If you’ve fallen in love with Spain enough to buy a holiday home, you probably don’t need much convincing to make the permanent move to the land of the sun. Read here how to turn your Spanish holiday home into a permanent move
When those blissful extended summer visits don’t feel like long enough, it’s time to put some serious consideration into becoming a full-time Spanish resident. But before you pack your bags and wave adios to the UK, you’ll want to be smart about how you go about turning your holiday home into a permanent base in Spain.
One of the tools you can use to make your transition to Spanish residency smoother is Spanish Compliant Bonds. These are especially beneficial when it comes to taxation and investment planning, and in this guide, we’ll be discussing how they’ll help you turn your Spanish holiday home into a permanent move.
Why Do Your Finances Need to Change When You Move Permanently?
You might be wondering why you can’t just keep your UK-based financial setup when you become a Spanish resident. Technically, you could, but there’s a good chance that this setup will stop working in your favour once you’re in Spain.
It’s unlikely that your UK pension, ISA, and any other financial products you hold will give you access to the same tax benefits under Spanish law. That’s why we recommend Spanish Compliant Bonds: because they give you a solution to grow your investments with the advantage of tax deferral. Plus, unlike a standard ISA or SIPP, they’re designed specifically for people who live in Spain.
The Prudential Spanish Compliant Bond is a popular Spanish Compliant Bond, letting you invest across a broad range of funds without the concern about not being compliant with Spanish tax rules. It’s also worth considering offshore bonds, like the Prudential Offshore Bond, which are another flexible option (although they don’t typically give you the same reporting advantages as fully-compliant Spanish structures).
How Can Spanish Compliant Bonds Support Long-Term Residency in Spain?
If you’re thinking about making your holiday home permanent, one of the big appeals is probably Spain’s slower-paced, relaxed lifestyle. But before you put your feet up, you’ll want to give some serious thought to your long-term tax and wealth management.
Again, this is where Spanish Compliant Bonds can be a beneficial financial product, keeping your investments growing, with no tax to pay until you withdraw money. Even then, you’ll only get taxed on the gain portion, not your original capital. This can be truly game-changing if you’re planning to rely solely on your savings or a UK pension transfer to fund your lifestyle once you’re living in Spain.
Spanish tax rules also let you use withdrawal strategies that can further reduce your tax bill, something you won’t get from your UK pension plan when you’re no longer classed as a UK resident.
What About Tax Reporting?
Financial admin is probably the last thing you want to be thinking about when you’re planning your move to Spain, but it’s better to be prepared in advance than unpleasantly surprised once you arrive.
Something really important to be aware of is that once you become a tax resident in Spain (which applies if you spend more than 183 days in the country in a calendar year), you’ll have new tax obligations to deal with, including the Modelo 720—Spain’s requirement to report overseas assets.
The Spanish Compliant Investment Bond can be a lucrative option here, as many of these bonds are structured so you don’t need to report them under Modelo 720, giving you one less job to do when you’d rather be sunbathing at the beach.
The Situation With Your UK Pensions and ISAs
OK, so Spanish Compliant Bonds have their appeal—but what happens to your UK State Pension and ISAs once you move to Spain?
Your state pension will still be paid to you as normal, but if you have any other pension pots, it’s well worth reviewing them to see if they still serve a purpose when you’re living in Spain permanently. It might make more sense, in terms of tax benefits and the level of control you’ll have, to move your funds into a Spanish Bond or an International Pension arrangement.
Good to Know: There’s no such thing as an ISA in Spain, but you might hear compliant bonds being referred to as a Spanish ISA or ISA Spanish because they offer similar tax-deferred benefits.
Final Thoughts: When to Get Advice Before You Make the Move
If you’re serious about becoming a full-time resident in Spain, making the right financial decisions can be a bit tricky when you have so many options available to you.
Before you commit to your decision, we recommend speaking with an expat financial advisor who can help you get your head around offshore bonds taxation and Spain’s financial rules. That way, you’ll have the reassurance of expert guidance when you’re making important, potentially life-altering financial decisions.
