EU-Investing if tax resident in Spain but not retiring there

For residents of Spain.
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Topic Author
trentfrog
Posts: 3
Joined: Mon Nov 30, 2015 12:29 pm

EU-Investing if tax resident in Spain but not retiring there

Post by trentfrog »

Hi Everybody. I will try to make this post as concise as possible. Sorry in advance if I haven't.

I need advice choosing between two options to invest in Index Funds/ETFs. My husband and I currently live and work in Spain. We are unsure if we will stay in Spain after retirement so we don’t know whether to use Internaxx and DIY invest globally or use one of the new robo advisors available in Spain so we don’t have to do it ourselves. *don’t like Interactive Brokers because of Estate tax laws* There is a possibility that if we don’t retire in Spain, it would Canada or Wales.


Relevant Info:

Husband: 51 yrs old, British citizenship, Spanish tax resident
Me: 47 yrs old. British and Canadian Citizenship, Spanish tax resident.

Initial investment of €10,000. Ability to add €1500 every quarter.

First Option

Internaxx (Luxemburg)

€ 7,000- Ishares Core MSCI Word ETF (IWDA) priced in € on EuroNext Amsterdam exchange
Transaction cost €24.95+.10%. TER .20%

€3,000- Ishares Global Inflation linked Gov’t Bond ETF (EGIL) priced in € on LSE
Transaction cost €14.95+.10%. TER .25%

With Internaxx there are also account fees of €25 euros per quarter (with 1-11 trades) or €45 a quarter (no trades).

Second Option

Indexa Capital Robo Advisor (Spain)
Portfolio of index funds based on age and risk appetite of 7/10 (husband). Total expenses .82% If we didn’t retire in Spain I would assume we would have to cash in and close account and pay capital gains as I don´t think we can just transfer funds.


ASSET CLASS INVESTMENT % QUANTITY


United States Actions Vanguard US 500 Stk Idx Eur -Ins 31.0% € 3,100
European Bonds linked to Inflation Vanguard Euroz Inf Lk Bnd Idx -Ins 23.0% € 2,300
Europe Actions Pictet Europe Idx -I 15.0% € 1,500
European Government bonds Vanguard Eur Gv Bnd Idx -Ins 11.0% € 1,100
Emerging Economies Actions Vanguard Emrg Mk Stk Idx Eur-Ins 9.0% € 900
Japan shares Vanguard Japan Std Idx Eur-Ins 6.0% € 600
European Business Bonds Vanguard Euro Inv Gr Bnd Idx Eur -In 5.0% € 500

I know the fees are more for Internaxx in the beginning but as investment amount increases it would be cheaper becuase it is a fixed rate and not a percentage. Any feedback is soooooooo welcome.
TedSwippet
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Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: EU-Investing if tax resident in Spain but not retiring there

Post by TedSwippet »

trentfrog wrote: Tue Oct 23, 2018 11:49 am... *don’t like Interactive Brokers because of Estate tax laws* ...
Husband: 51 yrs old, British citizenship, Spanish tax resident
Me: 47 yrs old. British and Canadian Citizenship, Spanish tax resident.
As far as US estate taxes go -- I'm assuming these are the ones about which you are concerned -- it might be worth doing a bit more digging to see what you can turn up here. For example, from the IRS's own manual on international estate tax examinations:
4.25.4.3.2 (08-05-2016)
United Kingdom
1. The U.S.-U.K. Estate Tax Treaty contains various rules that may reduce taxes for U.S. citizen or U.S. resident decedents with respect to U.K. property and may reduce taxes for U.K. citizen or U.K resident decedents with respect to U.S. property.
2. A special exemption rule under Article 8 (Deductions, Exemptions, Etc.) of the Treaty allows a U.K. citizen, who was neither a U.S. resident nor a U.S. citizen, who has taxable property in the United States to limit U.S. estate tax to the amount of tax that the U.S. could impose on such decedent if such decedent were treated as a U.S. resident immediately before death.
...
In particular, note that UK residency does not appear to be a necessary requirement here for UK citizens to use the US/UK estate tax treaty.

