Spanish tax on UK ISA,s
arnhemrd
Posts: 49 Forumite
I am a UK citizen, retired, and turn 65yrs in June 2019. I have a property in Spain and also in the UK.
I am looking to sell the house in the UK next year and become Spanish resident and move over to Spain full time.
At the moment I am a non tax payer on my private pension, but may pay a small amount of tax, at UK allowances, when my state pension kicks in. I realize that i will have to declare this income to the Spanish taxman and pay Spanish tax instead.
I have stocks and shares ISA's amounting to around 350k, plus around 40k cash, and will also have the proceeds from the UK house sale. I understand that I may have to pay capital gains on this sale
My question is, what is the best way to keep my stocks and shares ISA's tax free, if any?, as i understand that these will become taxable on my being resident in Spain.
Hopefully i will never need to touch these ISA's so is there any way that these could be 'frozen' for example, no money in and no money out, just let the funds accumulate, until i return to live in the UK or upon my demise.
I would obviously like to keep the UK tax free investments wrapper if possible, or is there any sort of alternative investments to keep from paying tax on these investments. I dont want to cash these in after years of ISA contributions to keep in a bank account paying little interest.
If it isn't possible to keep the tax free wrappers on the ISA's, how would the tax on the gains, or indeed the losses, be worked out. Are the dividends and capital growth still classed as a gain if i dont actually draw anything out whilst I'm a Spanish resident?
I don't imagine that i am unique in this situation, especially with so many expats that have moved to Spain, and so I would be interested to know it there is an easy or alternative solution that anyone has found.
Thanks in advance,
John :beer:
I am looking to sell the house in the UK next year and become Spanish resident and move over to Spain full time.
At the moment I am a non tax payer on my private pension, but may pay a small amount of tax, at UK allowances, when my state pension kicks in. I realize that i will have to declare this income to the Spanish taxman and pay Spanish tax instead.
I have stocks and shares ISA's amounting to around 350k, plus around 40k cash, and will also have the proceeds from the UK house sale. I understand that I may have to pay capital gains on this sale
My question is, what is the best way to keep my stocks and shares ISA's tax free, if any?, as i understand that these will become taxable on my being resident in Spain.
Hopefully i will never need to touch these ISA's so is there any way that these could be 'frozen' for example, no money in and no money out, just let the funds accumulate, until i return to live in the UK or upon my demise.
I would obviously like to keep the UK tax free investments wrapper if possible, or is there any sort of alternative investments to keep from paying tax on these investments. I dont want to cash these in after years of ISA contributions to keep in a bank account paying little interest.
If it isn't possible to keep the tax free wrappers on the ISA's, how would the tax on the gains, or indeed the losses, be worked out. Are the dividends and capital growth still classed as a gain if i dont actually draw anything out whilst I'm a Spanish resident?
I don't imagine that i am unique in this situation, especially with so many expats that have moved to Spain, and so I would be interested to know it there is an easy or alternative solution that anyone has found.
Thanks in advance,
John :beer:
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Comments
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I'm interested in responses on this question as I'm considering emigrating, too ..
.. but you'd maybe get better/more response on the tax board than on savings.0 -
https://www.gov.uk/individual-savings-accounts/if-you-move-abroad-or-diewill also have the proceeds from the UK house sale. I understand that I may have to pay capital gains on this sale
You are selling your PPR before moving?
https://www.gov.uk/tax-sell-home0 -
Thanks for the reply and the links, but these are based on UK taxation, so will not apply to me if i become Spanish resident.
I believe ISA tax free status does not apply in Spain and that is what i need to find a way around.
I know these ISAs are 'frozen' when i am no longer resident in the UK and im ok with that.
My way of thinking is that if i don't draw anything from them, just let them accumulate, then i should not pay Spanish income tax on any gains.
Also depending on the timing of my residency application and the sale of UK property i may become liable for Spanish capital gains tax.
