Retire To Spain
Are you ready to retire? Have you ever dreamed of retiring to the sun filled Spanish coasts? Well, keep reading to find out how this can be done in the most effective way..
Approximately 121,000 retirees have said said ‘Adios’ to cold rainy days and said ‘Hola’ to a new life style on the Iberian Peninsula.
Roughly 310,000 Britons have made the move and 40% of them are retirees, and they have set up home predominantly on the sun baked Costa’s, such as Costa Blanca, Costa del Sol and Costa Brava and some have even decided to move to Spains numerous islands like the Balearics and Canneries.
The Department for Work and Pensions data shows there are approximately 110,000 expats receiving their UK state pension in Spain.
The reason for this incredible number of expats is that Spain offers you nearly everything that you look for in retirement such as a great climate, low living costs, affordable homes near the beach and ease of access to numerous airports so they can make easy trips to and from the UK.
So why don’t we see how we can assist you in moving you from this cold and dull island to the warm, splendid climates of the colourful Spanish coasts.
The first thing that is probably on your mind is your pension.
You can still have your state pension paid in to your UK bank account or building society and draw it out from Spain, but some banks can put fees on withdrawals so please check with your bank first.
Another way you can receive your pension is by opening a Spanish bank account which we can assist you with. Too receive your pension from your Spanish bank account you will need the International Bank Account Number (IBAN) and BANK IDENTIFICATION CODE (BIC) numbers for your Spanish bank account. The thing to take into account when doing this will be that you will have no control over exchange rate used for transferring it from the UK to Spain
A large number of British expats prefer to have their pensions paid into their UK accounts and then use a reputable currency transfer specialist to exchange their pension from sterling to euros and deposit into their Spanish bank accounts, this again is something we can help you with and assist you in finding the best companies available. These specialist companies usually offer a better exchange rates than those offered by banks.
The benefit for using these exchange specialists is that the majority of the companies will offer you a fixed rate for future transfers. This will allow you to know exactly how much pension you will be receiving in euros and sterling which can give a better stability when calculating your finances. These services can be set up in person, on the phone, via email or on their respective websites.
Some of you might also have personal or workplace pensions and maybe wondering if the same applies. My best advice would be to talk first with a financial advisor who can look at your finances as a whole and could potentially offer you various tax efficient options for structuring all your assets and funds.
Tax for Retirees
If your plans to retire to Spain means that you will spend more than 183 days during a calendar year then you will need to become a tax resident there. This means that you will require a Spanish tax ID number (NIE), which you will also need to purchase any property in Spain.
If you plan on splitting your time between Spain and the UK and you are unsure of your residency status then you must find where you are officially residing but using the Statutory Residence Test that was introduced in 2013 to make easier this process.
When you relocate to Spain you will need to inform the HMRC that you will no longer be a tax resident in the UK. Please make the aware to the authorities in Spain that you are now a tax resident there, if not you could find yourself in serious trouble even if you are still paying tax in the UK on a UK sourced income.
Once you have become a Tax Resident in Spain then you are required to pay tax in Spain on your worldwide income, which will included your UK state pension, interests or gains earned on deposit accounts and investments in the UK or offshore. The UK government has stated that British citizens do not usually have to pay UK tax on their State Pension ig they are not a UK resident, but again i would obtain further information from a financial advisor and also make sure you fill out the correct paperwork for this. The International Pension Centre should probably be your first place of call.
The majority of income that come from the UK, such as rental incomes etc will continue to be taxed in the UK, this is also subject to usual allowances. Usually you must still declare this income with the tax office in Spain, but thanks to the UK and Spains double tax treaty you will be entitled to offset any tax paid in the UK. Not all incomes and gains are taxable in both countries but not getting it correct could mean that you might end up paying more than you are required. There are options available to minimise your obligations to tax in the UK once your are no longer a resident there.
Expect to have to complete and file an annual Spanish Tax Return and declare any assets outside of Spain, especially in the case of claiming any tax relief. At Elisa Properties we can assist you in finding reputable Law or Accountancy firms that will help you in completing said forms.
