# Inheritance Tax



## jakey (Nov 29, 2007)

Hi,

I've heard Spanish Inheritance Tax is awful.

Does anybody know a way round it?

Someone mentioned to me that you can set up a company, but have no idea what to do...............yours worried.


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## Stravinsky (Aug 12, 2007)

jakey said:


> Hi,
> 
> I've heard Spanish Inheritance Tax is awful.
> 
> ...


Not legally that I know of
And yes, it is awful when you leave an inheritence to a non resident. You can leave it to your spouse if you have things set up properly and get, I think, a 95% deduction. To have your house in joint names is an advantage.

You need to ensure you have a Spanish will also .... thats very important.

Inheritence tax goes up to 34% depending on the inheritence. Its a bit complex so you need to take advice really because it very much depends who's inheriting and where they are


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## jakey (Nov 29, 2007)

Thanks, Jakey


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## ColinCarter (Feb 26, 2008)

*Wills For Brits Who Live In Spain*

This is a confusing subject. I called the British consulate this morning to ask what was required and was told to contact a Spanish lawyer with UK knowledge and sent a list. Other questions were steadfastly answered by "I wouldn't know". 

I spoke to a Spanish notary who tells me my estate (entirely in Spain) would be dealt with in accordance with British law (I was born in Britain).

However, my son (British nationality, born in Germany, resident in Spain) took separate advice and was told his estate (entirely in Spain) would be dealt with in accordance with German law. I hear this is an EU agreement.

I suspect that probate would be delayed while things are sorted out. Maybe a will will help.

I do not have a lot of faith in Spanish lawyers and I don't want to waste time and money so I thought I would draw up a simple will (either from a handbook or an on-line service), get a _traduccion jurada_ and deposit it with a friend.

QUESTIONS

Is my plan for an economical solution feasible?
Is inheritance tax payable according to country of birth?
Can anyone confirm my son's situation?
What steps will my wife have to take if I die?
Any comments, especially from people who spouse has died in Spain, would be much appreciated.
Colin


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## Stravinsky (Aug 12, 2007)

I can assure you that if you die as a resident in Spain your estate here will be dealt with here under Spanish law. A neighbours husband dies last year and she has been through it all. When I moved here the person who had previously looked after our place died, and his wife also went through it.

An interesting point was that in the first of these instances, our neighbour was told by her solicitor that there was no longer an inheritence tax to be paid under local Valencian law.

If you have your house in joint names here and you die then inheritence tax can be reduced to almost zero (conditions apply). If you were the surviving partner and died leaving your estate to your son in Spain, the IHT would still be dealt with under Spanish tax. Also, you cannot sell the property to raise the IHT. You have to pay the taxes within (I think) 6 months to gain release of the property. Bank accounts in Spain are also frozen.

It is most important that a Spanish will is drawn up. Trouble is, if you draw your own up you won't know if its a problem, but your surviving relatives will.


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## ColinCarter (Feb 26, 2008)

Stravinsky said:


> I can assure you that if you die as a resident in Spain your estate here will be dealt with here under Spanish law. A neighbours husband dies last year and she has been through it all. When I moved here the person who had previously looked after our place died, and his wife also went through it.


Thanks Stravinsky,
Can you tell me if these people had to go to a Spanish notary for the probate process? Did the notary issue some sort of escritura that could be shown to the Property Register / tax authority?
Colin


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## Bevdeforges (Nov 16, 2007)

What Stravinsky said. I can add, just as a general observation, that the answer to question # 2 is definitely no.

Generally, a person's estate is subject to the laws of the country in which he resides at the time of his death. (OK, all the issues of "tax residence" can complicate things, but the general principle still holds.)

Real property (i.e. real estate - land and buildings) holdings, however, are usually subject to the transfer and inheritance laws of the country in which the property is located.

If most of your estate is in Spain, it's probably best to have a simple Spanish will prepared (and registered). If you do-it-yourself and it isn't in conformity with Spanish law, they'll wind up splitting your estate as though you died intestate and who knows what that will do!
Cheers,
Bev


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## ColinCarter (Feb 26, 2008)

Bevdeforges said:


> Generally, a person's estate is subject to the laws of the country in which he resides at the time of his death. (OK, all the issues of "tax residence" can complicate things, but the general principle still holds.)


Hey, thanks. So, in my case (Brit resident in Spain with only Spanish assets), my estate on death would be processed under Spanish law and there is no need for an English will (unless I can't understand Spanish). Are you pretty sure of this or should I check?



> . . . it's probably best to have a simple Spanish will prepared (and registered).


