Patrick2976

Of course it isn't retrospective but if you have overseas assets that are generating income and you declare them to the Hacienda you could end up paying income tax on 100% of that income. If they are placed in an off shore portfolio bond (for example) that complies with spanish regulations you won't pay tax on all the income (if you withdraw it) - just an amount proportionate to the original investment (and nothing if you leave it in the wrapper). Also, if the policy is in joint names (i.e. husband and wife) and one dies the surviving policy holder would not be liable for spanish inheritance tax on the inherited value if the policy - but that's a whole different subject.

jackytoo

Partly true but why use a British financial advisor in Spain. They haven't exactly got a good track record in Spain have they, thousands of ex-pats have lost their life savings and their homes with them. The majority aren't registered in Spain or the UK. Unless you are very rich you could find yourself paying the FA and administration fees more that you would have paid in tax. Still if you want to go ahead Domino, fine by me Let us know how you get on in 5 years time

Fred James

They are declared for income tax purposes but only the holder can make the asset declaration unless they have been exempted.

As you say it's just not worth taking the chance with the penalties being so huge.

Yes, if the values increase in any one type of asset by more than 20k they must be declared again but if they are moved into a different asset category they have to be declared again.

elfallero

What about UK pension funds not yet in payment, do they need to be declared?

Fred James

I'm not sure - there seem to differing opinions on this. Hopefully it will become clearer soon.

Logic says they should be as they are clearly an asset that you have some control over and hopefully are increasing in value.

Conversely, annuities, over which you no longest have any control have to be declared. It may be that pension funds, while they are interest producing, are not taxable until you take the lump sum and convert to an annuity or draw down scheme. Annuities are clearly taxable from the day they are created.

Mitzyboy

My tax gestor told me that HE had been told that a pension fund need not be declared, until it became an annuity. He has a copy of the decree on his desk and said it was like being back in university studies

CapnBilly

I think confusing is a very good description.

I've seen two opinions which say you have to declare a company pension ( I.e a defined benefits scheme), and two which say they don't think you do. Who on earth do you believe ?, and how do you find the definitive answer. And what about government pensions which you don't even declare for tax in Spain ?

With regards to pension plans not in payment, I think it's made clear in the. Q&A on the Hacienda website that you don't have to declare it whilst it's not in payment.

Porth

Income can only be taxed 'once in your hands' If it never touches it the argument is that you never had it.

Patrick2976

You are quite right, there have been and still are 'advisors' in Spain who are to be avoided. Hopefully that is becoming less the case these days. If you choose an advisor from a regulated firm they should have professional indemnity insurance in place. This type of insurance is very hard to get these days and is required by most regulaters (the FSC in Gibraltar for example). The insurers are only covering the most reputable firms which should lead to those firms in turn being very compliant so as not to incur compensation claim risk and put their PII at risk.

Patrick2976

Correct. It's very ambiguous regarding UK pensions. This is always a grey area in Spain as the authorities don't view them in the same way we do.

Fred James

Clearly annuities have to be declared but my view would be that if it not entirely clear what has to be declared with regard to pension funds, I would declare them.

You cannot be fined for declaring something that was exempted but if you are wrong you will be fined.

I am sure that there will be a lot of professional advice appearing over the next two months that will clarify the situation.

I have already completed my online declaration but I will not be submitting it until it is exactly clear how the rules will be interpreted.

Patrick2976

Yes, I think the main target is income generating assets (annuities) or larger assets that may push residents over the wealth tax threshold. You could argue that a UK pension in drawdown is already taxed and so subject to the double taxation treaty but a frozen/untouched UK pension? I would be concerned how they will veiw that if I was close to the wealth tax level. Otherwise it shouldn't be a problem as it's not providing income. In theory...

Mitzyboy

I'm quoting a professional who has the document on his desk
Trouble is, every professional may have their own take on it

Fred James

That's going to be the real problem.

As Patrick2796 said:-

Correct. It's very ambiguous regarding UK pensions. This is always a grey area in Spain as the authorities don't view them in the same way we do.

I know a few people who have had problems with some "professionals" trying to get their annuities taxed at the reduced rates.

The problem is that the Spanish wording of the asset types is not totally comprehensive. It mentions annuities and life insurance specifically but not pension plans as such. However you could consider them as investments in a financial institution so they could be construed to fall into that category or even as life insurance on the basis that they pay out on the death of the insured.

Luckily I don't have one so I don't have a problem.

Patrick2976

Yes, those with a QROPS will be fine as it will either be off shore in the aforementioned tax wrapper or already declared to the hacienda with minimal tax liabilities if on drawdown. However if you have a UK pension I'm sure it will be tempting to adopt the 'let them find me attitude'. Not advisable but understandable.....