The most common questions you as an expat might have when moving abroad are about tax obligations, currency, pension options, will, estate planning, savings and investments, and, of course, Brexit.
We have asked Jason Swan, the Senior Partner at Holborn Assets, our trusted partners, to become a permanent host of our Expat Financial FAQs section so that you as our readers can benefit from his expertise and experience.
Jason is a key pillar of Holborn’s European division. He specialises in providing compliant tax-efficient savings, investment and pension solutions for expats living in the EU.
If you cannot find the answers you need in this section, please contact Expatra and we will do our best to help.
FAQs when moving to Spain
How long do I need to be in Spain to be considered a Spanish tax resident?
Your tax residency status determines which country’s laws are used to tax your worldwide income and gains.
Spain does not allow split-year treatment for tax status. You are considered a tax resident if you live in Spain for more than 183 days of the calendar year (January to December) or if your major sources of income or economic activity occur within Spain.
Is there a Double Tax Treaty between Spain and the UK?
Yes, there is a Double Tax Treaty between Spain and the UK, but it is only possible to be a tax resident in one of the two countries at any given time.
The treaty includes rules to help you establish your tax residency. However, your circumstances may change and so it is important for you to take regular advice in order to ensure your circumstances continue to align with the rules necessary for your status.
Are my UK or other investments tax-free in Spain?
What is tax-efficient in the UK may not be tax efficient in Spain.
For example, both premium bond winnings and Individual Savings Accounts (ISAs) are tax-free in the UK but not in Spain.
Dividends are taxable in Spain.
Although it is possible to hold on to an ISA once you have left the UK for Spain, you will be unable to make any further contributions to the account. Also, all income and gains derived from an ISA are liable for tax in Spain.
What is a Modelo 720 and do I need to file one?
All residents of Spain are required by law to declare all assets they hold outside Spain that are worth more than €50,000, regardless of the holder’s nationality. Spanish tax authorities can issue large fines for any nondisclosure of assets.
You do this using the 720 Asset Declaration Form (Modelo 720). The deadline for filing is the 31st of March. You only have to submit the 720 form once. However, if your circumstances change, you will have to do it again.
So, if you have become a Spanish resident and it’s your first year, or if there’s a change in the value of your offshore assets, you must file the 720 form between 1st January and 31st March of the same year.
- Taxes In Spain For Residents & Non-Residents – find out about declaring offshore assets to the Spanish Tax Authorities
- Living In Spain After Brexit – everything you need to know to move to Spain from the UK
FAQs when moving to France
How long do I need to spend in France to become a French tax resident?
The French tax authorities consider you tax resident if you meet one of the following criteria:
- you spend more than 183 days in France during one year or you spend more days in France than any other country;
- your main home is in France or France is your main place of economic activity.
Does France and the UK have a Double Tax Treaty?
Yes, but this allows you to be tax resident only in one country at any one time.
The Double Tax Treaty can prove beneficial in helping you manage your finances and reducing your liability, but only if you understand and follow the guidelines.
For example, it is possible to offset tax paid in one country in the other, but it is not always possible to get a refund if you have paid tax in the country with the higher rate.
It is far better to plan ahead and to avoid the higher liability in the first place.
The UK/France Double Tax Treaty is in place to prevent income being taxed in both countries; however, it is possible to pay tax in the wrong country and consequently pay more than you need to.
There are other ways you can receive relief from Double Tax Treaty.
For example, if you receive income from UK rental property or a government service pension, you may be able to report this to the French authorities as part of your taxable income. It is important that you plan for this as mistakes can be treated and punished as tax evasion.
Do I need to contact the French Tax Authorities when I relocate to France?
Yes, when you move to France it is essential that you contact the authorities to declare your residency and tax status. You should report all your income, savings and pensions. Failure to do so could result in you breaking the law and incurring a penalty.
Are my UK ISAs tax-free in France?
Individual Savings Accounts (ISAs) are tax-free in the UK. However, they may attract considerable tax liability in France, as well as ‘social charges’ so you may want to restructure any investments of this type before your move to France.
A suitable alternative for a French resident would be to transfer your ISA into a French-approved / compliant investment vehicle, such as an Assurance Vie. Whilst most domestic contracts are only available in Euros, offshore contracts such as those located in Dublin and Luxembourg are far more flexible in terms of currency and investment choice.
Do I need to declare my worldwide assets in France?
French tax residents are subject to tax on their worldwide income. This includes bank interest arising anywhere in the world, even if you never use the accounts or withdraw any interest you earn.
All accounts, wherever they are situated and regardless of whether they are taxed at source, should be declared to the French authorities.
France is a signatory to the Common Reporting Standard, under which almost 100 jurisdictions automatically exchange tax and financial information on a global level. Failure to declare could result in significant fines and penalties.
Are French Succession Planning laws easy to understand?
No, French Succession Laws can be problematic for expats in the country.
The rules are even more complex for those who have children from previous marriages or former relationships, and even for those who would rather their spouse inherited the majority of their estate in preference to their children.
As such, careful planning in relation to succession laws and inheritance taxes is essential.
What’s the best way to save and invest my money when I become a tax resident in France?
When it comes to personal tax and estate planning, life assurance (assurance-vie) is one of the most widely used services. Life assurance offers valuable advantages for French tax residents, no matter their nationality.
Why is life assurance more beneficial when it comes to taxation when compared to standard saving schemes?
You will have more options and more control over when and what you pay:
- With life assurance, the tax will be deferred on income and gains until you withdraw the funds
- You can also choose whether to be taxed at standard income tax rates plus a social contribution or at the flat tax rate of 30 percent
- Your tax on gains can be reduced depending on the number of years you have been holding your life assurance contract
Can I use life assurance for inheritance planning?