Sounds good. In fact I would be quite happy with the standard Spanish rules for division of estates and have no will. 

But, if I did make a will and exercised the limited voluntary rights under the Spanish rules, with whom ought it to be registered?

When I get all the info together and verified I will post a summary here for others.

Colin


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## Big Pete (Aug 7, 2007)

jakey said:


> Hi,
> 
> I've heard Spanish Inheritance Tax is awful.
> 
> ...


Do what i intend to do , well fingers crossed i dont snuff it to early of course ..

I intend to spend spend spend so there is hardly anything left 

This is planned by spending loads during the next 10 years and then when it gets to the point where i need more as i get older .. I am going to do the sell the property but retain the rent it route 
So when i am finally dead there will be no inheritance issue ..

Now you could argue thats greedy , but ask yourself the following !!

Its my money and i doubt i could take it with me as it will get burnt .

The kids well its not for me to give them loads so they can use it , they should make there own .

So what is the point in saving it ?

Spend spend spend i say


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## Bevdeforges (Nov 16, 2007)

ColinCarter said:


> When I get all the info together and verified I will post a summary here for others.


That would be great! Or, you could take Big Pete's advice and just make sure you spend it all before you go. (Seriously, that was the suggestion of a finance prof in an estate planning class I took.)
Cheers,
Bev


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## ColinCarter (Feb 26, 2008)

Big Pete said:


> I intend to spend spend spend so there is hardly anything left


Yes, I agree. I also expect to die in bed at around 100 with nothing in the bank and my property pre-sold. 

But my wife is much younger and if I had a sudden accident (my hobby is mountaineering) she would be up Mierda Creek without a paddle. See what I mean? Under Spanish law I think she gets 50% of my property and the rest goes to my offspring. I can envisage a lot of complicated scenarios.
Colin


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## Big Pete (Aug 7, 2007)

ColinCarter said:


> Yes, I agree. I also expect to die in bed at around 100 with nothing in the bank and my property pre-sold.
> 
> But my wife is much younger and if I had a sudden accident (my hobby is mountaineering) she would be up Mierda Creek without a paddle. See what I mean? Under Spanish law I think she gets 50% of my property and the rest goes to my offspring. I can envisage a lot of complicated scenarios.
> Colin


I see your point Colin , But thats easy peasy to solve 

You just get a Insurance Policy on yourself so should you be hit by the worst scenario like a Rock landing on your head whilst climbing ,or something like getting electricuted whilst wiring that secondhand telly you brought etc etc..

Then the little lady can cash in and run of into the sunset with money in her purse and a toy boy on her arm ..


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## Goldberg (May 24, 2007)

*Simple*

The simpliest way is to get a mortgage on your property and not have assets in Spain. That is the legal and simpliest way. ie. have a mortgage. The tax man cant take what is not yours ie. it belongs to the bank.



jakey said:


> Hi,
> 
> I've heard Spanish Inheritance Tax is awful.
> 
> ...


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## Stravinsky (Aug 12, 2007)

ColinCarter said:


> (my hobby is mountaineering) she would be up Mierda Creek without a paddle. See what I mean? Under Spanish law I think she gets 50% of my property and the rest goes to my offspring. I can envisage a lot of complicated scenarios.
> Colin



Can I suggest you take up tiddleywinks 
If you leave a Spanish will your assets will be left to who you want to leave it to, i.e. all to your spouse.


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## Stravinsky (Aug 12, 2007)

Goldberg said:


> The simpliest way is to get a mortgage on your property and not have assets in Spain. That is the legal and simpliest way. ie. have a mortgage. The tax man cant take what is not yours ie. it belongs to the bank.


Aye, thats one way to do it, but then you end up paying a fortune in bank interest


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## ColinCarter (Feb 26, 2008)

Stravinsky said:


> Can I suggest you take up tiddleywinks.


 . . . hit by a falling rock, fried by a secondhand telly and now blinded by a flying tiddlywink . . . while my darling wife goes off with a toy-boy . . . 

What a charming bunch! 
Colin


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## Stravinsky (Aug 12, 2007)

ColinCarter said:


> . . . hit by a falling rock, fried by a secondhand telly and now blinded by a flying tiddlywink . . . while my darling wife goes off with a toy-boy . . .
> 
> What a charming bunch!
> Colin



Ahhhh but we have you're best interests at heart 




Can I get a mention in your will by the way


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## Goldberg (May 24, 2007)

*Reinvest the money elsewhere*



Stravinsky said:


> Aye, thats one way to do it, but then you end up paying a fortune in bank interest


Yes of course you pay interest but you re invest the money elsewhere, if you are borrowing at 5%, you should easily be able to make 8 or 10% per year on your money if you invest wisely.
If you are more risk orientated you can go for higher. It is about managing and investing your money and legally keeping as much as possible away from government entities.


