# Inherit tax in Spain?



## Sandraw719 (Jul 19, 2013)

My UK father in law will leave about 800k pounds to my husband and his sister if he die. My husband is a resident in Spain.He and his sister will inherit 50/50. We know they will have to pay 120k pounds tax together in UK. They can use some allowance left from the mother.

Then we assume there are 340k pounds left in my husband's pocket. They are mainly a house and shares. We live in Valencia. How much tax he will have to pay in Spain?

I read a lot about Spanish government discriminated non resident about inherit tax. I hope this will change? If it is worth to avoid any tax,I better go back to China with my husband for a year,haha.

One accountant suggest my husband does not mention any about the inherit to Spanish government. But the thing is you have to declare your assets and there will be a problem one day if we transfer money from uk to Spain.

Of course, my father in law may wont go for a couple of years. Hope by then the Spanish government change the rules about inherit tax.

Thanks


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## larryzx (Jul 2, 2014)

Sandraw719 said:


> My UK father in law will leave about 800k pounds to my husband and his sister if he die. My husband is a resident in Spain.He and his sister will inherit 50/50. We know they will have to pay 120k pounds tax together in UK.
> 
> Thanks


I am almost certain that the tax relief in the UK will have no bearing on a person tax resident in Spain. Thus, Spanish rules will apply to the whole of any inheritance for a Spanish Resident.

The same applies to say UK Lottery, Premium Bond winnings, Winter Fuel Allowance, OAP Christmas Bonus etc, they are taxable in full in Spain if resident


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## Sandraw719 (Jul 19, 2013)

larryzx said:


> I am almost certain that the tax relief in the UK will have no bearing on a person tax resident in Spain. Thus, Spanish rules will apply to the whole of any inheritance for a Spanish Resident.
> 
> The same applies to say UK Lottery, Premium Bond winnings, Winter Fuel Allowance, OAP Christmas Bonus etc, they are taxable in full in Spain if resident


Thanks. It sounds very horrible. I hope EU will force Spain to change the rules and my father in law can live a few years more.


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## larryzx (Jul 2, 2014)

Sandraw719 said:


> Thanks. It sounds very horrible. I hope EU will force Spain to change the rules and my father in law can live a few years more.


Maybe he could start giving some of it to his heirs now. Maybe that would avoid some tax. 

NB For those (her) who love to criticise: I did say avoid not evade.


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## Sandraw719 (Jul 19, 2013)

larryzx said:


> Maybe he could start giving some of it to his heirs now. Maybe that would avoid some tax.
> 
> NB For those (her) who love to criticise: I did say avoid not evade.


He is very controlling and won't give anything away now. A lot of people will give away 7 years before they die.But he won't do that at all.


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## snikpoh (Nov 19, 2007)

larryzx said:


> I am almost certain that the tax relief in the UK will have no bearing on a person tax resident in Spain. Thus, Spanish rules will apply to the whole of any inheritance for a Spanish Resident.
> 
> The same applies to say UK Lottery, Premium Bond winnings, Winter Fuel Allowance, OAP Christmas Bonus etc, they are taxable in full in Spain if resident


Even though succession tax in Spain is NOT the same as IHT in UK, one can be used to offset the other.

That is, if you pay IHT in UK, the amount you've paid can be offset against any succession tax required to be paid in Spain 


(or so I am told!).


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## Rabbitcat (Aug 31, 2014)

Sandraw719 said:


> He is very controlling and won't give anything away now. A lot of people will give away 7 years before they die.But he won't do that at all.


How do people know when they have 7 years left until they die????


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## snikpoh (Nov 19, 2007)

Rabbitcat said:


> How do people know when they have 7 years left until they die????


If they die within 7 years of gifting to anyone, then a percentage of the tax is still payable.

So, the sooner you make the gift, the better.


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## Lynn R (Feb 21, 2014)

Sandra, based on the figures you have quoted (an estate valued at 800k sterling) I believe the UK inheritance tax due would be 190K (that is, tax payable at 40% on everything over the current threshold of 325K). Of course, the threshold could be increased by the time your father-in-law dies, who knows?

