Inheritance Tax for non-residents

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05 Jun 2013 13:17 by Keyboard Star rating. 6 posts Send private message

 Can someone help me please? I've been searcing numerous websites but failed to find a decent answer!

I'm considering buying a holiday apartment in Mallorca and will be non-resident. Let's say the apartment will cost €150,000 and will be a cash purchase. In the event of my death, how do I calculate how much IHT my wife would be liable for?

Thanks!





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05 Jun 2013 13:40 by elaineG Star rating in Spain . 409 posts Send private message

If you want to know for sure asked a gestor, or better still  a qualified Spanish Accountant.

This can be  a minefield and almost everyone has a different idea.

 

However, the person or persons who inherit  is/ are the one/s liable to pay the tax, it is not a liability on the estate as would be the case in UK.   You will find that the amount an inheritor has to pay varies with which Regional Authority the deceased is 'resident for the purposes of inheritance tax'  (N.B. not as in tax resident ) and on the wealth of the inheritor too. 

 

In your position I would think very carefully about putting your money in Spain. If you really want to do it, seriously consider, with good legal advice, whether it would be better to put the property in the name/s of those who would stand to inherit.  Of course if one of owners dies before you, then there would be inheritance tax due on that death.


 


This message was last edited by elaineG on 05/06/2013.



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05 Jun 2013 14:09 by mariadecastro Star rating in Algeciras (Cadiz). 9344 posts Send private message

Legal Questions? Speak to Maria Direct

This may help :)

http://www.eyeonspain.com/blogs/costaluz/10199/Legal-tip-944-IHT-on-my--usufruct-as-widow.aspx

Legal tip 944. IHT on my usufruct as widow? 
10 May 2013 @ 17:40 

 

Usufruct heirs has a tax liability on the share he is inheriting ( as usufruct). That share is calculated by substracting your current age to 89. That is the percentage which, applied to value of assets, will determine the value of your share.

For instance:

If the two properties value is 200.000 euros, and you are 65 yeards old. The value of your usufruct is calculated:

89-65 equals 24. ( it always needs to be between 10%-70%)

24% of 200.000 is 48.000€

So, ownership heirs will have to pay taxes on 152.000 € and you will have to pay taxes on 48.000€.

If taxes are not paid by heirs, the AEAT might start an enforcement procedure on any free assets owned by debtor heirs.

P1030200.JPG

"P1030200.JPG", by jtatam, at flickr.com 



_______________________

Maria L. de Castro, JD, MA

Lawyer

Director www.costaluzlawyers.es

El blog de Maria



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06 Jun 2013 06:32 by El alamillo Star rating in Nottingham & El Alam.... 221 posts Send private message

 Maria. Thank You. That is the first explanation that I have been able to understand.

 

Age perhaps has it's wisdom

JB



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JB



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06 Jun 2013 13:36 by mariadecastro Star rating in Algeciras (Cadiz). 9344 posts Send private message

Legal Questions? Speak to Maria Direct

Happy to hear that!

I also remember when I was trying to understand it the first time!

Maria



_______________________

Maria L. de Castro, JD, MA

Lawyer

Director www.costaluzlawyers.es

El blog de Maria



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18 Jun 2013 16:05 by pinot Star rating. 120 posts Send private message

My property in Spain is in the name of myself and my two sons.  Should I die would they not be the owners of the property as it is in both their names???

Some guidance on this would be much appreciated.  We also have Spanish wills drawn up to leave the property to the survivors.

Pinot





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19 Jun 2013 06:26 by El alamillo Star rating in Nottingham & El Alam.... 221 posts Send private message

As I understand it. The inheritance tax would involve your share. As the property in your part is in 1/3rd ownership.

Just as if a property is in Joint ownership between Husband and Wife being 1/2 ownership. With children named in a Spanish will.


 


This message was last edited by El alamillo on 19/06/2013.

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JB



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19 Jun 2013 09:38 by mariadecastro Star rating in Algeciras (Cadiz). 9344 posts Send private message

Legal Questions? Speak to Maria Direct

 Pînot:

Once you die, your sons will have to start the title transference to their names.

If you have Spanish wills which do not contravene the UK one, the Notary will authorise a new deed where property shares are transmitted to your sons according to that Spanish Will. Just is you are spanish resident, having estate asset just in Spain, UK law will have no intereference in the process.

Once this new deed is obtaines, taxes are paid and their new property shares are registered in the Land Registry.

Yous sons will be paying Inheritance taxes in propertion to the value of the shares they are acquiring

 


This message was last edited by mariadecastro on 19/06/2013.

