Inheritance Tax Planning Spain

Avoid Spanish Property tax and inheritance tax legally through use of new EU Law.

None Spanish property owners in Spain hoping to pass on their assets after death need to take prior action or you could be leaving your benefactors with a financial headache.

What is not often understood is that heirs may be liable to pay inheritance tax in two jurisdictions, Spain and their country of domicile. A critical difference with the UK is that in Spain it is the actual inheritor, rather than the estate, who is taxed. This means on the owners death the property cannot be sold to pay the Spanish inheritance tax and is frozen until the heirs pay that tax.

As well as the Spanish Inheritance tax having to be paid by the Beneficiaries of the property, over a certain threshold value UK inheritance must be paid too. When you factor in the costs of probate in both countries the value of the asset can be reduced by an average of 60%.

Another crucial difference between the UK and Spain is that in Spain the husband or wife of the deceased may not be exempt from Spanish inheritance tax.

There is one perfectly legal and simple solution to avoid these taxes which is to purchase or move the property through/to a UK private trading limited company. This should not be confused with holding the company through an offshore based company for which there are a number of issues and is something we do not recommend as they are not part of the EU. The main advantages are summarised below:

• By placing the property in a UK limited company shares in that UK company can be dealt with by a simple UK will and for the vast majority of company structures there will be no inheritance tax to pay after the death of the shareholder in that company. The shares simply pass to nominated benefactors.
• Other than this you will maintain full control of the property at all times, all that is different is that a UK limited company owns the property and you are the owner of that company.
• You can rent the property, raise funds on it and if you decide to sell the company there will be no 7% transfer taxes for the purchaser to pay and reduced capital gains tax for the seller.
• Another advantage of this company structure is that all attributable expenses such as mortgage interest, rate bills, water, electricity and repairs can be tax deductable by the company; this can also include car hire and flights for the directors.

If you would like one of our agents to contact you to discuss in more details, please complete the form below: