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  • FIRST POST
    • arnhemrd
    • By arnhemrd 2nd Aug 18, 4:15 PM
    • 39Posts
    • 3Thanks
    arnhemrd
    Spanish tax on UK ISA,s
    • #1
    • 2nd Aug 18, 4:15 PM
    Spanish tax on UK ISA,s 2nd Aug 18 at 4:15 PM
    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
Page 1
    • soulsaver
    • By soulsaver 2nd Aug 18, 5:27 PM
    • 2,089 Posts
    • 950 Thanks
    soulsaver
    • #2
    • 2nd Aug 18, 5:27 PM
    • #2
    • 2nd Aug 18, 5:27 PM
    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.
    • xylophone
    • By xylophone 2nd Aug 18, 7:16 PM
    • 26,901 Posts
    • 16,051 Thanks
    xylophone
    • #3
    • 2nd Aug 18, 7:16 PM
    • #3
    • 2nd Aug 18, 7:16 PM
    https://www.gov.uk/individual-savings-accounts/if-you-move-abroad-or-die

    will 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-home
    • arnhemrd
    • By arnhemrd 6th Aug 18, 3:09 PM
    • 39 Posts
    • 3 Thanks
    arnhemrd
    • #4
    • 6th Aug 18, 3:09 PM
    • #4
    • 6th Aug 18, 3:09 PM
    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.

    • EdSwippet
    • By EdSwippet 6th Aug 18, 3:48 PM
    • 802 Posts
    • 774 Thanks
    EdSwippet
    • #5
    • 6th Aug 18, 3:48 PM
    • #5
    • 6th Aug 18, 3:48 PM
    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.
    Originally posted by arnhemrd
    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.

    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.
    • soulsaver
    • By soulsaver 6th Aug 18, 3:57 PM
    • 2,089 Posts
    • 950 Thanks
    soulsaver
    • #6
    • 6th Aug 18, 3:57 PM
    • #6
    • 6th Aug 18, 3:57 PM
    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.
    • xylophone
    • By xylophone 6th Aug 18, 3:59 PM
    • 26,901 Posts
    • 16,051 Thanks
    xylophone
    • #7
    • 6th Aug 18, 3:59 PM
    • #7
    • 6th Aug 18, 3:59 PM
    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.
    • kidmugsy
    • By kidmugsy 6th Aug 18, 8:35 PM
    • 11,770 Posts
    • 8,285 Thanks
    kidmugsy
    • #8
    • 6th Aug 18, 8:35 PM
    • #8
    • 6th Aug 18, 8:35 PM
    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.
    Originally posted by xylophone
    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.
    • AnotherJoe
    • By AnotherJoe 6th Aug 18, 11:16 PM
    • 11,021 Posts
    • 12,700 Thanks
    AnotherJoe
    • #9
    • 6th Aug 18, 11:16 PM
    • #9
    • 6th Aug 18, 11:16 PM
    and will also have the proceeds from the UK house sale. I understand that I may have to pay capital gains on this sale
    Originally posted by arnhemrd
    You'd be crazy to do that. Sell it before you move.
    • FatherAbraham
    • By FatherAbraham 7th Aug 18, 7:30 AM
    • 903 Posts
    • 669 Thanks
    FatherAbraham
    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.
    Originally posted by soulsaver
    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.
    • max11
    • By max11 20th Oct 18, 11:30 AM
    • 215 Posts
    • 11 Thanks
    max11
    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.
    Originally posted by EdSwippet
    It is a good point. Do you mean selling the funds / shares and leave them as a cash in the ISA ?
    Or would the gain be computed from the year you become non-UK resident ?

    thank you
    • kidmugsy
    • By kidmugsy 20th Oct 18, 11:47 AM
    • 11,770 Posts
    • 8,285 Thanks
    kidmugsy
    My guess is that ISAs are not protected by it in any way
    Originally posted by EdSwippet
    I once read something to the effect that most countries have pension schemes so that there are plenty of treaties covering them - and usually confirming the tax-free status of accumulation within them. Whereas, the bloke said, few countries have anything like the ISA so it won't usually be recognised - it will instead be treated as you suggest.
    Free the dunston one next time too.
    • EdSwippet
    • By EdSwippet 20th Oct 18, 1:46 PM
    • 802 Posts
    • 774 Thanks
    EdSwippet
    It is a good point. Do you mean selling the funds / shares and leave them as a cash in the ISA ? Or would the gain be computed from the year you become non-UK resident ?
    Originally posted by max11
    I mean, sell them in the ISA and then (perhaps, probably) buy them back again, or something similar. Beware foreign country analogues to the UK 'bed and breakfast' tax trap. A sell and repurchase like this will be a non-event for UK tax, but would 'rinse' out any unrecognised capital gains in them in preparation for moving to a country that looks through ISAs as if they do not exist and so treats your ISA as a plain general trading account.

    Most countries compute capital gains as sale proceeds less amount paid on purchase. They often don't give a rat's tail about whether you bought those assets perhaps years or decades before becoming a resident in their country. If you have assets that will be exposed to that country's capital gains tax and which have a built-in gain -- likely given markets over the past decade -- then sell and then repurchase before becoming resident there is likely to be a reasonable way to defeat this to the maximum extent possible. For assets with a built-in loss, it can be better to wait until after moving so that you get to take the maximum loss.
    • max11
    • By max11 21st Oct 18, 9:30 AM
    • 215 Posts
    • 11 Thanks
    max11
    I mean, sell them in the ISA and then (perhaps, probably) buy them back again, or something similar. Beware foreign country analogues to the UK 'bed and breakfast' tax trap. A sell and repurchase like this will be a non-event for UK tax, but would 'rinse' out any unrecognised capital gains in them in preparation for moving to a country that looks through ISAs as if they do not exist and so treats your ISA as a plain general trading account.

    Most countries compute capital gains as sale proceeds less amount paid on purchase. They often don't give a rat's tail about whether you bought those assets perhaps years or decades before becoming a resident in their country. If you have assets that will be exposed to that country's capital gains tax and which have a built-in gain -- likely given markets over the past decade -- then sell and then repurchase before becoming resident there is likely to be a reasonable way to defeat this to the maximum extent possible. For assets with a built-in loss, it can be better to wait until after moving so that you get to take the maximum loss.
    Originally posted by EdSwippet

    Thank you very much Edswippet, it makes sense.

    Just one last thing, if I may, as you have been so kind.

    You mention "sell and then repurchase before becoming resident there ". Is this because CG are computed from the last purchase of funds / shares that was made ?Would they look instead at how much money was put into the account originally, irrespective of the value of the last purchase?

    Just thinking of other options: sell everything and keep the cash in the account (maybe buying again when resident in the new country - you may have implied this too), or obviously close the ISA account completely.
    Thank you
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