That would leave your husband inheriting 305K sterling, then, and who knows what the exchange rate would be at the time of inheritance. In order to benefit from any regional IHT allowances (whatever they may be in Valencia at the time your father-in-law dies) he would have to have been resident (and submitting annual tax returns) in Spain for a minimum of five years. If your father-in-law should die before that period has passed, then the standard state allowance against inheritance tax for children or spouses is only €16K.

Succession tax in Spain is really complicated because the amount payable is based not onl on how much the beneficiary inherits and their degree of relationship to the deceased, but also to what the personal wealth of each beneficiary is before the inheritance is taken into account - so two children both resident in Spain could inherit exactly the same amount from a parent but one could end up having to pay more tax than the other if they are better off than their sibling.

Nobody knows what's likey to happen regarding Spanish IHT following the European ruling regarding removing discrimination against non-residents. Some commentators believe it could result in a standard system of rates and allowances being adopted nationwide, which could help people residing in regions where the allowances are not generous at present, but also make matters worse for those in other regions where the allowances are more favourable. However the Government has given no indication as yet about what they intend to do, so none of us should really be trying to second guess them.

I think you are quite right to disregard the adviser who suggested not declaring the inheritance, though. As you say, you would then be unable to account for the source of that money on any future 720 returns and that would cause serious problems. What an irresponsible position for a "professional" adviser to take.


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## Lynn R (Feb 21, 2014)

snikpoh said:


> Even though succession tax in Spain is NOT the same as IHT in UK, one can be used to offset the other.
> 
> That is, if you pay IHT in UK, the amount you've paid can be offset against any succession tax required to be paid in Spain
> 
> ...


Yes, I agree, because of the Double Taxation Treaty between Spain and the UK.


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## Sandraw719 (Jul 19, 2013)

Rabbitcat said:


> How do people know when they have 7 years left until they die????


Of course nobody knows. But he is 90 years old. It is his choice and we should not blame. Just do not want to panic when there is a huge bill to pay and cannot find the cash.


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## Lynn R (Feb 21, 2014)

larryzx said:


> I am almost certain that the tax relief in the UK will have no bearing on a person tax resident in Spain. Thus, Spanish rules will apply to the whole of any inheritance for a Spanish Resident.
> 
> The same applies to say UK Lottery, Premium Bond winnings, Winter Fuel Allowance, OAP Christmas Bonus etc, they are taxable in full in Spain if resident


All the things listed in your second paragraph are free of tax in the UK, therefore it is impossible to offset non-existent UK tax against the Spanish tax which is payable on them.

The same is not true of inheritance tax, though, where tax paid in the UK can be offset agains the Spanish liability.


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## larryzx (Jul 2, 2014)

duplicate edited by larry


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## larryzx (Jul 2, 2014)

Lynn R said:


> .
> 
> The same is not true of inheritance tax, though, where tax paid in the UK can be offset against the Spanish liability.


Sorry but that would not change the total which one would be liable to pay, just that some (might) be paid in UK and the rest in Spain. But still the same amount.


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## Lynn R (Feb 21, 2014)

larryzx said:


> Sorry but that would not change the total which one would be liable to pay, just that some (might) be paid in UK and the rest in Spain. But still the same amount.


I rather think that's what's meant by offsetting (to most reasonable people, anyway). You take the total tax liability (in Spain) and offset the amount already paid in the UK against it.


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## larryzx (Jul 2, 2014)

Lynn R said:


> I rather think that's what's meant by offsetting (to most reasonable people, anyway). You take the total tax liability (in Spain) and offset the amount already paid in the UK against it.


 Sorry, maybe I should have asked, " So how does that help with what the inheritor is going to have to pay? "


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## Lynn R (Feb 21, 2014)

larryzx said:


> Sorry, maybe I should have asked, " So how does that help with what the inheritor is going to have to pay? "


Because if IHT at 40% has already been paid in the UK, then depending on the amount of regional allowances available to a Spanish resident who fulfils the 5 year criteria, the amount inherited, and the degree of relationship to the deceased, the rate of Spanish tax payable might be less than 40% (or it might be greater). Thus, in certain circumstances, having paid tax at 40% in the UK could lessen the Spanish liability.

http://www.spanishpropertyinsight.com/tax-and-pensions/spanish-succession-tax/


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## larryzx (Jul 2, 2014)

Lynn R said:


> Because if IHT at 40% has already been paid in the UK, then depending on the amount of regional allowances available to a Spanish resident who fulfils the 5 year criteria, the amount inherited, and the degree of relationship to the deceased, the rate of Spanish tax payable might be less than 40% (or it might be greater). Thus, in certain circumstances, having paid tax at 40% in the UK could lessen the Spanish liability.
> 
> Spanish succession tax - Spanish Property Insight


Sorry if I am be obtuse, but even if it would be lessened, the inheritor will still pay the same, whether they pay any in UK or not.


