How to avoid Spanish Inheritance Tax

** EDITED - Please respect terms of posting **

Hi,

I’ve also read lots of articles about inheritance tax on a Spanish property. I’m not an accountant and find the solutions suggested confusing and daunting. Can anyone give me a simple guide on dealing with Spanish Inheritance Tax?

Many thanks,

Adam

Example of IHT in Andalucia:

 

-    Taxable Amount:                      150.000 €

-         Family reduction:                  15.956,87 € ( it depends on kind or family relationship with  deceased)

-         Taxable Amount:                 134.043,13 € (  then a scale provided by Regions is Applied)

Tax Amount:                        18.277,60 €.

The amount can be paid in several installments if solicited.

There is a programme about this on RealestateTV at this moment. I believe you can find the same on their web site.From our point of view buying in the childrens names with a "lifetime residence" agreement looks the easiest way for us.

 

You talking about a usufruct ?

That's right, however inheritance tax will still be applicable for your grandchildren, also, as far as away as it might seem, should one of your children get married and then divorced, or go bankrupt, you would be struggling to hold on to the house, despite the fact that your property might only be "in their name", they would legally own it.  

You would also have to ensure that your children have wills from the age of 16, passing the house back to you should anything happen, otherwise you might end up sharing the house with your kids ex and their new partner.

Question for Maria De Castro

I have just been told that if I purchase a property in a UK limited company, then I don't have to pay Spanish wealth tax, is this true ?

If you invest the property into a company, taxes for that are of 1% of the purchase price. Do you mean that?

Hi Maria

no, I mean the annual wealth tax you have to pay as an individual

 Hello All Spanish Property Owners & Potential Buyers,

I have purchased on Finca Parc near Murcia and was advised by my Agent as how to combat Spanish Inheritance Tax. They informed me that if I buy the property in a UK Limited Company and not my own name, I could leave the shares of the Company, which I own instead of the property to my Heirs & Beneficiaries.

I followed their advice and have now also produced a UK will, which instructs to leave my shares of the Company to members of my family. This means that when I pass away NO Spanish Inheritance tax will have to be paid by them, as they will inherit a UK Limited Company that owns the property, and not the property its self. Therefore Spanish Inheritance Tax is irrelevant and completely removed, (FANTASTIC)

Also if I wish to sell the property, I will not have to pay any 3% Witholding Tax which none Spanish Domiciled People have to pay when they sell the property on, Secondly anyone who wishes to purchase the property from me do not have to pay the 7% Transfer Tax. This is because when I sell, I will not be selling a property, but will sell the UK Limited Company which owns the property, so no Taxes are payable to the Spanish Government. (GENIUS)

My Agent who is also a Corporate Property Ownership Consultant can assist anyone who wishes to purchase in a UK Limited Company appose to their own names.

STalbot:

No, you will not.

Maria

Hi Maria and Co, just to reiterate. I have bought for example an apartment in Spain for 120 euros. If I die first my husband will have to pay IHT on my half which he has now inherited.

120 divided by 2 = 60 then minus 16 (Tax allowance) he will then pay tax on 44,000euros. (I have rounded up the figures). Or does he pay tax on the whole 120 - 16 (tax allowance) = 104,000euros

We have already purchased the apartment so the company loophole is not an option for us. Are there other ways of avoiding this ghastly tax? We have two children both over the age of 20.

thanks for your help in this matter.

This message was last edited by laurdan on 5/24/2008.

Laurdan - You haven't said what region your property is in, Valencia,Murcia etc.  Some areas have drastically reduced the %'s of inheritance tax which has to be paid.

Once we have that information someone will be able to give you the details you need.

I've just been reading a thread about Wealth Tax and it also gave information on the current regions who have reduced the inheritance tax.  It also gives details of what someone recently paid after the death of their spouse.  Interesting reading

whoops sorry, I am in the Andalucia region, little town called Sabinillas.  semijubilada please direct me to the thread that you are reading.  

Tax,Tax,Tax 
It is  a mine field trying to sort out your best options, of course the best option is NO TAX!  Drives me mad you work hard and then they still want a slice of you when your dead.

Dear Laurdan,

Before I purchased my Property on Finca Parc I asked my Agent / Consultant could I move the Ownership of my Spanish property to the Ownership of a UK Limited Company, after I had purchased. I was advised that my Consultant not only works with Clients who are purchasing, but they also work with current Owners of Spanish Property and move the Ownership from their personell names to a UK Limited Company.

They also explained to me the costings involved in both cases, and it was identical, this is why I purchased in the UK Limited Company from the beginning and fortunately it was definitely the right decision.