Absolutely. With life assurance, you don’t have to follow the French heirship rules, which state that certain heirs have to receive at least a portion of the estate regardless of your will.
This means you can leave the funds of your life assurance to anyone, although there are certain exceptions.
British citizens can also opt to use the inheritance law of their nationality in their will. Brexit should not impact this rule.
Can I reduce the succession tax with the help of life assurance?
Your policy should be funded prior to your 70th birthday. It’s possible to bring down succession tax rates from a maximum of 60 percent to 20 or 31.25 percent with a reduction of €152,500 per designated beneficiary.
What happens to my life assurance policy if I want to move to another country?
Your life assurance remains portable whether you want to return to your home country or move elsewhere.
If I die in France, are my beneficiaries liable for French inheritance tax?
In France, it is the beneficiary that is taxed rather than your estate. The relevant allowances and tax rates will be determined by their relationship with you.
With the right advice and structuring of your assets, succession tax rates of up to 60% can be substituted for the lower beneficiary tax rates of 20% or 31.25%, with a reduction of €152,500 per designated beneficiary.
Will my beneficiaries have to pay inheritance tax in the UK and France?
France and the UK have a double tax treaty regarding inheritance tax. Any tax paid in one country would be considered a credit in the other in order to avoid double taxation.
I am retired, do I need to pay social charges in France?
If you are of state pension age and have not paid social charges in France before, you should be able to obtain a form S1 health card from DWP. This means you may not need to pay social charges in France. However, top-up health insurance may be required to ensure you have full healthcare coverage in France.
If you reside in France during your working life or before the normal retirement age (state pension age), you may be required to pay social charges on taxable income. If you receive the right financial advice and your assets are structured well, charges/taxes could be deferred and/or reduced.
If I sell my main residence in the UK after I have moved to France, will I be liable for the UK and French Capital Gains Tax?
If you sell your UK property while living as a French tax resident, you should be exempt from being taxed on the sale, providing you sell the property within 12 months of it being put on the market. In the UK, the exemption will apply in full if the property is sold within 9 months (previously 18 months).
FAQs when moving anywhere in the EU
As an EU (Spanish / French / Portuguese…) tax resident, where do I pay tax when I sell UK assets?
If you aren’t a UK tax resident then you don’t pay UK Capital Gains Tax on shares or funds. You are most likely to be taxed in your country of residence according to the tax regulations.
If, however, you sell your property in the UK whilst living as a resident of another country, you will most certainly have to submit a non-resident Capital Gains Tax return to the HMRC.
- Living In Portugal After Brexit – everything you need to know to move to Portugal from the UK
- Living In Europe After Brexit – post-Brexit changes for Brits moving to the EU
Do I need to pay tax on my ISAs when I leave the UK?
Most countries tax you on your worldwide income and capital gains, including those in ISAs.
There may be more tax-efficient ways of investing your funds depending on your country of residence, and this is something you should investigate before you move.
Can I pay into a UK pension scheme after I have left the UK?
When you move abroad for either work or retirement, you can still go on paying into a UK pension scheme. It’s worth bearing in mind, however, that tax relief may be limited – or not available at all.
For now, you might receive tax relief on contributions up to £3,600 a year for five tax years after moving abroad. Most pension schemes will only accept contributions coming from a UK bank account.
Does my worldwide estate still pay UK inheritance tax if I die as a non-UK resident?
If you die outside the UK you may still be considered a UK domicile, which means your worldwide estate may still be liable for UK inheritance tax.
If your estate is valued over £325,000, it will be taxed at either 40 percent or 36 percent (if a certain amount is willed to the charity) on everything over this amount.
Since 2007, this threshold has increased to £650,000 for married couples and civil partners, but only if the spouses/partners leave their share to each other after they die.
Do I need to have a will in the UK and for the country I reside in?
In most cases, particularly if you have assets outside the UK, then yes. However, while living as a resident in other EU countries, you may be able to opt to follow English & Welsh or Scottish law, which in most cases will be more favourable.
Financial advice FAQs
How do you as financial advisors make your money / get paid?
There is no immediate charge for using Holborn Assets be it a financial review or initial advice.
Once you decide to proceed with our advice, we will get paid by the institution where the business is placed. This can be done in two ways: on a fee basis or a commission basis.
All costs and/or commissions are fully disclosed in the detailed suitability report you will receive, which will allow you to make an informed decision.
How often will you review my investments?
We review our clients’ circumstances every three months.
You will have your own dedicated adviser who is available to speak with between reviews but if we don’t hear from you, you will hear from us at least once every three months.
I have never met you, how do I know my money is safe?
Holborn Assets is an independent company and we do not handle your money. We only work with major financial institutions based in safe and secure locations.
We have some great client reviews on Trustpilot and we would be happy to put you in touch with our existing clients in the country you reside. We have clients in 100 different countries around the world.
Can you just send me some generic information by email (types of investments you deal with) to have a look at?
Being an independent company means we don’t offer an ‘off the shelf’ product.
Every client has different requirements and objectives. We need to have a good understanding of your current situation and these objectives before providing you with any advice.
What happens if I go back to the UK or move to another country?
We favour working with tax-neutral jurisdictions, which means your investments/pension will be internationally portable together with our management and servicing.
We have a global network of tax advisers/accountants who can help ensure your investments are treated favourably from a tax point of view in your new country of residence.
If you have a question that I haven’t answered yet, you can contact me through my Advice page and I will get in touch with you as soon as possible.