Fixed term investment on a non residents account

[NAH]

For the last while I've had the option using my online banking with Banca March to open a Fixed term deposit. I believe this is more like a 'bond' than a deposit account as such, since there is no mention of adding funds to it after its opening (although I may be mistaken) anyway...

I'm looking for the pros and cons of doing this, tying up €'s for the fixed term is obvious but any others?

available terms and interest rates payable are:

3 months   1.5%
6 months   2.0%
12 months 2.25%


Would the interest be paid net (after tax) and would I have to declare this income on my annual return. Bear in mind this would be on my non-residents account.

[Nova]

As long as your bank is in possession of a current "declaración de no-residencia" signed by you, in addition to your non-res status on the account, then your interest should be paid gross.  This would enable you to then declare it as income on your UK tax return (I think, but I really don't know much about the UK side).

Without the signed declaration you would receive the interest net.  The last time I had anything to do with this the tax on interest was 19% but it's probably gone up by now.

Yes, the way a deposit works here is that you put in your capital and leave it - you can't usually add more later.

Things to look out for:

Make sure you're aware of both the AER (APR) interest rate and nominal rate that they are offering, as many of the headline rates are designed to make it look better than it actually is.  For example, you might well be looking at a headline of "6 month deposit with 2% interest".  This probably means that it would be 2% over a year, but over the 6 month term your return on capital will actually be 1%

Check whether there is a penalty if you need to cancel the deposit early, there usually is.

Is the money you would deposit already with Banca March in euros?  If not, be aware that most banks here charge you to receive money, so the charge you pay for sending and receiving the transfer is likely to at least cancel out any interest you make.

Do check that both the capital and the interest are guaranteed.  I think the days of referencing the interest to the stock market have passed, but do check anyway.

If I think of anything else, I will add it 

[NAH]

As long as your bank is in possession of a current "declaración de no-residencia"

Yes they charge me every two years to 're-apply' for it rather than embargo'ing my account

signed by you

I've don't re-sign it every time

This would enable you to then declare it as income on your UK tax return (I think, but I really don't know much about the UK side).

I would have thought this income would have needed to be declared in Tenerife on my annual return, not in the UK 

The last time I had anything to do with this the tax on interest was 19% but it's probably gone up by now.

Thanks.

Yes, the way a deposit works here is that you put in your capital and leave it - you can't usually add more later.

That's as I read it then

Make sure you're aware of both the AER (APR) interest rate and nominal rate that they are offering, as many of the headline rates are designed to make it look better than it actually is.  For example, you might well be looking at a headline of "6 month deposit with 2% interest".  This probably means that it would be 2% over a year, but over the 6 month term your return on capital will actually be 1%

AER and nominal rate are both quoted the same

Check whether there is a penalty if you need to cancel the deposit early, there usually is.

Yes there is but it won't exceed the interest earnt, so the capital is always safe. Wasn't thinking of cancelling it early anyway

Is the money you would deposit already with Banca March in euros?

Yes

If not, be aware that most banks here charge you to receive money

Don't i know it !

If I think of anything else, I will add it 

Thanks, that's really helpful

[Nova]

Yes they charge me every two years to 're-apply' for it rather than embargo'ing my account

Possibly, but that sounds more to me like the "certificado de no residencia", that's different.  The "certificado" is the document obtained from the National Police database to make sure you are entitled to a non-resident account.  The "declaración" used to determine whether your interest is paid gross or net needs to be signed by you with your current address and passport number and is usually signed when you first open the account, then posted out to you each time it's up for renewal.  I'd suggest you check with your bank to make sure they have a current one.