Spanish Tax Planning Features

Is there an Offshore Bank Account Hidden in your Property? Plus how to Release Equity in your home.

Many Expatriate residents in Spain bought their homes for cash when they first arrived rather than utilize a mortgage. There were two reasons for this. Firstly, they had probably had enough of mortgages throughout their working lives and in retirement wanted the freedom of having none. Secondly, at the time they wanted to buy, mortgages in Spain were not that easy to obtain for foreigners. However, in avoiding one problem, they inadvertently created another – and one which could ultimately have a greater impact on their wealth. 

In recent years Spain has seen dramatic increases in the value of property with rises of 12.3% during 2005. The result is that a much larger proportion of an expat’s wealth is now tied up in their property while at the same time, the interest rates on bank or building society deposits has fallen by up to 80%.

The situation for many property owners in Spain is now one of falling incomes and the necessity to “watch the pennies”. Retirement is a time to relax and enjoy life. It should not be a time for additional worries and cares. However, all is not doom and gloom if you consider the options available to you below if you have a property that has increased in value since you purchased it.

Good news! Your personal wealth has increased significantly

If you have owned a property in Spain over the last few years you’ll have seen a huge rise in its market value. For example, a property bought just five years ago for €500,000 could well now be worth anything between €750,000 and €1,000,000 (or even more in certain cases). This would mean that your personal wealth would also have risen by between €250,000 and €500,000 – but what is it doing for you?

Accessing this new personal wealth

Assuming you are in the position above, would you be interested in a way to access this wealth – without having to sell your property – where you could take some of it in cash to use without restriction, with the balance placed in an account generating an income sufficient to cover all the costs of the arrangement and still leaving you with an additional retirement income of 4%?

OMM have been working with several offshore banks and insurance companies for the past few years developing just such a system. This is a well-tried and tested method of creating a new offshore account for you in a legitimate, simple yet effective manner.

Creating your offshore account

If we assume that you currently own a property worth €750,000 in today’s markets (with no outstanding mortgage), you could take up to €150,000 in cash to do whatever you wanted with it – no restrictions whatsoever. You’d also have an offshore account (legally growing tax free) which could generate enough each year not only to pay all the associated costs but also leave you with a highly tax-efficient additional investment revenue of around €18,000 p.a. to add to your retirement income. By taking advantage of recently introduced tax incentive programmes in Spain your withdrawals from this arrangement are practically tax-free.

“If anything ever seems too good to be true...”

We all know this very good piece of advice –especially when it comes to investments – but when you consider that OMM is licensed and regulated directly by the Dirección General de Seguros y Fondos de Pension (part of the Spanish Ministry of Economics) and that we can be held liable for any loss you may incur through negligence on our part (we are obliged to carry a very significant level of Professional Liability Insurance), then you’ll appreciate that we couldn’t possibly put any recommendation to you which didn’t stand up to scrutiny.

OMM’s Spanish Inheritance Tax Reduction Arrangement - SITRA

There are also other potential benefits for you when you apply SITRA to your Spanish Property. You could reduce the liability to Spanish Inheritance Tax on your property when you die and the asset passes to your heirs. Reductions of up to 95% are not uncommon. You could reduce your liability to Spanish Wealth Tax (although the savings are really only significant on properties in excess of €1,000,000). As your property continues to grow in value over the years ahead you can top-up your offshore account thereby keeping the additional retirement revenue it generates more or less in line with inflation.

More information

So if you own a property valued at more than €350,000 with no more than a 20% mortgage outstanding on it, why not get more information about Equity Release. We will also send you a free copy of A Guide to Equity Release in Spain.

Simply click here and complete the form with your details.