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Re: Spanish Inheritance Tax - do you know the facts?
Is there a threshold for inheritance tax as in the UK?
We were talking to friends today (Spanish) They have an apartment between 4 sisters. Fathers name was on the deeds. He died years ago, then it went to the wife, she died then it went to the eldest son, he died and now the sisters are selling it. Not once was inheritance tax paid (I know it's a but more complicated that that but)
The same goes for my Mother in law recently widowed. 50% of the inheritance went to her and the rest between the children including the wife. But no inheritance tax?
Both properties are in the 130,000 euro range. And legal, all information given to the Hacienda.
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Re: Spanish Inheritance Tax - do you know the facts?
Quote:
Originally Posted by pelinor
Is there a threshold for inheritance tax as in the UK?
We were talking to friends today (Spanish) They have an apartment between 4 sisters. Fathers name was on the deeds. He died years ago, then it went to the wife, she died then it went to the eldest son, he died and now the sisters are selling it. Not once was inheritance tax paid (I know it's a but more complicated that that but)
The same goes for my Mother in law recently widowed. 50% of the inheritance went to her and the rest between the children including the wife. But no inheritance tax?
Both properties are in the 130,000 euro range. And legal, all information given to the Hacienda.
When we bought a plot of land 2 years ago, all 13 (!) of the owners had inherited the plot from a mother/grandmother. We knew we had to pay 7% purchase tax (on the declared value), but were horrified to find the gestor at the notary charging us 14%. The reason was that the other 7% was inheritance tax payable by all the 13 people we had given cheques to, payable by them when the property was sold. Because they had all gone off in various directions, we as new owners were the ones liable to pay it. This was an oversight on behalf of the estate agent, who then had the task of chasing after all the people and getting them to pay their tax in cash to him. Amazingly, 12 of them paid on the spot, and a 13th had already spent it, so we only lost a couple of hundred euros on the mistake.
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Re: Spanish Inheritance Tax - do you know the facts?
Quote:
Originally Posted by pelinor
Is there a threshold for inheritance tax as in the UK?
We were talking to friends today (Spanish) They have an apartment between 4 sisters. Fathers name was on the deeds. He died years ago, then it went to the wife, she died then it went to the eldest son, he died and now the sisters are selling it. Not once was inheritance tax paid (I know it's a but more complicated that that but)
The same goes for my Mother in law recently widowed. 50% of the inheritance went to her and the rest between the children including the wife. But no inheritance tax?
Both properties are in the 130,000 euro range. And legal, all information given to the Hacienda.
Hi Pelinor
There are 4 different classes of beneficiaries for ISD:
I Descendents and adopted children under 21
II Descendents and adopted children over 21, spouse, parents and adoptive parents, grandparents
III Brothers, sisters, nephews, nieces, uncles, aunts
IV Anyone else. This includes unmarried partners unless there is acceptable and substantial proof of a long term cohabiting relationship.
Beneficiaries in Class I are entitled to an exemption of 15,957€ each, plus an additional 3,991€ for every year that they are under the age of 21 up to a maximum exemption of 47,859€.
For Class II beneficiaries the entitlement is 15,957€.
Class III receive an exemption of 7,993€ each.
Class IV beneficiaries attract no exemption at all.
The key word that you use in your example above is 'Spanish'. If you are an inheritor in Class I or II (as all of the people above were) and have lived in Spain for at least one year, and the deceased was a Canary Island resident of at least 5 years duration then you are entitled to a 99% exemption. This exemption will be revoked and the tax will be due if the beneficiary sells the property and/or leaves the Canary Islands within 5 years of the legacy.
Many people who live here think that they are OK because they have been on the island for a while. If a married couple have been fiscally resident (here for more than 183 days out of each tax year) for at least 5 years then they must be able to prove it. A Spanish tax return for each of those years is the general method of proof. Property owners should have been doing this, but I know of more than one British person who has been here for quite some time who has never submitted a tax return!
Legitimate fiscal residents who have been here for long enough will be fine on the first death in a couple as long as the surviving spouse is happy to stay here in the same house. The problem only then looms large on the second death and non resident children (for example) inherit.
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Re: Spanish Inheritance Tax - do you know the facts?
Quote:
Originally Posted by Rachael Bayliss
I am not sure that I understand what you are asking here GM. If a parent dies then no ISD will be owed by anyone because they didn't own the property. If a child dies then whoever their beneficiaries are will be liable for tax. I don't see where the age of the person who dies comes into it. Are you referring to the age allowance children under 21 get against ISD when they inherit?
The costs of the two ways of mitigating tax can be compared by contrasting the 1% transfer tax, the fee for the provision of the service and the ongoing annual costs against the 6.5% transfer tax payable when the property is transferred into the names of the children and the cost of the usufruct itself. The initial cost of the usufruct way will be more (considerably more in some cases) but the annual fees will be less.
The main problems of the usufruct to my mind are that the ISD problem is only ever being delayed unless the property is sold, and that if a child who owns the property dies you have not negated this tax at all.
I think the confusion is arising because I am talking about Spanish regs where the age of the deceased has a bearing on the value of the uso fructo "returned to the owning children - usually very little or nil.
Plus I was going to ask about tax payable on shares in the company inherited or doen't it work like that?
Re: Spanish Inheritance Tax - do you know the facts?
Quote:
Originally Posted by Rachael Bayliss
Hi Pelinor
There are 4 different classes of beneficiaries for ISD:
I Descendents and adopted children under 21
II Descendents and adopted children over 21, spouse, parents and adoptive parents, grandparents
III Brothers, sisters, nephews, nieces, uncles, aunts
IV Anyone else. This includes unmarried partners unless there is acceptable and substantial proof of a long term cohabiting relationship.
