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Will Spain follow Cyprus and tax bank deposits?

Spanish Wills &Estate PlanningPosted by Andrew Thu, February 02, 2017 14:16:20

March 17th, 2013

The EU bailout conditions for Cyprus have sent shockwaves throughout Europe and beyond. Indeed, anybody with bank accounts in what are perceived to be the weaker European countries should review carefully where their funds are held; and assess the risk of exposure to bank insolvency and taxation.

We are certainly not subscribing to the knee-jerk reaction of many-being immediately to transfer all funds out of Spanish banks (save for the minimal amount to cover property outgoings and day to day requirements). The official line remains that Spain does not require the form of bailout which Cyprus has sought; and for which the draconian conditions have been imposed.

Indeed, it would be reckless in the extreme to recommend a run on the Spanish banks, as the consequences would be disastrous. We would hope therefore, that an urgent assurance is given by the Spanish Government as to Spain’s position; and also that a categorical assurance is given that no such levy will in any circumstances be imposed on Spanish bank accounts.

Failing the immediate provision of those assurances, irrespective of calls for caution to avoid dramatic liquidity problems for Spanish banks, it is worrying but perhaps inevitable, that a significant outflow of funds from Spanish banks will now be seen.

Aside from this latest development, many of our clients have also expressed concerns about what they are reading in the Press about the security of their savings in some of the Spanish banks.

Also, although there is a capped Spanish Government guarantee of funds deposited with Spanish banks, many are expressing concerns as to:

· the limit of the Spanish Government guarantee;
· the ability of the Spanish Government to honour the guarantee in the event of the insolvency of a Spanish bank;
· how long it would take for the Spanish Government to honour the guarantee;
and finally,
· the fact that many Spanish savings products are not covered by the Spanish Government Guarantee.

Obviously each individual’s circumstances and banking arrangements are unique, so it is impossible to provide ‘standard’ advice on the issue; and to attempt to do so could be misleading.

But we do encourage those with savings in Spanish banks to take this opportunity review their arrangements; and take such action (or take no action) as they conclude to be prudent in their own circumstances.

In terms of cash holdings being returned to other countries, if conversion to Sterling (or another currency) is required, there can be significant variances in the rates given between banks and the best specialist Foreign Exchange (FX) brokers. So, there can be a very substantial hidden cost in this process or repatriation of funds for individuals who do not give the matter careful thought and attention.

We are able to refer our clients to a leading specialist FX broker, so that we can provide the required certification to have an FX facility set up in a matter of minutes. This ensures that the clients we introduce have a fast, secure and top quality FX service; saving substantial sums on each and every FX transaction. The service is available for all major currencies.

We will be happy to provide further details on request