Spain also has in place a wealth tax, know as Patrimonio. This is aimed at residents who hold a significant worldwide wealth. This does not affect most expats, but if you believe that it might apply to you then please contact a financial advisor.
As I have mentioned many times in this section, i would advise you to speak with a financial advisor who have experience in dealing with expats finances. This will ensure that you follow all the correct procedures and fill out all the relevant paperwork. They will also be able to advise you on how to take the appropriate action to minimise your tax liabilities. We want you you to retire with peace of mind.
British expats who are in recipt of a UK state pension are entitled to Spanish State Healthcare. Britons who retire in Spain will continue to have their healthcare paid for by the NHS post-Brexit, after a deal in principle was agreed bu negotiators in Brussels.
Before relocating to Spain, Britons should begin the process before leaving the UK. You can do this by applying for a S1 form (click the link) from the International Pension Centre. Once you have arrived in Spain you will need to register your S1 at your local Insitiuto Nacional de La Seguridad Social (INSS) office to obtain an accreditation letter, this will enable you to register with a doctor at your local Centro Salud (health centre).
The documentation you will require to complete this process will be, your passport, NIE & Certificates of local and National residency. Once all your documents have been processed you will then receive your Tarjeta Sanitaria (health card). You will need to present this overtime you require medical attention or visit a health centre or hospital.
If you are in recipe of long-term benefits in the UK the process is similar but be sure to check with the relevant UK offices whether your healthcare entitlements can be transferred to Spain.
Will and Inheritance
A major priority before anyone decides to retire in Spain should be to put in place all the required legal structures as to protect your assets and make sure they are passed onto your choose heirs.
Your assets are described as all of your worldwide estate, moveable and immovable, including any property that you may have in the UK as well as your new Spanish property.
The majority of people who are looking to retire to Spain already have a will in place in the UK. When you purchase your new home in Spain you should speak with a qualified lawyer who will consider your existing will and will advise you of the best approach, this may even mean making a new will in Spain.
There are many complex rules in Spain that govern the succession law for expats. These rules take into account the persons residence, domicile, nationality or habitual residence to determine whats laws should apply to the persons estate. These rules can become even more complicated if someone passes away in Spain without writing a will, as Spain has forced heirship laws.
These rules and laws have caused some problems over the years so the European Union introduced the New Succession Regulation in August 2015. This regulation will affect all Britons who own property in Spain regardless of whether the property is a full time residence or holiday home.
The new rules for succession is governed by the law of the country in which the deceased was a habitual resident. The new rules also state that any EU citizen my choose to apply the law of their own nationality to the succession and administration of their estates, if the person is multinational they may choose any of their nationalities. This must be clearly noted in their will.
The majority of British expats who retire in Spain retain their UK domicile status, this is different to residency or habitual resident (for further information i would advise contacting your lawyer) this means that their worldwide estates will be subject to UK Inheritance Tax (IHT) as well as the succession tax in Spain. Succession tax in Spain is paid by by the person who receives the assets. Ownership of the assets cannot be transferred until the tax has been paid. Succession Tax and rules can vary in Spain from one autonomous region to another so please look into the regions rules and regulations of you choose region, always refer to a lawyer so you can get a full understanding of what the taxes would be.
Spain and the UK, like many countries offer certain relief for Inheritance Tax liability. This usually means that the tax is paid in the authority demanding the highest amount (e.g Spain), a credit note will then be sent back to the UK confirming that the tax has been paid and no further tax is due.
To fully understand Inheritance Tax and how to effectively hold your assets and limit you Inheritance Tax and Succession Tax, get advice from a reputable Spanish law firm that specialise in assisting Expats, I would advise you do this before you leave the UK.
If you need to contact a lawyer for any information please do not hesitate to contact us and we can put you in touch with one.
Lets us help you Retire to the beautiful country of Spain and assist you in Making The Right Move
retire – jubilarse (in Spanish)
A place in the sun
Spanish Property Insight