Why You Should Invest in a Spanish Compliant Bond

Mar 16, 2022 | Investments, SJB Service, Tax

At least I’m relieved that the Spanish-compliant investment bond came to my rescue! It appears that each country’s tax code has various methods for getting rid of our money. They also provide means for us to legally avoid paying taxes, as long as we buy the proper financial investments.

Most individuals in the United Kingdom are familiar with the tax-saving aspects of pension plans and ISAs. The Spanish compliant investment bond is a tax-effective investment tool that may be utilized to postpone Spanish personal income tax payments. If the bond is put into a suitable trust, it can also assist UK domiciled persons to minimize their inheritance tax obligation.

Taxes in Spain

Spain is known for having a relatively high tax rate. As a result, many UK expatriates arrange their affairs in such a way as to retain their UK tax residency. Individuals who spend less than 183 days in Spain during any given tax year may claim to be UK tax residents as long as they do not spend more than 182 days there. Since Brexit, the situation has become more difficult as obtaining residency has become much more complex. Anyone who finds themselves in an uncertain situation should seek advice from a professional.

Tax planning with the Spanish tax-compliant investment bond

Spanish tax residents may find themselves in a less difficult position than initially expected. People who employ authorized investment strategies to minimize ‘savings income tax’ are entitled to legitimate methods of avoiding it.

It is important to understand that Spain taxes individuals on a worldwide basis, regardless of where they keep their assets. For example, a Spanish tax resident with UK assets such as real estate, ISAs, shares, or foreign non-compliant insurance bonds must pay tax each year. Individuals should file the ‘modelo 720′ for

In contrast, investments in compliant bonds are not subject to yearly taxation and don’t need to be reported on the “modelo 720” until you make a drawdown. Only the growth component of your withdrawal is taxed.

Taxation if no withdrawals for a compliant vs non-compliant policy

An individual invests €250,000 in an investment bond; they have no other source of savings income. If the insurance is a non-compliant policy, the policyholder must declare and pay tax on all of the growth each year as savings income. However, if they invest in a Spanish-compliant bond and do not make any withdrawals throughout the year, there will be no tax to pay. the tax is effectively deferred until you withdraw any money from the policy.

How is the tax calculated on withdrawals for a compliant vs non-compliant policy?

An individual buys a policy for €100,000. The growth after 10 years is €60,000 taking the value of the policy to €160,000. They then make a withdrawal of €20,000.

With a non-compliant policy, the full €20,000 would be taxable as it is withdrawn as per the below:

  • €6,000 x 19% = €1,140
  • €14,000 x 21% = €2,940
  • Total tax paid with a non-compliant policy = €4,080

However, with a Spanish-compliant bond, only the growth element of the withdrawal is taxed. In this case, the calculation would be as follows:

  • Purchase price: €100,000
  • Growth: €60,000
  • Withdrawal amount: €20,000

Taxable amount:

  • €160,000 / €60,000 = 26.67%
  • €20,000 x 26.67% = €5,333
  • Total tax paid with a Spanish compliant policy = €5,333 x 19% = €1,013


The Spanish Compliant Bond offers several benefits, including fast approvals, no hidden fees, and competitive interest rates. Plus, our team of experts will work with you every step of the way to make sure the process goes as smoothly as possible.

Enquire now on our website and get started on your path to financial success!

This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

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Personal advice, whenever it suits you.

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