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The Spanish tax office has announced new measures to crack down on tax fraud. Their tax inspections plan for 2017 revealed new IT tools and processes that will make it much easier to investigate the tax affairs of wealthy individuals.

It is that time of the year when many people make New Year resolutions to improve their life in one way or another.  Whether or not you make resolutions, this is a good time to consider whether you need to review your financial planning.

To protect your financial security through retirement, and achieve your wishes for your family and heirs, you need to have a strategic tax and wealth management plan in place.  This should cover your savings and investments, tax planning, pensions funds and estate planning.  These should all be set up to work together to preserve your wealth over the long-term and meet your objectives.

You need to consider any recent global and local developments that may affect your finances in the coming year, as well as have a long-term strategy.  Any changes in your personal circumstances could also warrant a review.

Once you have assessed your situation and financial planning, you will be able to discuss any necessary adjustments with your financial adviser.

Savings and investments

2016 was certainly an interesting year, with Brexit and US elections.  More recently the Italian referendum could add more uncertainty for the Eurozone and financial markets. Diversification is more important than ever, and you need a long-term strategic asset allocation plan which is specifically designed around your circumstances, needs and risk profile.

Diversification gives your portfolio the chance to produce positive returns over time without being vulnerable to any single area under-performing. There are various levels you should have in your investment portfolio -

1)      Asset allocation - spreading your capital across different asset classes (equities, bonds, real assets, property, cash etc).

2)      Diversification across geographical areas, sectors, company size etc.

3)      Owning equities and bonds issued by a range of companies (for example through owning a selection of funds).

4)      Utilising a multi-manager approach where you diversify across managers and styles.

5)      Currencies.

The starting point should be to obtain a clear and objective assessment of your appetite for risk, to make sure your portfolio is suitable for you. 

Remember that as asset prices rise and fall, your portfolio can shift away from the one designed to match your risk profile and objectives.  You should review your investments around once a year to rebalance it if necessary.

Tax planning

There are no changes to Spanish income or wealth tax for 2017 - except that the promised abolition of wealth tax has not come to pass.  The income tax rates remain the same as for 2016 income and wealth tax will be applied as it has in recent years.

Make sure your investments and wealth are placed in the most suitable arrangement to limit your tax liabilities.  Take advice from someone who is well-versed in the nuances of Spanish taxation, otherwise you could see your investment returns slashed by taxes that could have been avoided or mitigated. It is important that your tax planning is up-to-date and designed to take advantage of tax planning opportunities in Spain.

Another incentive to review your tax affairs is the global automatic exchange of information regime under the Common Reporting Standard is now in force.  The Spanish tax authority will receive information on every resident of Spain, without having to ask for it. Cross-border tax planning can be complex, so you need to ensure you are declaring income and paying tax in the right country.  

Estate planning

The first step is to establish your goals.  Who would you like to benefit from your estate?  Are you happy for them to have control over the money?  When should they receive the funds? How much tax will they have to pay on their inheritance?

You then need to obtain specialist advice to ensure that your estate plan is specifically set up to achieve your wishes for your heirs.

Under the EU succession regulation Brussels IV, which came into force in August 2015, you can choose whether Spanish or UK succession law will apply to your estate. The default position is for Spanish succession law to apply to foreign nationals living here, unless they have a will stating otherwise. If you do not have a valid will, your estate may be distributed according to the restrictive Spanish law.

Brussels IV does not allow you to opt out of Spanish succession tax, which can be costly in certain circumstances. This is due if the asset being inherited is located in Spain or the recipient is resident in Spain. Tax is paid by each recipient, with varying rates.  Inheritances between spouses are taxable. Also, bear in mind that UK inheritance tax may still apply for UK nationals. 

Whether it is investments, tax or pension planning, seek advice to ensure you do what works best for your personal situation.  Use an adviser who can guide you on all these aspects and provide holistic solutions so you can have peace of mind that your financial affairs are in order.    

David Bowern, Partner, Blevins Franks
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Tel: 952 809 212

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Many British expatriates close their UK bank accounts and open new ones in offshore centres once they leave the country.  They may not have a choice if their bank does not allow non-UK residents to hold accounts.  Nationwide International in the Isle of Man is a popular choice for expatriates, in Spain and elsewhere, but it has announced that it is closing its doors in summer 2017. 

The bank will start closing customer accounts from the beginning of 2017   It has sent out an initial letter to clients advising them of the news, but will be writing again with important information and dates regarding the closure of their specific accounts.

