Author Topic: Aussie-Fire and moving to Europe  (Read 1305 times)

chuchuinOz

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Aussie-Fire and moving to Europe
« on: November 07, 2023, 10:07:14 PM »
G'day Aussie-MMM community,
I am working my way towards FIRE here in Australia and came across the following problem I hope to get your advice on. Once I reach my FIRE figure, we would like to make use of my European passport and move to Europe. You know, culture, learning another language, showing my kids the value of living in and learning from other cultures!

Does anyone know how taxes would be calculated for such an example?

Example:
Portfolio: $1M
Living off: 4% of 1M = $40K - let's assume all of this is from dividends. 50% is from fully franked dividends, 50% from unfranked dividends.

Taxable income: (40,000/2)/0.7)+40,000/2 = $48,571. This would be my taxable income in Australia. How would this figure change when moving, let's say to Spain?

WHT: If I am tax resident of Spain, I know I would not qualify for the franking credits which would reduce the taxable income by $8,571. Is my taxable income $40,000 or $48,571? I would also need to pay 15% WHT for the unfranked dividends (20,000x0.15 = 3,000). I assume my after tax income for when doing my Aus tax return would be = $37,000 ($48,571-8571-3000).  Everyone with me on this?

Taxes is Spain: Let's say the taxable income is $40,000 AUD which in Euro is 24,000. Now, according to this website: https://salaryaftertax.com/es/salary-calculator I have to pay the following income tax in Spain. I selected Valencia as the council because, you know...beach, culture and pajella:

Gross Income   24,000   
Income Tax   3,624   
Social Security Contributions   1,524   
Total Tax Due   5,148

Take-Home Pay   18,852

The 15% WHT I paid in Australia of $3000 equals 1800 Euro. Can I now claim a tax credit in Spain for this amount reducing my income tax from 3624 to 1824 Euros? I effectively paid 1800 Euro through my WTH. Has anyone done something like this before when they moved to, for example, Bali? Can I also claim the foregone Franking Credits and offset them against my tax in Spain further reducing my tax liability (this would of course depend on the tax law in the country I would reside in)?

I was hoping anyone else has tried the same and might know the answer to this riddle.

Thanks MMM-followers. Love this community.
« Last Edit: November 07, 2023, 10:09:42 PM by chuchuinOz »

daverobev

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Re: Aussie-Fire and moving to Europe
« Reply #1 on: November 08, 2023, 04:04:30 AM »
Not Aus resident = no Aus system. You'll pay withholding tax on divis.

So you get $40k AUD income, you'll lose whatever % to withholding tax (assuming the divis you receive are all Australian sourced...? Aus-domiciled ETFs I guess?). No Aus tax return needed. That money's gone, you never see it.

Then you do your Spanish tax return. https://taxsummaries.pwc.com/spain/individual/taxes-on-personal-income says 'savings' tax is 19% on the first 6k then 21%. You'll claim all the foreign tax paid (withheld). In theory this means you'll always pay the greater of two numbers but no more. So let's just say you lose 20%? Not sure about social charges - may not be assessed on savings income.