Beneficiaries in Class I are entitled to an exemption of 15,957€ each, plus an additional 3,991€ for every year that they are under the age of 21 up to a maximum exemption of 47,859€.
For Class II beneficiaries the entitlement is 15,957€.
Class III receive an exemption of 7,993€ each.
Class IV beneficiaries attract no exemption at all.
The key word that you use in your example above is 'Spanish'. If you are an inheritor in Class I or II (as all of the people above were) and have lived in Spain for at least one year, and the deceased was a Canary Island resident of at least 5 years duration then you are entitled to a 99% exemption. This exemption will be revoked and the tax will be due if the beneficiary sells the property and/or leaves the Canary Islands within 5 years of the legacy.
Many people who live here think that they are OK because they have been on the island for a while. If a married couple have been fiscally resident (here for more than 183 days out of each tax year) for at least 5 years then they must be able to prove it. A Spanish tax return for each of those years is the general method of proof. Property owners should have been doing this, but I know of more than one British person who has been here for quite some time who has never submitted a tax return!
Legitimate fiscal residents who have been here for long enough will be fine on the first death in a couple as long as the surviving spouse is happy to stay here in the same house. The problem only then looms large on the second death and non resident children (for example) inherit.
Yep thanks, cleared that up
P.S. They do acept a P60 as proof of tax paid if you are in recipt of a UK government (civil service) pension.
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Re: Spanish Inheritance Tax - do you know the facts?
Quote:
Originally Posted by pelinor
Is there a threshold for inheritance tax as in the UK?
We were talking to friends today (Spanish) They have an apartment between 4 sisters. Fathers name was on the deeds. He died years ago, then it went to the wife, she died then it went to the eldest son, he died and now the sisters are selling it. Not once was inheritance tax paid (I know it's a but more complicated that that but)
The same goes for my Mother in law recently widowed. 50% of the inheritance went to her and the rest between the children including the wife. But no inheritance tax?
Both properties are in the 130,000 euro range. And legal, all information given to the Hacienda.
Well if they are fiscal residents in Spain the amounts are now considerably less for the surviving spouse and then a little more for other family members. it will depend on other assets as well.
See here http://www.gobiernodecanarias.org For those lumped with the possibility of a huge bill what has happened historically is that the property has been left in the deceased name(s) and then after 4 years - the amount of time that the Agencia Tributaria can back claim taxes - has passed the deeds are put right.
Today with computers ruling our lives it is becaoming increasingly difficult to for non residents to dodge the tax plus the surviving spouse may want to sell and cannot do so until the IHT is sorted..
Re: Spanish Inheritance Tax - do you know the facts?
Quote:
Originally Posted by goldenmaniac
I think the confusion is arising because I am talking about Spanish regs where the age of the deceased has a bearing on the value of the uso fructo "returned to the owning children - usually very little or nil.
Plus I was going to ask about tax payable on shares in the company inherited or doen't it work like that?
If there is a small amount of value on the usufructo returned to the owning children then the 15.957€ allowance is more than likely to cover it.
The shares inherited by the beneficiaries are a UK asset and will be subject to UK inheritance tax where applicable. Between husband and wife this will be nothing. They will not be subject to any ISD in Spain.
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Re: Spanish Inheritance Tax - do you know the facts?
One for Goldenmaniac I think:-
The scenario is
Mr and Mrs XYZ own a property in Tenerife. They have one child a son Mr WXY who also has one child by his marriage to Mrs WXY. The child Master VWX lives with his mum and dad in the UK.
The XYZ’s wills state that in the event of death all property in Tenerife is passed to the grandchild master VWX.
The XYZ’s have opened a bank account in VWX’s (grandchild) name in Tenerife and all the utilities are paid out of this account which is topped up on every visit to Tenerife.
One of the XYZ’s dies and they do not tell the Tenerife authorities. Then the surviving XYZ dies and Mr & Mrs WXY do not tell the Tenerife authorities just continue to top up the Bank account so that bills are paid.
Fifty years later both WXY’s die and Master VWX does not tell the Tenerife authorities or the Bank but continues to top up the Bank account so that bills are paid.
VWX has married and has one child should he inform the authorities of the situation or continue as before topping up the bank account or possibly open a new bank account in his child’s name and pay the utilities from there.
.
Re: Spanish Inheritance Tax - do you know the facts?
Quote:
Originally Posted by Briz
One for Goldenmaniac I think:-
The scenario is
Mr and Mrs XYZ own a property in Tenerife. They have one child a son Mr WXY who also has one child by his marriage to Mrs WXY. The child Master VWX lives with his mum and dad in the UK.
The XYZ’s wills state that in the event of death all property in Tenerife is passed to the grandchild master VWX.
The XYZ’s have opened a bank account in VWX’s (grandchild) name in Tenerife and all the utilities are paid out of this account which is topped up on every visit to Tenerife.
One of the XYZ’s dies and they do not tell the Tenerife authorities. Then the surviving XYZ dies and Mr & Mrs WXY do not tell the Tenerife authorities just continue to top up the Bank account so that bills are paid.
Fifty years later both WXY’s die and Master VWX does not tell the Tenerife authorities or the Bank but continues to top up the Bank account so that bills are paid.
VWX has married and has one child should he inform the authorities of the situation or continue as before topping up the bank account or possibly open a new bank account in his child’s name and pay the utilities from there.
.
Nice try!!
but I can see at least one problem - Unelco - they no longer let you change the bank account to a name other than that of the contract holder!
Re: Spanish Inheritance Tax - do you know the facts? 
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