That rumour that banks are considering relocating to Spain resurfaces
A year ago, there was a rumour - which proved entirely spurious - that Goldman Sachs was so dismayed with the British bonus tax that it wanted to move 1,000 of its UK employees to Spain.
Goldman denied this at the time, and 12 months on there's been no big shift of its people to Madrid, so the rumours were evidently groundless.
Nevertheless, the supposed lure of Madrid remains real in the realm of rumour and speculation.
"Three top US banks in London have set up working groups to look at the viability of moving some of their UK business abroad," alleges the head of one headhunting boutique. "They've been looking at Switzerland, Madrid and Dubai."
The fiscal incentives of moving to Switzerland and Dubai are well known. The fiscal incentives of moving to Madrid are less so.
However, they do exist. Under the so-called, 'Beckham Rule,' dating back to 2005, expats in Spain can spend 5 years paying a flat rate of tax of 24% on Spanish-sourced income up to €600k and nothing on their worldwide income. Beyond €600k they're taxed at 45%.
Despite this, Pedro da Cruz, a Spanish tax lawyer, says he's seen no visible rush of hedge funds or financial services professionals to Spain recently. "We do have hedge funds on our books, and when the UK raised the income tax rate to 50% we saw some people leaving, but nothing significant," he says.
This may be because Spanish corporation tax is comparatively high, at 30%. It may also be because Spain's favourable tax treatment for expats only lasts 5 years, after which they're taxed like normal Spaniards.
Or maybe it's because Madrid is less compelling than it seems. According to a survey by Astbury Marsden, a recruitment firm which mostly deals with middle office bankers, the place people really want to go now is Singapore.
