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I am resident in Spain. My mother who was resident in UK recently died. I inherit and am below threshold for UK inheritance tax. I know I have to declare this inheritance to Hacienda but I want to know if I have to pay tax on the inheritance (as opposed to tax on interest I will gain from investing it)?
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Come on-thought there would be several replies to this! Maria de Castro, Johnx etc
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Yes you do. The amount of tax depends on the amount inherited.
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Todos somos Lorca.
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This is one of the main reasons we are not moving to Spain.. This very unfair Inheritance Tax the Spanish have, effective double dipping.. In the UK as well as in Canada where I presently reside any Inheritance is taxed (as the norm everywhere) upon death on the estate, taxes owed, capital gains (from sale of stocks etc) are paid.. The benerficeries then are given the settlement from the will and no further liabilities are incurred, if you live in Spain this is now classed as 'income' and you are taxed on your portion of the estate.
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As Gus says: If one is Tax Resident in Spain they pay tax (with just a couple of exceptions, and depending on any Double Taxation Agreement between Spain and the other country) in Spain, on their worldwide income. So if you have income anywhere, inherit anything anywhere or win the Lottery, premium Bonds, pick the winner in the 2.30 at Ascot, etc., you pay tax in Spain.
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Golden Light,
with respect, it is not unfair it is different. Each country makes its own laws and its citizens are bound by them. One cannot say, I will pay this tax based on UK law, that one on Canadian Law, draw a pension based on German Law, pay my road tax as in Spain, etc. Ojala !
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Read a few months ago UK are not only going down the same route of taxing an inheritance now but trawling back 5 years to tax beneficiaries. It was in the D Mail so might not be true....
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Don't read the DM but is that not just the rules around gifting Floella - which means gifts can have a tax liability for years? Or something new?
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QUOTE:_
The seven-year rule - 'potentially exempt transfers'
Any gifts you make to individuals will be exempt from Inheritance Tax as long as you live for seven years after making the gift. These sorts of gifts are known as 'Potentially Exempt Transfers' (PETs).
However if you give an asset away at any time, but keep an interest in it - for example you give your house away but continue to live in it rent-free - this gift will not be a potentially exempt transfer. Follow the link below to find out more.
If you die within seven years and the total value of gifts you made is less than the Inheritance Tax threshold, then the value of the gifts is added to your estate and any tax due is paid out of the estate.
However, if you die within seven years of making a gift and the gift is valued at more than the Inheritance Tax threshold, Inheritance Tax will need to be paid on its value, either by the person receiving the gift or by the representatives of the estate.
If you die between three and seven years after making a gift, and the total value of gifts that you made is over the threshold, any Inheritance Tax due on the gift is reduced on a sliding scale. This is known as 'Taper Relief'.
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At least the Uk has a decent IHT threshold of 325,000, on the estate, whereas Spain has a derisory allowance of 16,000 on the deceased's assets.Each of the 17 autonomous regions sets its own regional allowance, meaning you pay nothing, or a fortune;if you are 1 cent above the allowance, you don't pay it on the excess-you pay it on the whole amount!
If more people realised this I'm sure there would be a decrease in the numbers of people becoming resident, preferring instead to be a holiday home owner.
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If more people realised this I'm sure there would be a decrease in the numbers of people becoming resident, preferring instead to be a holiday home owner.
I must say I never gave that a thought when I decided to come and live in Spain and I would not do so if I were making the decision now. It would where do I want to live ? Where will I get the most out of life?
As for IHT, I will be dead ! Having lived where I wanted to
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But someone has to sort everything out, and even if you've made a will and left instructions and information, someone has to deal with IHT, sort/sell your house and effects-I don't want my children to be burdened with it.
I think it's something everyone moving to Spain should consider now that some regions have abolished IHT allowance .
How could most people find thousands of euros to pay IHT when bereaved?
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The way I read the article it was collecting tax from inheritors of estates which , except from death duties, was always free from personal taxation. This is totally different from the 7 year rule, which has to be done by a legal process, so that if prior death occurs there is still a percentage due via death duties. Or the permitted annual tax free £ 3000 per individual .
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Campo, I have given my sons the name of my chosen Gestor. She will do what is needed so no problems for any one.
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If it was only in the DMail, I truly would not worry about it. It is probably just someone's bright (or not so bright) idea -
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Admit haven't read about it anywhere else but when Governments are desperate to fill national debt black holes laws by stealth incur.
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johnx even with the best gestor, who surely doesn't sort out the personal stuff it must be a nightmare for relatives to come ourt to Spain to see to things.
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Campo as we all know things can change with the functionario you are dealing with, the day of the week, the time of the day etc. so the idea that one could put everything in place, so there would be no problems, I believe is impossible.
Dealing with day to day matters can be a big enough headache, without going out to look for problems. And maybe I am fortunate in that both my sons are accountants.
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