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## extranjero (Nov 16, 2012)

What a wonderful problem to have!


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## CapnBilly (Jun 7, 2011)

The rules on inheritance tax were changed as part of the tax reforms a few weeks ago

Essentially they say that non residents inheritors in the EU/EEA , and resident beneficiaries of EU/EEA assets will pay tax based on the Autonomous Community where the assets are situated or the taxpayer lives. Residence is confirmed as the greater number of days in a 5 year period ending the day before the taxable event.

With regard to Valencia, it's not too bad a place to live from an inheritance tax perspective. For a group 2 inheritor ( over 21 year old child) the tax free allowance is €100,000, plus the remaining taxation is relieved at 75%. Take care though if you have more than circa €400k in personal assets as there are extra taxes to pay.

In terms of offsetting tax already paid in the UK, the legislation (translated) says :

"“When the taxpayer is subject to tax liability, you can deduct the smaller of the two
following amounts:

a) The actual amount of the paid abroad on account of similar tax, which affects the inheritance subject to tax in Spain.

b) The result of applying the effective average rate of the corresponding inheritance tax on assets where they had been subjected to tax in abroad for a similar tax.”


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## Sandraw719 (Jul 19, 2013)

CapnBilly said:


> The rules on inheritance tax were changed as part of the tax reforms a few weeks ago
> 
> Essentially they say that non residents inheritors in the EU/EEA , and resident beneficiaries of EU/EEA assets will pay tax based on the Autonomous Community where the assets are situated or the taxpayer lives. Residence is confirmed as the greater number of days in a 5 year period ending the day before the taxable event.
> 
> ...


Thanks. Can you give me the Spanish link? 

So if the tax paid in UK is 100k euros, the tax is 150k euros according to Spanish tax office, the actual tax should be paid in Spain will be 50k euros?

If we only resident in Valencia for 3 or 4 years, the allowance will be only 16000 euros?

How can people find so much money to pay? My husband said he will have to sell the shares or property to get the cash. But it takes a long time.


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## GallineraGirl (Aug 13, 2011)

So, does the new ruling work the other way? As a Spanish resident I think I would have to pay tax on my inheritance when my Mum dies in Scotland. However, my brothers and sisters who live in Scotland and England will not have any liability as UK residents. Is this not discrimination too?


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## larryzx (Jul 2, 2014)

Sandraw719 said:


> How can people find so much money to pay? My husband said he will have to sell the shares or property to get the cash. But it takes a long time.


Good question as of course one cannot inherit the asset until the tax uis paid, so cannot sell the shares or the property to raise the tax.

I once asked at a seminar (by a very well known company in Europe on investments etc) what the poor, old, Spanish widow does. They said, if the tax man comes she just says her husband is upstairs drinking tea and cannot be disturbed, After 5 years she says, sorry, I forgot he died. After (I believe it is) 4.5 years the tax-man cannot start proceedings to recover the money.

Galinera Girl.


Yes you are right. But one cannot expect every law in every country to be the same. At an extreme, you cannot drive on the left in Spain albeit that you can it UK.


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## Sandraw719 (Jul 19, 2013)

larryzx said:


> Good question as of course one cannot inherit the asset until the tax us paid, so cannot sell the shares or the property.
> 
> I once asked as a seminar what the poor, old Spanish widow does. They said, if the tax man comes she just says her husband is upstairs drinking tea and cannot be disturbed, After 5 years she says, sorry, I forgot he died. After (I believe it is) 4.5 years the tax-man cannot start proceedings to recover the money.


My husband has to sell his OWN property or shares to pay the tax before he inherit. But this will be a big problem for us since we live on the income from them. Anyway,he may wont pay very much in Spain since he will have to pay a lot in UK.


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## Sandraw719 (Jul 19, 2013)

larryzx said:


> Good question as of course one cannot inherit the asset until the tax uis paid, so cannot sell the shares or the property to raise the tax.
> 
> I once asked at a seminar (by a very well known company in Europe on investments etc) what the poor, old, Spanish widow does. They said, if the tax man comes she just says her husband is upstairs drinking tea and cannot be disturbed, After 5 years she says, sorry, I forgot he died. After (I believe it is) 4.5 years the tax-man cannot start proceedings to recover the money.
> 
> ...


Don't think the local Spanish people will have any problem. The children will inherit 2/3 automatically. The grandchildren will inherit too. But my father in law won't share his assets between 5 grandchildren (4 from my sister in law and we have one boy). He insists to give 50/50 to my husband and my sister in law.

If my husband inherit 25% and my son inherit 25%, I am sure this will reduce some tax in Spain even if it won't affect the tax in UK.


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## larryzx (Jul 2, 2014)

Sandraw719 said:


> My husband has to sell his OWN property or shares to pay the tax before he inherit. But this will be a big problem for us since we live on the income from them. Anyway,he may wont pay very much in Spain since he will have to pay a lot in UK.


If he had to pay say 200,000 euros in Spain and say the equivalent to 100,000 euros in UK, albeit that he can off-set, the total he will have to pay will still be the same. i.e. either 200,0000 in Spain, or 200,000 minus 100,000. That still equals 200,000 which he will have to find.

Justin passing. 
I am not sure what the difference in the inheritance law in UK and Spain, work in Practice. In UK the tax is on the inheritance, in Spain on the inheritor. If the tax man in UK takes his/her tax, will that mean the taxable amount in Spain will be less?

Be interesting to hear from someone who has experienced that situation.


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## jimenato (Nov 21, 2009)

larryzx said:


> If he had to pay say 200,000 euros in Spain and say the equivalent to 100,000 euros in UK, albeit that he can off-set, the total he will have to pay will still be the same. i.e. either 200,0000 in Spain, or 200,000 minus 100,000. That still equals 200,000 which he will have to find.
> 
> Justin passing.
> I am not sure what the difference in the inheritance law in UK and Spain, work in Practice. *In UK the tax is on the inheritance, in Spain on the inheritor.* If the tax man in UK takes his/her tax, will that mean the taxable amount in Spain will be less?
> ...


You have hit the nail on the head. There is no obvious way to implement a reciprocal tax system as the taxes are entirely different and imposed on different entities. 

If I were the OP I would take proper professional advice.

And then let us know what the answers are...


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## snikpoh (Nov 19, 2007)

jimenato said:


> You have hit the nail on the head. There is no obvious way to implement a reciprocal tax system as the taxes are entirely different and imposed on different entities.
> 
> If I were the OP I would take proper professional advice.
> 
> And then let us know what the answers are...



See post #6 - whilst the taxes *are *different, there is some reciprocation between the two countries.


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## jimenato (Nov 21, 2009)

snikpoh said:


> Even though succession tax in Spain is NOT the same as IHT in UK, one can be used to offset the other.
> 
> That is, if you pay IHT in UK, the amount *you've* paid can be offset against any succession tax required to be paid in Spain
> 
> ...


Yes I see that. 

The problem I have is that *'you'* don't pay IHT in the UK - the estate does and it's on the whole value - not just your share. I suppose that they can 'pro-rata' the amount paid to your share but I would need convincing of that.

Anyway, even if there is reciprocity the amount payable is likely to be far higher than in the UK. I have known several people leave Spain because of it.


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## Turtles (Jan 9, 2011)

I've seen this subject discussed for years on fora like this, but I've never seen anyone say "Yes, that happened to me and I know exactly how the rules work". I'd love to know. Anyone???


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## jimenato (Nov 21, 2009)

Turtles said:


> I've seen this subject discussed for years on fora like this, but I've never seen anyone say "Yes, that happened to me and I know exactly how the rules work". I'd love to know. Anyone???


I think that the reason for that is that compared to the UK the tax in Spain is so punitive that people either leave Spain (I have known a couple do that) or just keep their heads down.


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## Lynn R (Feb 21, 2014)

jimenato said:


> I think that the reason for that is that compared to the UK the tax in Spain is so punitive that people either leave Spain (I have known a couple do that) or just keep their heads down.


Did you read the information in CapnBilly's excellent post about the allowances in Valencia?

"With regard to Valencia, it's not too bad a place to live from an inheritance tax perspective. For a group 2 inheritor ( over 21 year old child) the tax free allowance is €100,000, plus the remaining taxation is relieved at 75%. Take care though if you have more than circa €400k in personal assets as there are extra taxes to pay."

Taken in conjunction with a tax rate of 29.75% on the kind of amount the OP's husband might expect to inherit, I wouldn't exactly call that "so punitive".


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## Lynn R (Feb 21, 2014)

I think we should all move to Madrid. 

Inheritance tax deductions madrid

(see page 9)

Compared to paying 40% on everything over 325K, I´d say that was pretty good. No wonder the late Duchess of Alba wanted to be tax resident in Madrid instead of Andalucia where she actually spent most of her time, is it?


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## jimenato (Nov 21, 2009)

Lynn R said:


> Did you read the information in CapnBilly's excellent post about the allowances in Valencia?
> 
> "With regard to Valencia, it's not too bad a place to live from an inheritance tax perspective. For a group 2 inheritor ( over 21 year old child) the tax free allowance is €100,000, plus the remaining taxation is relieved at 75%. Take care though if you have more than circa €400k in personal assets as there are extra taxes to pay."
> 
> Taken in conjunction with a tax rate of 29.75% on the kind of amount the OP's husband might expect to inherit, I wouldn't exactly call that "so punitive".


note - '...compared to the UK...'


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## jimenato (Nov 21, 2009)

Lynn R said:


> I think we should all move to Madrid.
> 
> Inheritance tax deductions madrid
> 
> ...


In the case of a married couple, unused allowance can be carried forward to the surviving spouse, making their tax free allowance potentially 650,000.

Madrid is much better than Andalucia isn't it? Trouble is that hardly any expats live there.


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## Sandraw719 (Jul 19, 2013)

Lynn R said:


> I think we should all move to Madrid.
> 
> Inheritance tax deductions madrid
> 
> ...


I always dream to live in Madrid!


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## larryzx (Jul 2, 2014)

Yesterday on Talk Radio Europe, I heard a well-known (in EU including Spain) financial adviser who was talking about IHT. (admittedly he was seeking business).

He said the inheritance laws both in UK and Spain depend on ’Domicile’ and that it is very possible for a person to be domiciled in more than one country.

In such a case it was very possible one would payi tax in both UK and Spain, and that in certain circumstances, that is not covered by the Double Taxation Agreement i.e. it may not be possible to off-set tax paid in say UK, thus one would pay the 'same tax' twice


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## snikpoh (Nov 19, 2007)

larryzx said:


> Yesterday on Talk Radio Europe, I heard a well-known (in EU including Spain) financial adviser who was talking about IHT. (admittedly he was seeking business).
> 
> He said the inheritance laws both in UK and Spain depend on ’Domicile’ and that it is very possible for a person to be domiciled in more than one country.
> 
> In such a case it was very possible that could mean paying tax in both UK and Spain and that in certain circumstances that is not covered by the Double Taxation Agreement. i.e. it may not be possible to off.sett tax paid in say UK, thus one would pay the 'same tax' twice


I thought the concept of 'domicile' (for tax purposes) was a purely British thing??


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## larryzx (Jul 2, 2014)

snikpoh said:


> I thought the concept of 'domicile' (for tax purposes) was a purely British thing??


I have no idea, I was quoting a well known professional. His company specialises in 'avoiding' inheritance tax across the EU. 

(quote from their web page) "_xxxxxxx has been providing specialist, professional advice to British expatriates for decades, and has earned a reputation as the leading international tax and wealth management advisers to UK nationals living in Europe. We provide integrated tax, wealth management and estate planning services to private clients in France, Spain, Portugal, Cyprus, Malta and the UK."_

If he says something, I do not have the professional knowledge to even 'guess' that he 'might' be wrong, but of course he may be !