If you would like me to give you the Property Consultants contact details who can help you move the Ownership from your personell names to a UK Limited Company, then please let me know.

Kind Regards,

Property On Finca Parcs

Hi laurdan


As it was me who posted details of the IHT I'm posting my post  & the thread is at the top of it. See it says "Andalucia is considering this move too, and again, that will depend on the regional elections this year".

25 Apr 2008 11:12 AM morerosado ** EOS Superstar ** I'm in Somerset, UK / Guardamar Del Segura on the Costa Blanca (Completed April 2005) I've made 4114 posts Edit this post

This post belongs to the following thread: wealth tax abolished from january this year Seems you have to wait till elections, Plexx >>>> IHT INFO HERE<<<< Posted on February 19, 2008 by Fernando Del Canto Inheritance Tax abolition in Spain. This morning I was reviewing the current status of Inheritance Tax in Spain, in light of the recent news regarding the abolition of the Wealth Tax after the general elections.The Wealth Tax is administered by the regional entities, Comunidades Autonomas, but legislated nationally by the national government. This is also the case with the Inheritance Tax. What we have seen however is that the move on this tax has started by the regions by improving the position or even technically abolishing the tax itself. In this case, they did not wait for the central government to act. Ten regions have already abolished this tax in the context of family inheritance. The regions are Madrid, La Rioja, Murcia, Castilla y León, Comunidad Valenciana, Baleares y Cantabria, in a first move and Canarias, Aragón y Castilla La Mancha in a second move. Andalucia is considering this move too, and again, that will depend on the regional elections this year. We welcome the move toward abolition of the Inheritance Tax and the Wealth Tax in a system overload with income, indirect duties and VAT. _______________________ Hello-o-o I've clocked up 4,000 + posts !             By the way, I'm a FEMALE !

Hello All Again,

I have been researching further and talking to a number of Consultants & Accountants who specialise in Spanish Inheritance Tax. My findings have confirmed that yes it is regional to dependent on where the property is located in Spain, But I have been informed that because I am not Spanish and are not Domiciled in Spain, nor are my Heirs & Beneficiaries. the Tax waver does not count, so I along with the Beneficiaries to my Estate will have to pay Spanish Inheritance Tax in full should or when the worst  happen.

I also was looking at becoming a Resident in Spain, so asked the same question, if I am a Resident in Spain does the Spanish IHT become exempt and the answer again was no.

It would be really great if any one has any way of confirming that this is not factual as I am looking at all aspects of Spanish IHT, and it still seems to me that purchasing in a UK Limited Company was the correct and only route to go down.

Kind Regards,

Property On Finca Parcs

 

Hello All Members,

I have been using this Forum for about a year to research whether there is any other solution in removing Spanish Inheritance Tax for my Heirs and my Beneficiaries, other than purchasing and owning the property I am about to buy in a UK Limited Company. The research I have done and the comments made to this Forum still lead me to believe this is the only true legal way to safeguard against IHT in Spain. My property on Finca Parc is still to be completed but it will be great if anyone can confirm any other way of removing Spanish Inheritance Tax in Spain on my property other than the UK Company ownership route.

Kind Regards,

Property On Finca Parcs
 

What are the pit falls in having a PLC in your name and do you need to be English to have one also how much does it cost to set one up.

Hello Cormona,

I have not found anything negative about owning a property in Spain using a UK Limited Company compared to owning it in your own name, which is a headache and very expensive in Spanish Taxes. My Consultant offers a website so you can apply for a free illustration to work out your IHT liability in Spain, they will then supply you the costings involved. I will send you a private message with their contact details on so you can look at it yourself. Once the transfer of the property has taken place in Spain to your UK Company which does not require the 7% transfer tax, there is only the production once a year of the accounts which are sent to Companies House that my UK Accountant prepares, and a small annual charge of about £200 for the continued registration of the Company in the UK.

I checked what Nationality can own a UK Limited Company, and I was informed that any Nationality can own the Company to safeguard against taxes in Spain.

Thanks for your help and for sharing key info Cormona.

Dear Cormona & others,  if you own your property in a company you have to pay the Spanish Taxman 3% of the Valor Cadastral and in Estepona that has just increased fourfold.  Any comments on this would be welcome.

Dear Angell & Members,

The below statement is correct for a property in Spain owned via an Off Shore Company, e.g The Isle of Man. The UK Limited Company I used does not receive this Tax in Spain for Ownership as under EU Law it is Taxed solely in the UK, and not Spain, therefore this Tax you talk about is irrelevant and incorrect in this case.

Also if I wish to sell the property, I will not have to pay any 3% Withholding Tax which none Spanish Domiciled People have to pay when they sell a property on, Secondly anyone who wishes to purchase the property from me do not have to pay the 7% Transfer Tax. This is because when I sell, I will not be selling a property, but will sell the UK Limited Company which owns the property, so no Taxes are payable to the Spanish Government.

Regarding having a Spanish property in a UK company, I have checked with three top Abogados in Spain and they all confirm my previous message that if a Spanish property is owned by ANY company apart from a Spanish company the 3% tax on the Valor Catastral is payable every January.  I have just paid 6.678 Euro

Dear Angell,

Your Tax Advisor's are 100% in the wrong and it sounds like you own a property via a Company yourself and I think you need to take advice from a Professional Company who specifically deals in Corporate Property Ownership. If you send me a private message I will send you my Consultants details so you can contact them directly for their advice. If you own your property in Spain via an Off Shore Company, e.g The Isle of Man then the annual Tax at 3% is correct and should be paid. If you own a property via a UK Limited Company then you have a CIF number which is the equivalent to an NIE number but for a Company, Under EU Law that Company then decides if it wants to be Taxed in Spain or the UK as it is only Taxed in one jurisdiction and the 3% Tax is not charged.

If you own via a UK Limited Company and you have paid €6678 then that is not correct and you are being completely given the incorrect advice and robbed. Also if your Abogados only understand the Spanish Law and not EU Law then how can they advise on it, and it looks to me you are only getting advice from one ruling, the Spanish Side. My Consultant I can put you in contact with understands the Spanish, UK & EU Laws so can give you advice from all 3 jurisdictions and how to use them to your best advantage. If you have paid €6678 in Tax then have you been given a receipt for the money from the Spanish Government which has been paid as the Abogados may have simply kept it. There is no reason for a Spanish Lawyer or Accountant to help you structure via a UK Limited Company and be Taxed Solely back in the UK, as there is no future Taxes to pay in Spain, so they end up losing your Business and gravy train of Taxes in Spain.

 

.

 

This message was last edited by Property On Finca Parcs on 3/15/2009.

This message was last edited by Property On Finca Parcs on 3/15/2009.

Hi

Have read this thread with interest as my company offers advice on the avoidance of Spanish succession tax. First of all, for the vast majority of property owners the actual amount of tax ultimately payable is negligible - see the blog on my site that tackles this subject for more detailed information.

If you buy via a company: -

Neil

In reply to your post I make the following observations . We are Spanish Tax Advisor's with offices in Spain and the UK.

1) Only offshore companies such as IOM, Gibraltar ,Jersey  pay 3% tax on the value of their assets and this type of company is no longer suitable for property ownership,But a UK Company is not an offshore company to Spain and therefore under EU law does not pay tax in Spain.

2) Benefit in kind tax for directors of UK Companies owning Foreign property was abolished in April 2008

3) Capital gains tax is 18% in both Spain and the UK on the sale of property or Shares so no difference  to a non domiciled Spain owner. But the company can claim tax relief on its attributable expenses including travel of the directors and mortgage interest also all property expenses ,this will reduce the tax payable on the sale of the company or property. With regards to the disposal of the property your option is to sell the property from the company exactly the same as selling from yourself  or to sell the Shares this method saves the 7% for the buyer and and the 3% retention for the seller.you can use a UK professional to deal with the Sale and Purchase and obtain suitable warranties in respect of the property and company .this is much better protection than you would normally get from a Spanish transaction.

4) I agree that some benefits may not be open to a corporate owner such as no CGT for over 65 but in our experience IHT is far more important to client than CGT as most end up resident back in the UK sooner or later. and need to take advantage of the UK NHS ,they then leave their property to their UK inheritors with massive IHT problems in Spain, if the property is in a UK Company then no IHT in Spain and no probate in Spain .

OWNING THE PROPERTY IN A UK LTD COMPANY MEANS NO TAXES IN SPAIN DURING OR AFTER YOUR LIFE .

You can leave your property in your UK Will to a UK company and no IHT in Spain another option.

It is much easier to deal with a UK Company in the UK through your UK Will ,no need for your inheritors to obtain NIE numbers no 7% if 1 inheritor wishes to sell their inherited shares to the other inheritors ,no need for your inheritors to deal with the Spanish legal system .

I would be interested in hearing of how you would reccomend UK Domiciled Clients avoid Spanish IHT and other taxes

 

This message was last edited by malcroach on 3/26/2009.