‘Expats are nervous about losing their assets’

This week, The Local talks to financial adviser and deVere Group Senior Area Manager for Spain and Portugal Andy Oliver about common mistakes expats make with their money, whether investing in Spain is a good idea right now, and the joys of having time for a proper family life.

'Expats are nervous about losing their assets'
Financial adviser Andy Oliver says doing proper financial research is key.

What is your professional background?

I have been working in financial services since 1995, at first in the UK — until I got sick of the cold and the dark and the long commutes! — and then in Spain.

I first came here with the IFG group, setting up a subsidiary called Siddalls. I then bought the company out in 2008 and built it up to 17 staff.

We joined the deVere Group in 2010 in what was a perfect fit.

Tell us about deVere in Spain.

We have about 80 staff across the country: in Madrid, Barcelona, Palma de Mallorca, on the Costa Blanca, and Andalusia's Costa del Sol.

We also have about 55 people working at the European Communications Centre (EEC) in Fuengirola, also on the Costa del Sol.

What do you look for in job candidates?

Our ideal candidates at the EEC — where most of our people work — would be 25 to 35 years old. They need to be energetic and positive.

In terms of the skill set, most of our work at the EEC is telephoned-based so people need to have great communications skills.

This is also not just a 9-to-5 job. It’s a career, and there are plenty of learning opportunities.

Do they need to speak Spanish?

It’s not a prerequisite but it certainly helps. I would say the vast majority of our staff don’t speak Spanish, but 30 percent do, and then we have a large number of multilingual staff, including, for example, Dutch and French speakers.

What sorts of advice does deVere Spain provide?

For younger people, this is everything ranging from getting the best value car insurance to putting a will in place and making sure people have sufficient emergency funds in their bank account.

For older people, it’s making the most of the money they have saved and — longer term — making sure their family is taken care of after they die.

And what are the most common issues you see?

These can be divided into four groups.

Number one is the inheritance tax issue. In Spain — as opposed to the UK — there is an inheritance tax for spouses, so if your husband or wife dies you need to pay tax on any inheritance you receive.

The amount varies from region to region so you need to find out what the situation is where you live.

Also, in Spain, all beneficiaries are taxed, and not just the estate as a whole, which people need to be aware of.

Another mistake expats make is they assume assets which are tax-free where they come from (like ISAs in the UK) are also tax free in Spain. This is not always the case.

Then there is the issue of UK-sited pensions.

There is a 55 percent flat-rate tax on pensions when someone dies in the UK. But if expats protect this money in a UK Qualifying Recognized Overseas Pension Scheme (QROPS), they can avoid the 55 percent tax charged in the UK.     

Lastly, there is the resident for tax purposes issue.

Some people go on paying tax in the country they come from, rather than Spain, even though they are a resident in Spain for tax purposes.

This is incorrect: if you are a resident for tax purposes in Spain, you need to pay your tax here.

Given the current economic situation, would you recommend investing in Spain at the moment?

The short answer is no!

If you do have cash though, you could avoid tax and get better interest rates by investing in Spanish life insurance wrappers, or portfolio bonds. These provide a mix of investments.

Usually domiciled in Ireland, which has a strong double taxation agreement with Spain, these products are registered with Spanish authorities.

What about investing in Spanish property?

Personally I’m not a fan of investing in residential property because the cost of entry is 11 or 12 percent above the cost of purchase, once you take into account stamp duty and legal fees and notary fees.

Then you have to find residents who will pay the rent, and there are maintenance costs too.

Also with the market in a slump, people may struggle to pay the mortgage and then find they can’t sell their properties. So you can end up “asset rich but cash poor”, and your lifestyle suffers.

Of course, if you are buying a house because you want to live in Spain, and you are planning to be here for a long time, that’s a different story.

How has the crisis affected your business? Has the Cyprus bailout changed people’s thinking?

There’s a lot of fear and uncertainty among expats. This is not because of what Spain has actually done but because of a fear of what could happen.    

But I don’t think Spain would experience a Cyprus-style raid because that would mean a huge exit of cash from the banking system.

Madrid's decision to introduce compulsory reporting of foreign assets (Modelo 720) has also increased concerns about the future.

While this means Spain now has a handle on where the assets of its tax residents lie, and if these assets change, the scheme was launched much too quickly and there was a lack of clarity about how it should be completed.

What’s the one piece of advice you would give to people before coming to Spain?

Do your research. Find out exactly what tax privileges are available but also what the differences are between the tax system in your home country and that of Spain.

You should also sit down with a professional. Don’t go down to the pub and find out what someone’s brother or cousin did.

At the same time, you should be aware of the tax privileges that come with living in Spain.

To give just a couple of examples, in Spain mortgage payment can be claimed as tax deductions, and you can also use the tax allowance of your non-working spouse in addition to your own.

Finally, what do you like about working in Spain?

I love the culture here, and the lifestyle. I like the fact that I have time to see my kids before I go to work in the morning and then — because my commute is much shorter — again for a couple of hours in the evening.

And because the weather is better, Spain also has much more of an outdoors-based culture. At the same time, I have a better and a healthier diet here, partly because I have more time.

And what don’t you like?

It can be difficult for a business to operate in Spain given the bureaucracy.

Sometimes it seems this is actually a disincentive for companies to expand and grow.   

To contact deVere Spain, click here.