To be certain of this you would probably want to parse the relevant treaty pretty carefully, and perhaps also take some professional legal advice. However, my amateur reading of the treaty plain language text (it uses "United Kingdom national" in Article 8 para 5) suggests that UK citizens may well be protected by it even when not resident (or even domiciled?) in the UK.
Someone
Posts: 12
Joined: Sat Nov 26, 2016 3:27 am

Re: EU-Investing if tax resident in Spain but not retiring there

Post by Someone »

Hi,

When it comes to broker choice, Spain is quite expensive compared to other places. If your only concern about interactive brokers is the estate tax, you can open an account with interactive brokers UK limited. Then all your assets will be in the UK and you will get UK protection instead of the SPIC. Of course if you buy US securities you need to care about estate tax, but that's the same regardless of the broker.

In Spain taxation is hard. If you pick a broker outside of Spain you might need to do extra reporting (eg: form 720). If you're thinking about leaving Spain after you retire, keep in mind that since 2015 there is an "exit tax" and depending on your situation you might need to "realize" all your unrealized capital taxes when you stop being a resident.

I'm not aware of all details, as I've never invested in Spain, but if you can read Spanish, you can find more information and some bogleheads threads in rankia (eg: https://www.rankia.com/foros/fondos-inv ... indexacion)

From a quick look, seems that the cheapest broker (after IB) might be http://www.degiro.es I have no experience with them, so I can't really recommend their service.

When it comes to the ETFs you've selected:
  • Try to get accumulating ETFs over non accumulating ones. This is better for Spanish tax law.
  • IWDA seems like a good pick. I'm not sure if there is more volume in euronext or in the london stock exchange, but that's probably worth checking.
  • The proposed bond fund (EGIL/IGIL) is denominated in USD even if you're buying it in EUR. See: https://www.ishares.com/ch/individual/e ... -ucits-etf This means that you're taking a substantial currency risk. Additionally, ~25% of the holdings are 20+ year bonds, and 40% are over 10 years. If the interest rates go up (and this is expected) you might lose a lot of money. At the moment I'm not aware of any good bonds for an european investor, but a good alternative is to just use a savings account.
I wouldn't go for the roboadvisor. Transactions in European exchanges are expensive and usually come with big spreads, so every time you trade you're likely losing money. Therefore the less you do it, the better for you.
indexfundinvestor.eu
Posts: 28
Joined: Sun Oct 14, 2018 7:56 am
Contact:

Re: EU-Investing if tax resident in Spain but not retiring there

Post by indexfundinvestor.eu »

I would suggest finding a cheaper broker if you can. I've paid Degiro's fees in the order of 0.2%-0.7% of transacted amount (this is cheaper than (25*4)/10000 = 1% in account fees alone, excluding the transaction fees which are around 0.4%-0.5% ). But you will have some additional work to do when filing your taxes since Degiro is based in NL.
Additionally, Degiro has some ETFs for which you won't pay any transaction fees, IWDA being one of them.

If you want to have a Spanish broker you may check Degiro's pricing page as some other local brokers are mentioned there. From those brokers it will be easier to find other competitors.

Nevertheless, You can always batch trades to bring costs lower (specially if you have an expensive broker).

Your allocation seems simple enough therefore I'd pick it over a robo-advisor if you have a cheap broker.
Topic Author
trentfrog
Posts: 3
Joined: Mon Nov 30, 2015 12:29 pm

Re: EU-Investing if tax resident in Spain but not retiring there

Post by trentfrog »

Thanks for all of your input. I will research, DEGIRO’s, the exit tax and the Uk/US tax treaty to consider using IB. It seems that all of you are against using the robo advisor in a spain. May I ask why exactly? Is it that you are against using Robo advisors in general or that you don’t link the Index funds they have recommended?

Also, would this be a better global bond etf option since i can buy it in Euros but it’s hegdged?

I shares Global Aggregate Bond UCITS (AGGH) accumulating. EUR Hedged, TER .10%

Thanks in advance for any input.
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