For customers Wealth Management Portfolio European portability option Spain Here we give you information on how your Wealth Management Portfolio (WMP) bond will continue to offer you the tax efficiency and tax deferral you expect when you move to Spain. We also cover what you should consider in relation to your bond as you prepare to leave the UK. We strongly recommend that you seek professional tax advice before you leave the UK and also to assist with your Spanish tax affairs. Tax rates in Spain The tax system in Spain is different to that in the UK. Your Spanish tax adviser will be able to keep you up to date on an ongoing basis. In Spain, there are two main categories a WMP style investment can fit into it will be either a qualifying or a non-qualifying policy. Due to the way we ve structured our WMP, we can provide you the option of having either a qualifying or a non-qualifying policy, but you have to make this choice at the time of your initial investment.
Qualifying With a qualifying policy you can continue to benefit from gross roll up with a tax charge only arising on a withdrawal from the WMP. Non-qualifying With a non-qualifying policy, a yearly tax charge arises on any growth during the calendar year even if you don t take any withdrawals from your WMP. This is referred to as the imputation regime. Any taxable income from the WMP whether you re actually taking withdrawals or not will be subject to progressive tax rates. The rates for the 2017 financial year are: Savings income up to 6,000 19%. Savings income from 6,000 to 50,000 21%. Savings income over 50,000 23%. Page 2 of 8
The difference between the UK and Spain an example The following example compares the difference between how the amount liable to tax will be calculated on a partial cash in and full cash in when in the UK or when in Spain. This example is for illustration purposes only and shouldn t be taken as a basis for advice. Paul invests 250,000 in his WMP with the European portability option. Paul sets up his WMP as a qualifying policy. This means that the investment will provide tax deferral while Paul is resident in Spain until he takes a withdrawal. He takes a partial withdrawal of 50,000 after he s had the bond three years and six months. At this time, the value of his bond was 275,000. Paul is aware that the value of investments can fall as well as rise and isn t guaranteed. He knows he may get back less than he originally invested. Page 3 of 8
Position in the UK for partial withdrawal Let s first consider the position in the UK. As you can see below, the 50,000 partial withdrawal falls within Paul s carried forward 5% tax-deferred allowance, so there s no chargeable gain any tax liability is deferred until a later date. Year 5% taxdeferred allowance brought forward from the previous year 5% taxdeferred allowance for the year Amount withdrawn in the year 5% taxdeferred allowance carried forward to the following year Chargeable gain 1 n/a 12,500 0 12,500 0 2 12,500 12,500 0 25,000 0 3 25,000 12,500 0 37,500 0 4 37,500 12,500 50,000 0 0 Page 4 of 8
Position in Spain for partial withdrawal The yearly 5% tax-deferred allowance that Paul can get in the UK isn t available in Spain. Instead, tax is only payable on the investment gain. This 50,000 withdrawal is treated as Paul taking part of his premium back and part of the growth (known as investment gain). The formula for calculating the taxable investment gain is: Withdrawal amount 50,000 Withdrawal amount/value of bond immediately before the withdrawal x premium x = 50,000 275,000 250,000 Gain 4,545 Paul would pay tax at his appropriate rate on this amount The key difference is that in the UK any tax liability is deferred to a later date, but in Spain, as long as the WMP has been set up as a qualifying policy, tax is payable on the amount of the withdrawal that relates to the growth in Paul s investment. Let s take our example a stage further. Paul decides to cash in his bond in year eight. The value of his bond is 265,000. Page 5 of 8
Position in the UK on full cash in As there have been no previous taxable gains in the UK, the formula in the UK for calculating the chargeable gain on cash in is: Cash-in value 265,000 Any previous withdrawals 50,000 Total investment + = 250,000 Chargeable gain 65,000 Paul would pay tax at his appropriate rate on this amount Position in Spain on full cash in The formula in Spain for calculating the chargeable gain on cash in is: Cash-in value Balance of premium after cash-in value previous withdrawals = 265,000 250,000 45,455 Paul would pay tax at his prevailing rate on this amount. Gain 60,455 As Paul has already been liable to tax on the 4,545 from his earlier partial withdrawal, the total amount liable to tax over the eight-year period would be 65,000 just as it is in the UK. The actual amount of tax you d pay on these amounts would depend on the advice you get from your tax adviser. We ll provide you with the details they need to help you complete your Spanish tax filing obligations. This is a complicated area of taxation and other local taxes including wealth tax may apply. We d strongly recommend that you seek appropriate professional advice for your personal circumstances in the UK and Spain. Page 6 of 8
Moving to Spain checklist Here we show what you should consider in relation to your bond as you prepare to leave the UK, and give some information about the tax reporting deadlines in Spain. You need to be aware of these for when you arrive. What you need to do Tell HM Revenue & Customs about your move Tell us your confirmed move date, your new address, and your taxpayer identification number(s). Get all your tax affairs in order How to do it Request a P85 Leaving the UK form from your tax office, or get it online at www.hmrc.gov.uk. Complete and return the P85 form. Use our European portability option commencement form. You can find this at www.aegon.ie or contact us and we ll send you one. Phone: 08456 000 173 Email: client.relations@aegon.ie Seek advice from a qualified tax professional in both the UK and Spain. Further information You must do this to get any refund you re due and to work out if you ll become a non-resident. You may still need to complete a UK tax return for the year that you leave and also if you continue to have UKsourced income. You may have given us some of this information already, but we need your confirmed move date and your new address so that we can activate the European portability option on your bond and so that we know where to send future correspondence. We also need updated tax information about you so that we can comply with our reporting obligations to Irish Revenue. It s important that you seek advice on your own personal circumstances. If you don t have a tax adviser, your financial adviser should be able to help you find one. Although we ve done all we can to give you the option of a WMP that s as tax-efficient as possible, in Spain the amount of tax you ll actually pay will depend on your personal circumstances. We can t give you any specific tax advice. Page 7 of 8
Tax reporting deadlines in Spain The taxable period in Spain is 12 months and is the calendar year (1 January to 31 December). Income tax is liable on the income in the preceding year. In general, resident individuals subject to income tax must file a return by 30 June. If you haven t selected our investment restriction option (only investing in Undertaking for Collective Investments in Transferable Securities compliant funds) at the start, your WMP will be liable to tax yearly on any growth under the imputation regime. You can find out more about the imputation regime in your Key features of the Wealth Management Portfolio document or from your financial adviser. This information is based on our understanding, as at November 2017, of the tax legislation for the UK, Ireland and Spain. While we ve taken every care in preparing this material, we accept no responsibility for any actions taken, or refrained from, on the basis of these comments. We ve covered a lot of information here. If you need any further information, please speak to your financial adviser. aegon.co.uk @aegonuk Aegon UK Aegon UK Aegon is a brand name of Aegon Ireland plc. Aegon Ireland plc, registered office: 2nd Floor, IFSC House, Custom House Quay, Dublin 1, DO1 R2P9. Registered in Ireland (No. 346275). Authorised by the Central Bank of Ireland and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request. An Aegon company. www.aegon.ie 2017 Aegon Ireland plc DUB 00273531 11/17