How to avoid Spanish Inheritance Tax

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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

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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.

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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.

 

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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.

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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 ?

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

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Hi Maria

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

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 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.

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STalbot:

No, you will not.

Maria

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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.

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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

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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.

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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

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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 !

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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

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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
 

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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.

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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.

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Thanks for your help and for sharing key info Cormona.

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