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## Stravinsky (Aug 12, 2007)

Goldberg said:


> It is about managing and investing your money and legally keeping as much as possible away from government entities.


Oh yes, I'm all for that


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## ColinCarter (Feb 26, 2008)

Goldberg said:


> It is about managing and investing your money and legally keeping as much as possible away from government entities.


I have a friend in Liechtenstein who can help . . . . .


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## **JOHN** (Feb 15, 2008)

Hello!!

I just can recommend you a lawyer I contracted when I came to Spain, really professionally. you can see the side:

(SNIP)


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## ColinCarter (Feb 26, 2008)

*grammar error*

I haven't given up on this subject. In fact, I have obtained a lot of info from my notary. But the loose ends will not be nailed down until I visit the Registrar of _Testamentos_ in a few days time. It appears to be general practice to let a foreign will (eg, UK will) prevail but this is potentially open to appeal by heirs under the Spanish system.

More to come in a few days (the Registrar in my town is being replaced).

colin


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## STalbot101 (Apr 7, 2008)

Hi all, the best way to avoid Spanish Inheritance tax is to set up a UK limited company. The advantages of doing this are numerous. Firstly, when you do pass away, under a UK limited company, there is ZERO tax for the beneficiaries to pay, you simply transfer the shares in the company, it means that there is no need to deal with any Spanish tax, or any Spanish lawyers accountants etc.. plus you don't have to pay any legal fees. Another advantage is that Capital Gains Tax is halved, should you want to return to the UK.


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## Stravinsky (Aug 12, 2007)

STalbot101 said:


> Hi all, the best way to avoid Spanish Inheritance tax is to set up a UK limited company. The advantages of doing this are numerous. Firstly, when you do pass away, under a UK limited company, there is ZERO tax for the beneficiaries to pay, you simply transfer the shares in the company, it means that there is no need to deal with any Spanish tax, or any Spanish lawyers accountants etc.. plus you don't have to pay any legal fees. Another advantage is that Capital Gains Tax is halved, should you want to return to the UK.


Does the limited company own your assets in Spain then, including your property? Presumably if you make a profit on your home in Spain then, you have to pay tax on it in the UK . Who would the directors of the limited company be, bearing in mind the "owners" would not be UK residents.


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## STalbot101 (Apr 7, 2008)

Stravinsky said:


> Does the limited company own your assets in Spain then, including your property? Presumably if you make a profit on your home in Spain then, you have to pay tax on it in the UK . Who would the directors of the limited company be, bearing in mind the "owners" would not be UK residents.


The limited company owns the property certainly, as for the other assets, it depends what they are. As for profit, you must first understand how the system works. When you sell the property, you take the money owed to you from the company as a directors loan, the value of property when you originally invested it in the company, then you sell your shares in the company, dependent upon the profit. For example, the house has risen in value by €100,000 and there are four shares, €25,000 per share. The buyer buys the company not the house, so the shares represent the rise in value. This is the clever bit, because you are a limited company, if you put flights and other expenses through the company, the tax in the UK would only be 9%rather than the usual 18% Capital Gains Tax.
The directors of the company would be for example, you, your wife and your two kids. One share each. But you are completely free to decide. So when your kids come to inherit your share, it would be free.


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## ColinCarter (Feb 26, 2008)

*Property held by a foreign company*

Ha! I know this one well. Back in the 80s many estates on the Costa del Sol were selling shares in Gibraltar-based companies which in turn owned your unit. 

Naturally, that is illegal for Spanish residents (ie, expats) and creates all kinds of problems. For example, the AEAT would like to see rental payments for the property you occupy and expect the foreign company to pay tax on income earned in Spain. 

Furthermore, the Spanish authorities are constantly closing loopholes of this kind - including the latest move to kick Gib banks out of international banking circles if they do not co-operate fully on money laundering and tax fraud.

However, in some special cases this approach would be useful and legal.


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## STalbot101 (Apr 7, 2008)

ColinCarter said:


> Ha! I know this one well. Back in the 80s many estates on the Costa del Sol were selling shares in Gibraltar-based companies which in turn owned your unit.
> 
> Naturally, that is illegal for Spanish residents (ie, expats) and creates all kinds of problems. For example, the AEAT would like to see rental payments for the property you occupy and expect the foreign company to pay tax on income earned in Spain.
> 
> ...


