In recent years, a growing number of individuals, both UK-domiciled and non-domiciled, have chosen to leave the United Kingdom and make Spain – particularly Mallorca – their permanent home. This trend is driven by a variety of factors, including lifestyle benefits, tax changes in the UK, and Spain’s appealing tax regimes. Mallorca, with its stunning landscapes, vibrant culture, and high-quality services, has become a top choice for those seeking an exceptional quality of life alongside favorable tax conditions.
Whether you are a digital nomad, entrepreneur, or retiree, understanding the financial, legal, and personal implications of this move is essential. Here, we explore the key motivations behind relocating to Spain and outline five essential steps to make the transition as seamless as possible.
Why Mallorca is becoming a Top destination for UK residents
Relocating abroad is rarely a decision made lightly, but recent developments in the UK tax system have accelerated the trend. Some of the main changes driving this shift include:
- The end of the non-domiciled tax regime, which historically allowed significant tax advantages for certain individuals.
- Increased capital gains tax rates, reducing post-sale returns on investments.
- The anticipated reduction of Business Asset Disposal Relief, further impacting entrepreneurs and business owners.
Spain offers an attractive alternative, not just for its renowned lifestyle but also for its tax opportunities. Popular options like the Beckham Law (ideal for highly skilled workers) or the Mbappé Law (for elite athletes and certain professionals) provide reduced tax burdens under specific conditions. Full tax residency is another option, often accompanied by various exemptions and deductions within Spain’s tax framework.
The importance of Tax Planning and the UK-Spain Tax Treaty
Spain’s tax system is highly nuanced, offering regional differences in tax rates and incentives. Choosing the right region can significantly impact your financial outcomes, as areas like Madrid provide substantial wealth tax reductions, while others, such as Catalonia, impose higher rates.
The UK-Spain double tax treaty is another key factor to consider. While it offers mechanisms to avoid double taxation, it also includes robust anti-abuse provisions, particularly for UK trusts and other succession planning vehicles. A thorough understanding of these rules is crucial to avoid unexpected liabilities.
Key steps to relocate successfully to Spain
If you are considering relocating, these steps can help streamline the process and ensure your financial and personal interests are protected:
- Plan first, file later
Avoid filing any tax or administrative documents in either country until you’ve completed a comprehensive tax strategy. Premature filings can limit your options and result in suboptimal tax positions. - Choose advisors with cross-border expertise
Relocation requires expertise across taxation, legal compliance, accounting, and administrative matters. Select a team that understands the complexities of both UK and Spanish systems and can address any interests you may have in other jurisdictions. - Adopt a holistic approach
Tax planning must extend beyond finances to include legal, administrative, and family considerations. Ensure your advisors provide an integrated plan that addresses all aspects of your life and business. - Align personal and professional strategies
Whether you’re managing a business, pursuing new investments, or transitioning into retirement, your relocation strategy should be tailored to your goals. If you have family members moving with you, their financial and tax situations should also be addressed. - Choose the right location in Spain
Spain’s autonomous regions have varying tax policies, which can significantly affect wealth taxes, income taxes, and inheritance rules. Understanding these differences will help you choose the best location for your needs.
Who is moving to Mallorca?
Spain’s appeal extends across a diverse range of profiles, including:
- Digital nomads, attracted by the new Digital Nomad Visa and the country’s vibrant remote working hubs.
- Entrepreneurs, seeking a gateway to European markets and a favorable tax environment.
- High-net-worth individuals and fund managers, looking to optimize wealth and succession planning.
- Retirees, drawn by Spain’s excellent healthcare system and relaxed lifestyle.
Each scenario requires a tailored approach, factoring in personal circumstances, professional ambitions, and family dynamics.
Relocating from the UK to Spain represents a major life decision, but with the right preparation, it can unlock significant financial and personal benefits. From tax planning to legal compliance, every detail matters. By following the steps outlined here, you can ensure a smooth transition and make the most of your new life in Spain.
At Lullius Partners, we specialize in providing tailored tax solutions for individuals and families relocating to Spain, with a particular focus on Mallorca. As a premier destination for international clients, Mallorca offers unique opportunities and challenges, from regional tax benefits to property investments and lifestyle planning. Our deep expertise in Spanish and cross-border taxation, combined with our local knowledge of the Balearic Islands, ensures that our clients receive exceptional, personalized advice. Whether you’re navigating the Beckham Law, succession planning, or wealth management, our team is dedicated to making your transition seamless and successful.