I will also post this on the pensions forum as i feel sure this problem must have been addressed before.https://www.gov.uk/individual-savings-accounts/if-you-move-abroad-or-die
You are selling your PPR before moving?
https://www.gov.uk/tax-sell-home0 -
Most likely(*) is that Spain will simply ignore the ISA tax wrapper, and treat this for Spanish tax purposes as a vanilla trading account. In that case, you would probably be liable for Spanish taxes annually on the dividends received into the ISA (even if in 'accumulation' fund units), and Spanish capital gains tax on any sales.My way of thinking is that if i don't draw anything from them, just let them accumulate, then i should not pay Spanish income tax on any gains.
In the latter case, the gains could well be computed from the date you bought through to the date of sale, even if most or all of the actual gains accrued long before you set foot in Spain. At minimum, you probably want to sell and then later re-purchase your ISA assets before moving to Spain, to at least minimise the capital gains damage here. If Spain has any nasty anti-offshore-funds tax rules, then if you hold UCITS funds or ETFs in your ISA you at least stand a decent chance of not encountering these. UCITS funds are licensed to be sold across Europe.
(*) Based on extrapolation of personal and bitter experience by having lived outside the UK, but in a country that is not Spain. I do not know any of the precise details of Spain here, and you will need to consult the UK/Spain tax treaty (if any). My guess is that ISAs are not protected by it in any way, but a surprise to the contrary would be something pleasant. I am just some random bloke on the internet, so do not assume that I know what I am talking about.0 -
As I said - try the tax board on here, but you may get more good info from a Spanish expat forum... and it may all change re Brexit.0
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https://www.blevinsfranks.com/news/blevinsfranks/article/spain-uk-investments-taxation
ISAs too are fully taxable in Spain in the hands of Spanish residents at the corresponding savings income tax rates (19%, 21% and 23%). This applies to income and gains from cash and share ISAs.
Some expatriates mistakenly think that, since they are UK investments, and tax-free ones at that, that they do not need to be declared in Spain. In fact they do, and with the new global automatic exchange of information regime which started this year, the Spain tax authorities will be informed about your UK investments.0 -
https://www.blevinsfranks.com/news/blevinsfranks/article/spain-uk-investments-taxation
ISAs too are fully taxable in Spain in the hands of Spanish residents at the corresponding savings income tax rates (19%, 21% and 23%). This applies to income and gains from cash and share ISAs.
Some expatriates mistakenly think that, since they are UK investments, and tax-free ones at that, that they do not need to be declared in Spain. In fact they do, and with the new global automatic exchange of information regime which started this year, the Spain tax authorities will be informed about your UK investments.
That makes Ed's suggestion of realising capital gains before the OP enters his first Spanish tax year a good one.Free the dunston one next time too.0 -
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As I said - try the tax board on here, but you may get more good info from a Spanish expat forum... and it may all change re Brexit.
Brexit is unlikely make any direct difference to personal taxation, since fiscal policy has always remained a competence of member states, and was never within the remit of the Union (other than a degree of harmonization concerning VAT levels because those could otherwise be used to distort the Single Market).
This is why taxation treaties are referred to in these sorts of questions, not Union law.Thus the old Gentleman ended his Harangue. The People heard it, and approved the Doctrine, and immediately practised the Contrary, just as if it had been a common Sermon; for the Vendue opened ...THE WAY TO WEALTH, Benjamin Franklin, 1758 AD0 -
It is a good point. Do you mean selling the funds / shares and leave them as a cash in the ISA ?In that case, you would probably be liable for Spanish taxes annually on the dividends received into the ISA (even if in 'accumulation' fund units), and Spanish capital gains tax on any sales.
In the latter case, the gains could well be computed from the date you bought through to the date of sale, even if most or all of the actual gains accrued long before you set foot in Spain. At minimum, you probably want to sell and then later re-purchase your ISA assets before moving to Spain, to at least minimise the capital gains damage here.
Or would the gain be computed from the year you become non-UK resident ?
thank you0
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