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Just for general information.
I live in Andalucía with my wife. We are both resident in Spain.
I spoke to a gestor this morning regarding IHT liability for my spouse.
The gestor added up the catastral values of my apartment, store room and garage space, and multiplied the total by 1.3. It came to 165,191 euros. She said that a bank account in Gibraltar was not libel to IHT but my bank account in Spain, my car, other assets were. However, the total came to under 200,000 euros, thus she said there would be no IHT liability for my wife.
She said, if I decided to leave anything to my sons who are not resident in Spain, they would get 15,965 euros tax free, but anything above that would be taxable. This message was last edited by johnzx on 05/05/2014.
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I just wish it was the same here in Murcia. There would be a sizeable bill for 200K value.
This message was last edited by ayrez on 05/05/2014.
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Johnzx- why is your bank account in Gibraltar not liable for IHT? Ayers I 'm in the same situation, in Murcia. The situation, whereby regions can set their own allowances, or even none, is grossly unjust. Tax is something that should be set at government level, same for all. It Is a reason for going back to the Uk, and I bet many have, and who can blame them?
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Johnzx- why is your bank account in Gibraltar not liable for IHT? Ayers I 'm in the same situation, in Murcia. The situation, whereby regions can set their own allowances, or even none, is grossly unjust. Tax is something that should be set at government level, same for all. It Is a reason for going back to the Uk, and I bet many have, and who can blame them?
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Johnzx- why is your bank account in Gibraltar not liable for IHT?
She (the gestor) said that a bank account in Gibraltar was not libel to IHT but my bank account in Spain.
She said, because it was outside Spain
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I thought that IHT was on all your worldwide assets fI you are a resident of Spain?
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My aesoria friends have yet to organise the IHT evening , unfortunately, however , regional differences apart, I do believe that Nationally it is on the catastral value x % that IHT is based. This being a mere fraction of what we paid or what we deem our properties to be worth.
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Camposol
Tax is something that should be set at government level, same for all.
Well, that's how it works in UK. Most countries don't operate like that at all. Italy has different local taxes and rules, even Germany being a federal republic has 5% of taxation set by each different lander.
The USA, of course, has different taxes for each state despite being a federal republic. Even tax on tobacco, booze, sales tax (VAT) is different in each state. Australia has 26 different taxes levied by each state (and there's only 6 of them).
If people went back to UK because of one taxation rule then there wouldn't be many people living abroad.
Back to the original subject, there is a IHT calculator for Murcia online. It shows that a property valued at 150,000 euros with further cash assets of 50,000 would attract an IHT of around 10,000 euro to the surviving spouse. Any debts on the estate reduces the IHT by that amount. Yes, I agree, this is terrible considering it was not so long ago they were actually going to bin IHT. Moving just up the road to Valencia would, at the moment, attract a zero IHT for residents on the same value estate which, again I agree, doesn't seem fair.
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IHT is the subject of an EU debate as it is deemed to be discriminatory both to residents and non residents, and apparently, there are going to be huge changes this year sometime to make it fairer in regard to regional differences. This " one taxation rule" is a huge issue, and I have seen posts on different forums where people were were planning to move to Murcia, and have cancelled their plans purely because of the IHT situation.similarly people have moved back to the UK or are considering doing so for the same reason, and who can blame them? The differences between regions are so vast- something must be done. I am still waiting for an answer to the fact that Johnzx 's gestor says his account in Gibraltar isn't liable for IHT, when we are always being told it is payable on your entire worldwide assets, no matter where they are. Perhaps Maria de Castro could clarify.
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Campo: I am still waiting for an answer to the fact that Johnzx 's gestor says his account in Gibraltar isn't liable for IHT, when we are always being told it is payable on your entire worldwide assets, no matter where they are.
Campo, I did not make the post so that I could get into an argument. It was as head 'for info.' I repeated what I was told. If you ’think’ what I was told is wrong, may I suggest you speak to a professional for clarification? (As many will know, in Spain I tend to more sceptical that most about anything advise given by professionals)
Campo, I have sent you a private message with name and number of gestor I used. Please feel free to call her and discuss the matter.
(By the conditions set out in each Double Taxation Agreement, worldwide income in taxed in Spain).