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## CapnBilly (Jun 7, 2011)

Domicile us an extremely complex subject. It is possible to be domiciled in the UK having been born abroad and never having set foot in the UK.

There are in fact four types of domicile :Origin, Dependency, Choice, Deemed. If you are domiciled or deemed to be domiciled in the UK, then inheritance tax payable on all your worldwide assets. If you are domiciled abroad then only your UK assets are subject to tax.

The real problem with domicile is that it isnt really decided until you die, and then your heirs have to prove that your domicile of choice (which is how you change it) was spain, and they take all sorts of things into account. Not a path to choose if you cann help it. 

Interestingly, I wonder if the Revenue would consider that your choice of nationality in a will would imply that your domicile of choice is still the UK. Of course, has never been tested yet.


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## Dave&Alina (May 8, 2008)

Spain has been forced to adopt the EU policy from the 1st January 2015. BUT each region can modify its allowances. You need to find the allowances for your region.

In essence you had to be resident in Spain for 5 years before being treated the same as locals...now that time limit doesn't apply.

Inheritance tax changes for non-residents as from 2015 | DavidJackson.info

I also understand (not certain though) that you cannot borrow against your future inheritance to pay the tax bill......and like the UK you have a time limit to pay...not long if you are intending to sell property to pay the bill.

Sun cream is essential for holidaying in Spain....... Vaseline for living here!


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## larryzx (Jul 2, 2014)

Dave&Alina said:


> ...not long if you are intending to sell property to pay the bill.


But you cannot inherit the asset until the tax is paid. So of course you cannot sell it to raise the funds.


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## alborino (Dec 13, 2014)

larryzx said:


> But you cannot inherit the asset until the tax is paid. So of course you cannot sell it to raise the funds.


Don't know if this is of interest but I see in the UK "However only 10% of the IHT bill attributable to property needs to be paid upfront. Therefore where the only asset in the estate is the deceased’s house (worth £525,000) then only £8000 needs to be paid in order to get a Grant of Probate; however the remaining £72000 will have to be paid as soon as the house is sold, together with interest.

Interest is payable on an estate 6 months after death. The present rate is 3% per annum".

This was from a fee based company so I won't plug them but I've always found if you talk to HMRC many things become possible. They aren't out to get you as many believe :eyebrows:


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## Dave&Alina (May 8, 2008)

Apologies.... you are of course both right - you cannot sell the property OR borrow against it to find the money to pay the bill. Joseph Heller also wrote tax law?

I've come to love and admire HRMC since being here! They don't set the taxes, only collect them. They even apologised for calling me on a Saturday to answer the question I had asked.

Agency Tributaria are sym-pathetic...they always give a nice smile as they shrug their shoulders.


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## larryzx (Jul 2, 2014)

alborino said:


> I see in the UK


But we are I believe talking about Spain not the UK.


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## alborino (Dec 13, 2014)

Sorry Larry if I've got the wrong end  but I thought the house was in the UK and that there were options in that regard. If it really must all be Spain based heaven help them.


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## Isobella (Oct 16, 2014)

I have seen reports that many Spanish are turning Down inheritences as they are looked on as a poisoned chalice.


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## snikpoh (Nov 19, 2007)

I agree SOME do that - hence the number of empty properties.


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## larryzx (Jul 2, 2014)

alborino said:


> ......... but I thought the house was in the UK and that there were options in that regard. If it really must all be Spain based heaven help them.


Just thinking on that, I wonder what happens regarding tax liabilities in Spain when the inheritor is tax resident in Spain and the asset; say a house is in UK. Hacienda could not prevent the property in UK being sold before the inheritor in Spain pays the tax.

I did ask before if people who have been in non-straightforward situations, where there was a ‘conflict’ of residence, location of the asset, etc. could tell us what happened. Knowing what actually happened in situations might be very useful for some, and certainly very interesting for others


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## alborino (Dec 13, 2014)

larryzx said:


> Hacienda could not prevent the property in UK being sold before the inheritor in Spain pays the tax.


Wouldn't count on their stupidity not extending that far. But in truth that would not be possible unless the will was actioned in the UK. I know the OP said it was difficult to get transfer of assets before death but a trust might be a halfway house acceptable to the owner.


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