the 90/180 no longer applies to you. You have 90 days from the issue of the visa to arrive in Spain, & then one month to apply for the TIE residence card. 

With the NLV you must spend over 6 months in Spain in the first year, & no more than a total of 10 months outside Spain in the first 5 years.


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## Ferryden (7 mo ago)

Thanks for that info.. it was a question that I’d been wondering about but now nicely clarified. Thank you! 👍


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## Ferryden (7 mo ago)

The Skipper said:


> It's not necessarily true to say "and are going to end up paying a lot more tax on your savings." Spain offers a very tax-efficient means of investing through a Hacienda-approved tax compliant wrapper. This link explains how it works: Spectacular Tax Savings for Expats using Spanish Compliant Investments! - Blacktower Financial Management EU
> Any reputable financial advisor in Spain will be able to set this up for you and the other advantage is that the investment company will handle all of the tax reporting arrangements for you.


Thanks for the link 👍…however given that this is a Gibraltar based business with recent negative press (e.g pension-life.com) and the product is a Gib- based bond wrapper style, many of which have been recently outlawed by Spanish Tax authorities, I’m immediately getting red flags here. So more research my side required methinks…


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## The Skipper (Nov 26, 2014)

Ferryden said:


> Thanks for the link 👍…however given that this is a Gibraltar based business with recent negative press (e.g pension-life.com) and the product is a Gib- based bond wrapper style, many of which have been recently outlawed by Spanish Tax authorities, I’m immediately getting red flags here. So more research my side required methinks…


I only gave that link because it explains the Hacienda compliant bond very clearly. I have had a tax compliant wrapper for 14 years through a highly respected company called Blevins Franks (https://www.blevinsfranks.com/) who are British owned with offices throughout Europe (many in Spain). Unfortunately they don't explain the workings of the wrapper on their website but they are exactly as explained on the Blacktower web page. I know nothing about Blacktower and, as I say, only put the link to them because they explain very clearly how the tax is calculated. The product I am telling you about has nothing to do with Gibraltar. It is a Spanish government approved investment scheme.


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## Ferryden (7 mo ago)

Of course..and I am grateful for all tips and information TS..and fully recognise I must do my own research, which I now will on this subject. Once again, many thanks! 👍


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## trotter58 (Feb 8, 2017)

Ferryden said:


> Thanks kaipa. I do get your point completely, having been a little bit taken aback by the relative difference in tax environments, however I’m currently paying for two properties- UK home and Spain rental, which I’m not getting most use from. Hence plan to sell UK home.
> 
> My thought was if I am mainly using cash savings for the next 4-5 bridge-years I would be paying very little tax at all (relating to interest and wealth tax) if it’s primarily not income related. That would cost me c£180-£200k before wife’s pension arrives.
> 
> ...


Just to check I've got this right. 
You're cashing in UK assets to release £180K - £200K and using this cash to fund your expenses in Spain for 4 to 5 years, at which point your wife's pension will kick in. (assuming cash held in bank deposit account attracting interest below inflation but still taxable in Spain)
OR
You're considering using this cash to purchase a buy to let in the UK and use this rent to fund your expenses in Spain (but have concerns about current house prices in the UK).

My advice would be to buy a UK property.


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## Ferryden (7 mo ago)

No, I am CONSIDERING using a proportion of the c£550k cash that I receive from my house sale for purchasing a buy to let. Invest rest. Alternatively invest the lot to get a return, but UK buy-to-let market tightening and markets in a mess..🤷‍♂️

All the advice seen seems to be to cash in all tax-free SIPP pension monies before going to Mallorca, producing an additional c£210k of available cash. with that I would not have normally done at this point). That would leave me with c£560 in SIPP that would remain invested in a HL SIPP to be drawn down later. 

We’d need c£30k pa (as I do have £6k pa prior annuity from next year), so say £150k of cash, though I could drawdown £4k.5K pa to sit under the Spanish income tax allowance. Let’s assume the £150k is needed. We’ve also £40k in SIPPs.

So normally if we were buying a UK BTL property (to keep on the UK housing ladder) I’d have remained invested in the UK and used some of the house sale cash to fund most of gap to wife’s pension age in 4-5 yrs (when she gets state + c£9k, total £18kpa. But it seems I’ll be hit big time if I don’t take the tag free cash now… 🤔


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## MataMata (Nov 30, 2008)

Ferryden said:


> … apologies if not clear.. we have rented a beachfront apartment for 14 years. Never had an NIE , but ready recently that you should get one before getting a long term rental. We pay annual rent but are only using within Schengen limits at present…


No, my bad for not reading your post properly!


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## Ferryden (7 mo ago)

MataMata said:


> No, my bad for not reading your post properly!


No problem MM…appreciate you responding! 😀


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## jacksdad56 (10 mo ago)

The Skipper said:


> It's not necessarily true to say "and are going to end up paying a lot more tax on your savings." Spain offers a very tax-efficient means of investing through a Hacienda-approved tax compliant wrapper. This link explains how it works: Spectacular Tax Savings for Expats using Spanish Compliant Investments! - Blacktower Financial Management EU
> Any reputable financial advisor in Spain will be able to set this up for you and the other advantage is that the investment company will handle all of the tax reporting arrangements for you.


Spanish Compliant Investments
This looks good! 
Do you have to keep your savings in here for a stated period to gain the tax advantages? ie 3/5 years?
Also if we need to take monies out like say a bank account is allowed or is there a minimum amount?
TIA
Keith n Macy


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## The Skipper (Nov 26, 2014)

jacksdad56 said:


> Spanish Compliant Investments
> This looks good!
> Do you have to keep your savings in here for a stated period to gain the tax advantages? ie 3/5 years?
> Also if we need to take monies out like say a bank account is allowed or is there a minimum amount?
> ...


It has been 14 years since I opened my tax compliant investment portfolio so I can't answer your questions with any certainty but I don't recall any minimum period. I do remember that management charges were higher in the first five years.
I can withdraw money whenever I want but it normally takes a week to ten days to be paid in to my bank current account. I presume everyone's experience will be different depending on the financial advisor they use and the investments they select. I started out with very low risk bonds but later converted to equities which offered better returns. I have also switched funds a couple of times so my portfolio is very flexible.


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## Ferryden (7 mo ago)

Further to your suggestions TS, I’m currently researching unit linked life insurance policy handling 👍

In doing the early stages of this I’ve noted that new laws were passed in July of last year to restrict investment options and bring them into the wealth tax calculation. https://www.engage.hoganlovells.com...-introducing-other-measures-against-tax-fraud

Can I ask what impact these new rules have had for you TS?

..thanks for your patience! 👍


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## The Skipper (Nov 26, 2014)

Ferryden said:


> Further to your suggestions TS, I’m currently researching unit linked life insurance policy handling 👍
> 
> In doing the early stages of this I’ve noted that new laws were passed in July of last year to restrict investment options and bring them into the wealth tax calculation. Spain: Law 11/2021 implementing ATAD and introducing other measures against tax fraud
> 
> ...


These new measures have no impact on me whatsoever. They have been introduced to combat tax fraud. My investments are made via a Spanish tax office compliant plan. The finance company that manages my investments report annually to the Spanish tax office and pay any taxes due on my behalf. They issue a certificate to me every year detailing the tax paid on withdrawals and this is noted on the annual tax return submitted by my accountant.


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