We are not talking about Gib based companies. You can set up these companies in the UK, 100% legally. Plus, the company is in your name, nobody elses. You can even go as far as writing your own shareholders agreement. There is no fraud or money laundering involved !


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## ColinCarter (Feb 26, 2008)

*foreign company*

Thanks. I take your point. But as you know, expats - as residents in Spain - have to identify the property they occupy (_datos catastrales_), its owner and the amount paid in rent. I may be mistaken but I think that will force the UK company to pay Spanish VAT and income tax on the rent less maintenance (must be a reasonable amount - whether actually paid or not). That could make the foreign company approach decidely less attractive.

Would you agree?


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## STalbot101 (Apr 7, 2008)

you can go to a Spanish Lawyer and a Spanish notary, neither will advise you to put your property into a UK limited company because firstly, it is out of their jurisdiction, and secondly because should you need to go to probate, they stand to earn thousands !


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## Stravinsky (Aug 12, 2007)

I have to make it clear to everyone that the reason this poster has been so proactive about this method of IHT protection is that he has a vested interest in the product, therefore if you do intend to investigate any further then caution is advised as the poster already has not been completely honest with us in declaring his association with the product


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## STalbot101 (Apr 7, 2008)

I would like to invite any other user within this forum, to point out where my "vested interest" has comprimised the advice that I have offered. 
*I do not even have a signature directing people to a website !*


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## Stravinsky (Aug 12, 2007)

STalbot101 said:


> I would like to invite any other user within this forum, to point out where my "vested interest" has comprimised the advice that I have offered.
> *I do not even have a signature directing people to a website !*


No ........ but you have introduced the subject and been extolling the virtues of it whilst not telling anyone that you are the person who sells it and might be slightly biased. I have a duty to point that out, and I have.

Oh, and if you read the site rules it is quite in order to have a link to your own personal web site in your signature, but of course as you deny to me that you are the owner of the site despite using his email and MSN/Skype addresses then its not an option open to you 

Shall we continue this offline if you feel the need to and not compromise the thread any further


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## beachcaster (Apr 12, 2008)

Big Pete said:


> Do what i intend to do , well fingers crossed i dont snuff it to early of course ..
> 
> I intend to spend spend spend so there is hardly anything left
> 
> ...



I saw a sticker in the back of a Rolls it said TRAVEL FIRST CLASS..IF YOU DON'T YOUR KIDS WILL

So good on you 

Barry


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## W.C.D. (Apr 30, 2008)

*I Bought In A UK Limited Company And I"ts Fine*

Hello All,
(SNIP) Thread deleted


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## Stravinsky (Aug 12, 2007)

W.C.D. said:


> (SNIP) Thread deleted.


*It is a tremendous coincidence, isn't it, that your IP details completely match the gentleman who posted earlier in this thread extolling the virtues of the same system *


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## oddball (Aug 1, 2007)

*inheritance tax*



Stravinsky said:


> *It is a tremendous coincidence, isn't it, that your IP details completely match the gentleman who posted earlier in this thread extolling the virtues of the same system *



This is a friendly forum for people needing and giving advice to each other and whom so ever may take advantage of advise given as that , advise from PERSONAL experience , it is not meant to extend for personal gain or explotation . Thank you Stravinsky for keeping an ever watchfull eye on proceedings here , i am even gratefull when you pick me up for being somewhat errant at times .You are a good mediator in MHO . Colin


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## Stravinsky (Aug 12, 2007)

oddball said:


> This is a friendly forum for people needing and giving advice to each other and whom so ever may take advantage of advise given as that , advise from PERSONAL experience , it is not meant to extend for personal gain or explotation . Thank you Stravinsky for keeping an ever watchfull eye on proceedings here , i am even gratefull when you pick me up for being somewhat errant at times .You are a good mediator in MHO . Colin


Thanks Colin

You may not be suprised to hear that I found three other users on the forum, registered to the same IP, either extolling the virtues of the system, or making leading questions which were later answered by others with the same IP seemingly registered to the company that is selling the system.

I have no idea if the system they mention works, but it might have been a more beneficial plan in the first place to speak to admin about advertising the service on here, rather than give the impression _they_ had used the service


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## ColinCarter (Feb 26, 2008)

*Vested interests*

Yeah. I agree. Although I am ever sceptical of peoples motives. 

BTW, I am still waiting for my notary to talk to the new Registrar of Wills and Testaments (as promised). Whan that occurs I will be able to let you all know the legal references.

Colin Carter


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