Financial Advice for Expats in the Canary Islands

Expats living in the Canary Islands, and indeed in any overseas location, need to manage myriad factors when it comes to handling their wealth, investments, assets, retirements and tax obligations. This can become very complex due to the blend of financial regulations, cross-border tax exposure considerations, and residency-specific rules that go into making informed financial decisions. 

Working with a team of regulated expat financial advisers ensures your wealth is managed in line with both Spanish and international frameworks, without any surprises or missing out on tax efficiency opportunities.

Chase Buchanan Private Wealth Management, and our local team in the Canaries, provides tailored financial planning, helping expats make confident judgements about their pensions, investments, tax planning and estate management.

Potentially, yes, you could be exposed to both – hence the importance of speaking with an accredited wealth manager or financial adviser to ensure you take appropriate action. Spanish succession tax applies to beneficiaries, while UK Inheritance Tax (IHT) applies to the estate. 

The liabilities arising will, therefore, depend on factors such as where you are categorised as a tax resident, the locations of your assets, where you are domiciled, and the relationship of you to your beneficiaries.

Our wealth management services include the creation of bespoke estate planning strategies designed to reduce or eliminate exposure to both UK and Spanish inheritance taxes, using compliant cross-border solutions.

Generally, you will become a Spanish tax resident if you spend more than 183 days in a calendar year anywhere in the country, including the Canary Islands. You may also be considered a tax resident based on family or economic ties among other criteria that apply when there is ambiguity, or where you could theoretically be considered a tax resident of two jurisdictions.

Understanding the implications of residency status is essential, and our skilled financial advisers in the Canary Islands will help you assess your tax residency status, report your income accurately, and take advantage of all available tax allowances.

UK pensions are typically taxable according to the domestic income tax brackets in Spain if you are categorised as a tax resident in the Canary Islands. The Spanish tax system treats foreign pensions as standard income, with rates as high as 47%. 

That tax treatment may, though, vary depending on your residency status and the type of pension  you receive, such as a state, personal, or occupational pension fund.

It remains essential for all foreign national expats to seek advice before making firm decisions about the right ways to manage their pensions. We offer expat financial solutions in the Canary Islands that can include structuring your pension withdrawals tax-efficiently and aligning them with your long-term retirement planning.

There is no one ‘correct’ way to manage your pension as an expat. Transferring your UK pension to a  Recognised Overseas Pension Scheme (ROPS) or a Self-Invested Personal Pension (SIPP) might  offer greater flexibility, control over the currency you receive your pension in, and tax advantages — but only if this suits your overall financial position.

Our private pension, retirement and wealth management advisers can conduct full pension reviews to determine whether a ROPS, SIPP, or alternative transfer or reinvestment would be beneficial, or whether retaining your UK scheme would be most appropriate for your life in the Canary Islands.

Financial planning involves complex terms, explanations of tax rules and compliance recommendations, and when language poses a barrier, misunderstandings can be costly. This is one of many reasons why working with English-speaking financial advisers in the Canary Islands is often non-negotiable. We ensure that:

• Clients have clear communications and no confusion around important documents
• Expats can consult highly qualified experts with an in-depth knowledge of both the UK and Spanish tax systems
• We support foreign national residents in making confident decisions when navigating residency, tax, and investment laws

The local Canary Islands Chase Buchanan team delivers personalised support in your language, so you stay in control of your wealth, while also liaising on your behalf with Spanish tax authorities where required.

While a lot may depend on the value of your savings, investment products, dividends and returns, Spanish tax residents are generally taxed on their worldwide income, including all capital gains and rental earnings. 

Tax rates will vary depending on the nature of the income,  and foreign accounts held by tax residents outside of Spain must be declared under the Modelo 720 rules for tax purposes.

Our advisers regularly support expats looking for professional guidance around structuring their investments using offshore or tax-compliant solutions, as part of our full-service wealth management assistance for expats in the Canary Islands.

Properly regulated and credible Spanish banks provide consumer protection through the Deposit Guarantee Fund (FGD), which protects deposits up to €100,000 per person, per bank. While this offers some degree of security, it is essential to select both banking providers and accounts with care, as returns on some savings accounts are low.

Expats creating succession plans must be conscious that funds held in Spanish banks will typically be subject to succession tax and will usually be frozen until any tax liabilities have been settled.