In the meantime, it suggested that since looking for a new home for their savings can take time, clients should start looking now.  

If you have accounts with Nationwide International, you can choose to close them right away or wait until you have the closure dates.   The bank has removed any notice requirement on its accounts, and fixed rate bonds can also be closed before the scheduled maturity date, with no penalty.

You can continue to deposit money into your accounts until you close them, but cannot open any new ones.  Nationwide assures clients that their money remains in safe hands.

The bank's decision to close came following a strategic review of its operations and was based on a number of factors including falling customer demand, running costs and changing market conditions.

This only affects Nationwide International in the Isle of Man. Accounts held with the Nationwide Building Society in the UK are not affected and the business continues as usual.

Looking for a new home for your savings

This is a good opportunity to review your savings and consider if a bank is the best place for your money. 

The Bank of England interest rate has been at historic lows since March 2009 and was cut to an even lower 0.25% following the Brexit referendum.   If you need your savings to provide an income, preferably without withdrawing much capital, or are looking for capital growth to keep pace with inflation over your retirement years, seek advice on how you may be able to generate better returns from your savings.

How long do you need your money to last?

This is a sobering question and not one most people can answer with certainty. Underestimate this, however, and your money could run out too soon, leaving you unable to live the lifestyle you want. Life expectancy has been increasing and you need to make sure that your savings will provide the income you need right to end of your and your spouse's retirement years. No-one wants to be forced to reduce their quality of life, especially in their later years.   

You therefore need to establish a strategic savings and investment strategy to preserve the value of your wealth and income. 

Remember to factor in the effect of inflation on reducing your spending power each year. Say, for example, you typically spend €5,000 a month. Assuming an inflation rate of 3% a year, in 10 years' time you could need about €6,720 a month to maintain the same spending, and €9,030 in 20 years.

Time not timing

The uncertainty over Brexit has been making some people cautious about investing.  However, trying to time when to buy and sell investments has plenty of risks - but the biggest one may be the risk of missing out. 

To illustrate this point, a hypothetical £10,000 investment in the FTSE All-Share index for the 10 year period to 31 December 2015 would have earned a profit of £7,197 if invested the whole time. If the five best days were missed, the profit would be considerably lower at £1,831. Missing the 10 and 30 best days would have resulted in losses of £607 loss and £5,269 respectively. (Source: Russell Investments)

Short-term declines or uncertainty should not detract from the long-term potential of stockmarket investing.  Looking at the FTSE All-Share index from 1996 to 2015, although there were average intra-year declines of 15.7%, annual returns were positive for 15 out of the 20 years.  A hypothetical lump sum investment of £100,000 at the start of 1996, with dividends reinvested, would have been worth £367,525 at the end of 2015. (Source: Russell Investments)

It is important to ensure that your portfolio is built around your risk profile, and with strategic asset allocation and diversification to reduce risk and meet your objectives. You want to ensure that your portfolio is suitable for you. Take specialist advice and build a good relationship with your financial adviser so they understand your needs and guide you through the Brexit years and into the future.

At Blevins Franks our investment advice is personalised for each client.  We take the time to get to know you, your situation and objectives, and use sophisticated means to establish your risk profile ensuring we recommend a portfolio that you are comfortable with.  Investments can be in Sterling or Euros or a mix of currencies, and you can switch currencies at a later date.

We have been providing trusted financial advice to British expatriates in Spain for over 40 years, only recommending funds that have been carefully vetted for performance and security.  We would be happy to have a free, no obligation discussion with you to outline your options and explain how we can help you.

David Bowern, Partner, Blevins Franks
Email: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
Tel: 952 809 212

These views are put forward for consideration purposes only as the suitability of any investment is dependent on individual circumstances; take individual personalised advice. The value of investments can fall as well as rise. Past performance should not be seen as an indication of future performance.

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Tax rates, scope and reliefs may change.  Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change.  Tax information has been summarised; an individual is advised to seek personalised advice.

From January 2016, financial institutions in over 50 countries around the world began collecting information on their clients and their accounts.  This data will be passed onto the clients' country of residence in 2017.  Cross-border taxation can get complex for expatriates, and it is important to make sure you are correctly declaring your income and paying tax in the right country.

This exchange of information will be repeated every year, with a further 47 countries starting to collect data in 2017, ready to exchange it in 2018.   It is carried out under the Common Reporting Standard (CRS), developed by the Organisation for Economic Co-operation and Development (OECD).