Real term suffering

Spain amongst worst hit in cost of living crisis

SPANISH workers suffered the most of any large Eurozone country as their real wages got hit by high inflation in 2022.

The Organisation for Economic Co-operation and Development (OECD) report, Taxing Wages, worked out the effect of inflation on purchasing power and calculated that wages in real terms fell by 5.3% in Spain last year. Although gross salaries grew by 2.9% (almost €800) to €28,360 gross on average per year, skyrocketing inflation (which closed the year at 8.6%) reduced the purchasing power of people in Spain far higher than their European neighbours.

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By Alex Trelinski

On average, the gross salary of the 38 countries that make up the OECD suffered a loss of 3.4%, two points less than in Spain.

Moreover, the purchasing power of Spaniards fell 10 times more than in France (-0.5%), three times more than in Italy (-2.2%) and 1.4 points more than in Germany (-3.9%) - a country that had an inflation rate similar to Spain’s in 2022 but where a significant rise in wages cushioned the blow.

The only European countries whose real wages fell more than in Spain were the Neth-

CAUGHT BETWEEN A ROCK AND A HARD PLACE?

THE terms residency and domicile are often interchanged despite having two completely different legal meanings. Your domicile can be your residence however your residence is not necessarily your domicile.

You may move abroad without changing your domicile.

WHY IS THIS IMPORTANT?

Spanish succession tax is based on your tax residency whereas UK inheritance tax is based on your UK domicile of origin. This is acquired at birth and is usually the same as the domicile of your father at the date of your birth, unless your parents were unmarried, in which case you take your domicile from your mother.

Whilst you can claim and acquire a domicile of choice by settling say in Spain with the intention of living there permanently, making it stick to avoid being liable to UK inheritance tax is notoriously difficult. The burden of proof falls on you (or more likely your heirs) to prove that you had successfully acquired a new domicile of choice.

You may avoid UK IHT after five years of non-UK residency. However, it’s not straightforward. HMRC will consider your ties including business interests, social connections, family, property ownership and your intentions to eventually return to your country of birth, to determine whether you are UK domiciled or not.