We are an entirely independent team, and help clients assess whether holding their capital in local banks would be optimal or whether diversified investments and alternative savings products would provide greater security, returns, and tax efficiency.

In the UK, inheritance tax is payable by the estate, whereas in Spain, succession tax is a liability  of each individual beneficiary – with exact rates depending on their relationship to the deceased. 

Additionally, Spain enforces a rule that is common in the EU called forced heirship, which means that, unless you take action to protect your right to distribute assets differently, certain percentages of your estate must be passed to direct family members, legal exemptions notwithstanding.

Our Canary Islands wealth management team helps expats structure wills, trusts, and succession plans that respect their wishes while complying with both Spanish and UK inheritance rules.

UK expats who move to any region of Spain, including the Canary Islands, should be aware that they can no longer contribute to ISAs and will, in almost every case, lose their tax-free benefits. This is because products with specific tax treatments in the UK are taxed as any other savings or investment product elsewhere, including in the Canaries. 

Likewise, Premium Bond winnings, which are  tax-free in the UK, must be declared in Spain, and will normally be subject to the full applicable tax rate.

Chase Buchanan can schedule a review of all your existing UK products and recommend tax-efficient alternatives that are better suited to your new residency position or planned relocation.

Whether you’re in Fuerteventura, Gran Canaria, or another island, you’ll likely have several potentially beneficial tax schemes, allowances, reliefs and deductions that could apply to your tax profile – as just a few examples, expats may benefit from:

• Provisions included in the double tax treaties between Spain and the UK
• Strategic pension drawdown opportunities
• Capital gains and wealth structuring
• Tax-compliant offshore bonds

Where tax-advantaged treatments apply to your affairs, it remains vital to apply allowances or treaty clauses correctly and compliantly, and we can create personalised tax strategies  that adhere to Spanish tax law and are developed according to your tax residency status.

Wealth protection and generational succession planning is a complex area of financial management, and also one that should be structured around your estate, assets and wishes. We provide cross-border estate planning solutions that can include:

• Reviews of wills that are legally valid in Spain and the UK
• Developing asset gifting strategies to reduce long-term tax exposure
• Advice around the potential use of  tax wrappers or trusts where appropriate
• Creating familial wealth protection through products such as structured life policies

Our goal as your succession planning advisers is to ensure that, when the time comes, your wealth passes to the right people, at the right time, with minimal tax exposure, and according to your wishes.

Expats intending to purchase a residential home, expand their property portfolio or take out financing within the Canary Islands are always advised to seek independent, personalised guidance to ensure they review the options and recommendations most relevant to their objectives. 

Chase Buchanan’s Canary Islands advisers can assist expats looking to invest in either residential or investment real estate, with:

• Tax planning to account for the obligations associated with  property ownership
• Access to competitive financing products through expat-friendly lenders
• Wealth structuring with property wealth tax thresholds in mind
• Inheritance and succession planning to ensure real estate assets have been accounted for

Our property experts and investment managers work with expat clients to ensure any decisions you make are tax-efficient and align with your wider financial strategy.

Wealth managers refer to financial planning rather than a one-off plan, because it is always better to conduct a comprehensive review at least once a year, or immediately if any of the below changes to your circumstances apply:

• Your income, residency position or familial set-up alters
• You decide to acquire or dispose of major assets
• Reforms are announced to local or UK tax legislation

As part of a long-term expat wealth management service, we organise regular portfolio reviews and provide proactive updates and recommendations to help your financial planning evolve alongside your life overseas.

Although the Canary Islands are a Spanish territory, they are also autonomous, which means expat residents benefit from a unique regime called the Régimen Económico y Fiscal (REF). This offers several considerable tax advantages over mainland Spain, including the following:

• A reduced sales tax, with a standard IGIC rate of  7% compared to  21% on the mainland
• The Special Zone (ZEC) with varied tax benefits for investors and businesses, such as a reduced corporation tax rate of 4%
• Potentially lower wealth tax thresholds than in many Spanish provinces, with rates of 0.2% to 3.5%

Our financial advisory team in the Canary Islands can, of course, provide further information about these and other tax treatments and ensure your wealth strategy takes full advantage of these regional tax efficiencies.