As for a ‘One tax rule. I understand there is such a law in Spain which is set by central government. However, in Spain regional authorities are permitted to alter that providing it is to the benefit of the citizen. That I take to means that the regions which have the more liberal approach are exercising their right to improve the rule. If that were not so then we would all be treated the same and none would get a more lenient deal. Not sure if all suffering the same makes anything better albeit that it would be ‘fair’. I would have thought efforts to improve the law as set by central government would be the sensible approach.
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It would certainly be a good idea if central government were to set a generous state allowance.
Naturally you are going to be in favour of the more liberal approach by regional governments, in regard to how it affects your own circumstances, but at the moment it is discriminatory, if a person in Madrid pays zero IHT, and one in Murcia pays thousands-it shouldn't be a post code lottery, as it is now. Your statement, "providing it is to the benefit of the citizen" is a joke! No benefit to those in Murcia. I'm all for everyone suffering the same!
As to the double taxation treaty, it does not apply to IHT.
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Campo As to the double taxation treaty, it does not apply to IHT.
Sorry I thought I made it very clear that I was referring to income as I used ‘bold’.
(By the conditions set out in each Double Taxation Agreement, worldwide income in taxed in Spain).
I only mentioned worldwide income in response to your post
I am still waiting for an answer to the fact that Johnzx 's gestor says his account in Gibraltar isn't liable for IHT, when we are always being told it is payable on your entire worldwide assets, no matter where they are.
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I had a quick look at the calculator Bobaol refers to and he is correct and even in Murcia is not as bad as I feared,especially if catastral values are used to calculate the tax as Floella mentioned.
Is it also true that the property bequeathed has to be kept by the inheritor for 10 years or the IHT becomes due on the value?
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If it's the same one as I saw, I am wondering if it is up to date, and has taken into account that Murcia has abolished regional IHT allowances.
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Camposol
I think the calculation must be fairly current as previously the IHT would have been reduced to nil ( or almost) by the 99% deduction allowable.
I am still curious about the ten year rule though. If it is correct you are tied to the marital home for 10 years and may not be suitable for every circumstance.
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Ayurez. The 10 year rule remains applicable.
It was introduced to protect family businesses. Owners were dying, leaving to next of kin, who maybe then died shortly afterwards and thus wwith a couple of generations the family lost the business.
However, following it's introduction, it was relised that the same rule, although not intended as such, could be applied to the family home. Of course both the parties must be resident in Spain to take advantage of the rule.
I understand on good authority that although the property must be kept for ten years that does not mean the person must live in it, nor must they even remain in Spain. It can be rented out with only the income being liable to income tax as usual. It just must remain in their possession.
If the inheritor dies within the ten years, the obligation is abandoned, and no tax is due.
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Thanks Johnzx. I had understood it correctly.
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I was at my gestor's this morning. She confirmed that IHT (succession tax) only relates to property / assets which are in Spain, but I must say, I have my doubts on that.
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All the advice given is that a resident pays IHT on all worldwide assets of the deceased. Cannot understand your gestor saying this. You are very knowledgeable on tax matters yourself, and must know that what she says is not right. If her clients are paying only on assets in Spain, then that is unfair on the people who are paying the correct tax. Could your gestor explain why her advice is at odds with all the others? I e mailed the gestor at the email address given but got no reply. In this weeks CBN Blevins Franks stated that IHT must be paid on worldwide assets.
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A resident of Spain pays Spanish IHT on the worldwide assets received from the deceased. What the Law actually says is that the taxpayer, the heir, if a resident of Spain, will pay tax on all assets received from the deceased regardless of the country where they are located.
On the other hand, an heir who is not a Spanish tax resident will pay Spanish IHT only on the assets received from the deceased that are located in Spain.
That is clearly stated in the Law and there is no question about that. However, a tax credit is allowed for the amount of any IHT paid outside of Spain when the assets are located outside Spain, thus meaning that in practice, only the assets located in Spain actually pay tax. For this to be true, an IHT needs to be have been paid or be payable in the country of the assets and it must not be lower than the amount that would have been payable in Spain.
The gestor could have been thinking about the tax credit when she spoke to Johnzx but she should have made that clear. Also, perhaps Johnzx's heirs are not Spanish tax residents and then her statement to John would have been correct. I think she should be given the opportunity to explain.
This message was last edited by lobin on 16/05/2014.
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