_______________________

Maria L. de Castro, JD, MA

Lawyer

Director www.costaluzlawyers.es

El blog de Maria



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19 Jun 2013 09:55 by pinot Star rating. 120 posts Send private message

Maria:

Many thanks for your prompt reply.  The value of the shares - is this linked into the value of the property?  Obviously we are all aware that property values have fallen drastically in Spain and throughout Europe.

We were told initially that as long as we all made Spanish wills and the property was in all three names, no inheritance tax would be incurred.  Obviously this has changed but thank you so much for your reply which is most helpful.

Pinot





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20 Jun 2013 07:39 by johnzx Star rating in Spain. 5247 posts Send private message

Pinot, 
          Maria means 'the percentage share in the ownership of the property'.  In your case, that might one third each.  So one owner dies leaving the share equally divided to the other two owners,  would mean they pay tax on one sixth each of the value of the property at the time of the death.  If you have a Gestor or solicitor,  they can find the ‘official value' on the internet.

We were told initially that as long as we all made Spanish wills and the property was in all three names, no inheritance tax would be incurred.

You misunderstood something.   It is not correct, unless the value was below the tax free allowance and even with property prices as they are,  that is just about impossible.





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20 Jun 2013 10:02 by pinot Star rating. 120 posts Send private message

John - many thanks for explaining it all to me.  I now understand completely.

Pinot





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24 Jun 2013 13:05 by mariadecastro Star rating in Algeciras (Cadiz). 9344 posts Send private message

Legal Questions? Speak to Maria Direct

 Great answer John!



_______________________

Maria L. de Castro, JD, MA

Lawyer

Director www.costaluzlawyers.es

El blog de Maria



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24 Jun 2013 13:28 by johnzx Star rating in Spain. 5247 posts Send private message

Thank You Maria





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24 Jun 2013 14:04 by Poppyseed Star rating. 898 posts Send private message

Can anyone explain if after completion of the transfer of the property ownership to the inheritors (non residents) and payment of the IHT the beneficiaries decide to sell is CGT also then due and if so how is it calculated?  Does it make a difference if the deceased was a resident or non resident, does it make a difference how long after the death the property is sold?

Thanks.



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Poppyseed




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24 Jun 2013 14:46 by mariadecastro Star rating in Algeciras (Cadiz). 9344 posts Send private message

Legal Questions? Speak to Maria Direct

CGT is exempt if you sell your habitual dwelling and reinvest this money in a new habitual dwelling within 2 years.



_______________________

Maria L. de Castro, JD, MA

Lawyer

Director www.costaluzlawyers.es

El blog de Maria



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24 Jun 2013 17:09 by Poppyseed Star rating. 898 posts Send private message

Thanks Maria, does this mean if the non resident beneficiaries sell the house immediately they will also incur CGT as well as the IHT? How will the CGT be calculated, will it be based on the total value of the property with no allowance, can the IHT be offset against the CGT?

Thanks.



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Poppyseed




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24 Jun 2013 17:17 by mariadecastro Star rating in Algeciras (Cadiz). 9344 posts Send private message

Legal Questions? Speak to Maria Direct

IHT and CGT are two different taxes for two differnt taxable events so yes, both transmissions are taxed.

Capital Gains is calculated on the difference between price of acquisition-selling



_______________________

Maria L. de Castro, JD, MA

Lawyer

Director www.costaluzlawyers.es

El blog de Maria



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24 Jun 2013 19:55 by Poppyseed Star rating. 898 posts Send private message

Thanks again Maria. A double whammy for non resident inheritors it seems, and as there is no aquisition cost CGT on full  sale price.Think I'd better sell before I die, pay the CGT and give the kids the cash and save them the IHT!



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Poppyseed




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24 Jun 2013 20:09 by aliton Star rating. 331 posts Send private message

 

Just to clarify for NON RESIDENTS . If a husband and wife buy a house in Spain and both names are on the property deeds as 50 / 50 owners > One of them dies and so the survivor inherits the partners share ( covered by a spanish will ).

Does the survivor have to pay inheritance tax because in UK they would take ownership of the property and no tax would be payable if it was worth less than £324,000.   ....



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25 Jun 2013 03:53 by JC1 Star rating in Manchester and La Du.... 963 posts Send private message

JC1´s avatar
Maria, I have seen plans to avoid iht that involve setting up a uk limited company to own the property and issuing shares to cover ownership. Is this viable?


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Regards

 John

 


 

 




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