SPAIN Life Ins. Investments - TAX
Jul 9th 2015, 10:26 am
#1
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SPAIN Life Ins. Investments - TAX
I have a British friend who has taken up permanent residency in the Alicante region. He has an Isle of Man issued Life Insurance Investment Bond that he has held for over ten years.
A local financial advisor ( not Spanish ) has told him to surrender the plan and to start one with a firm called SEB (Ireland) which this advisor claims meets Spanish tax requirements.
However if my friend does this he stands to incur charges of around 16,000 euros with regards to the new plan. ( Perhaps even more ). All the charges as regards the setting up of his existing plan have long since been paid.
Does he really have to do this !? Surely he can simply pay tax on any growth on his existing ‘Bond’, out of his income on year by year basis and not then have to pay tax when he eventually cashes out of his plan ?
Any advice you can provide would be gratefully received. ( This friend has spoken to a British tax advisor and they have confirmed what the financial advisor has said but there is a suspicion that they are working in close collaboration, and to that extent perhaps the Tax advisor advice is not properly independent !? ).
A local financial advisor ( not Spanish ) has told him to surrender the plan and to start one with a firm called SEB (Ireland) which this advisor claims meets Spanish tax requirements.
However if my friend does this he stands to incur charges of around 16,000 euros with regards to the new plan. ( Perhaps even more ). All the charges as regards the setting up of his existing plan have long since been paid.
Does he really have to do this !? Surely he can simply pay tax on any growth on his existing ‘Bond’, out of his income on year by year basis and not then have to pay tax when he eventually cashes out of his plan ?
Any advice you can provide would be gratefully received. ( This friend has spoken to a British tax advisor and they have confirmed what the financial advisor has said but there is a suspicion that they are working in close collaboration, and to that extent perhaps the Tax advisor advice is not properly independent !? ).
Jul 9th 2015, 12:43 pm
#2
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Location: Ontinyent - Valencia region (campo)
Posts: 5,159
Re: SPAIN Life Ins. Investments - TAX
I have a British friend who has taken up permanent residency in the Alicante region. He has an Isle of Man issued Life Insurance Investment Bond that he has held for over ten years.
A local financial advisor ( not Spanish ) has told him to surrender the plan and to start one with a firm called SEB (Ireland) which this advisor claims meets Spanish tax requirements.
However if my friend does this he stands to incur charges of around 16,000 euros with regards to the new plan. ( Perhaps even more ). All the charges as regards the setting up of his existing plan have long since been paid.
Does he really have to do this !? Surely he can simply pay tax on any growth on his existing ‘Bond’, out of his income on year by year basis and not then have to pay tax when he eventually cashes out of his plan ?
Any advice you can provide would be gratefully received. ( This friend has spoken to a British tax advisor and they have confirmed what the financial advisor has said but there is a suspicion that they are working in close collaboration, and to that extent perhaps the Tax advisor advice is not properly independent !? ).
A local financial advisor ( not Spanish ) has told him to surrender the plan and to start one with a firm called SEB (Ireland) which this advisor claims meets Spanish tax requirements.
However if my friend does this he stands to incur charges of around 16,000 euros with regards to the new plan. ( Perhaps even more ). All the charges as regards the setting up of his existing plan have long since been paid.
Does he really have to do this !? Surely he can simply pay tax on any growth on his existing ‘Bond’, out of his income on year by year basis and not then have to pay tax when he eventually cashes out of his plan ?
Any advice you can provide would be gratefully received. ( This friend has spoken to a British tax advisor and they have confirmed what the financial advisor has said but there is a suspicion that they are working in close collaboration, and to that extent perhaps the Tax advisor advice is not properly independent !? ).
It is true that unless the investment is in a 'Spanish wrapper' that is, it is Spanish compliant, then the costs could be massive.
Putting it basically, if the investment bond is NOT Spanish compliant, then you pay tax on the entire investment whereas if it is in this wrapper, you only pay tax on any gain and only then if you draw money from the investment (as a % of the bond value) - SEB do a nice diagram to help explain this.
By the way, SEB are Swedish but have an office in Ireland as they took over Irish Life a couple of years back.
Jul 9th 2015, 2:06 pm
#3
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Re: SPAIN Life Ins. Investments - TAX
Surely this cannot be legal !!?? How on earth can a capital sum on which tax has already been paid in another location some 10 yrs ago have tax levied on it ! That is against EU rules surely !? I have heard that the Spanish are taking the mickey out of Expats but this would take the biscuit !
Jul 9th 2015, 4:50 pm
#4
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Re: SPAIN Life Ins. Investments - TAX
Don't forget to declare it on Modelo 720 as well ...
Jul 9th 2015, 5:26 pm
#5
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Re: SPAIN Life Ins. Investments - TAX
Yes, my chum is aware of Medolo, but he is now seeking advice professionally as to the comment you have made as regards his 'after tax' capital deposit into his Investment Life Ins. Bond some 10 to 11 years ago. He refuses to believe that the capital element is taxable. The capital he brought into Spain to buy his villa was not taxable so why would the capital value of his Life.Ins. policy be taxable !?
Jul 13th 2015, 9:19 am
#6
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Re: SPAIN Life Ins. Investments - TAX
I have transferred my previous investments held in the IoM into my SEB Spanish Portfolio Bond without a problem or tax. Try asking the advisor.
Jul 13th 2015, 9:30 am
#7
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Re: SPAIN Life Ins. Investments - TAX
Yes, but you will have had to pay a whole new raft of set up charges - circa 8% of the investment or more. Would it not have been better to pay the tax on the growth out of income year on year which I understand is the option if you retain a non compliant ( so called ! ) IOM investment life ins. plan !?
