Pringle

I've tried researching this both in the Forum and on line and I am none the wiser.

Perhaps someone can help? We are looking to buy a property around 250-300K Euros in the Costa Blanca. I just wanted to check what the tax liability would be for the surviving spouse, assuming we don't die at the same time?

We are married, plan to make a will and live full time in Spain as residents and paying Spanish tax.

Neptuno

It all depends on your specific circumstances
There isn't a one size fits all answer
The amount of assets
The wealth of the beneficiary
The regional allowance
The only way you wil find out exactly what IHT either of you will have to pay is to consult an accountant
Remember the surviving partner will have to pay IHT on the deceased's worldwide assets, regardless of whether they've made wills or not.
In your case, with a property of 300,0000k if you also have substantial assets there would be IHT to pay.
I'm sure someone will correct me, even if the region has generous allowances, go over the threshold and you will pay tax on the lot, not just the excess.
IHT is on the person in Spain, not the estate as in UK. Spouses pay IHT on the others assets.
It's a good reason for not staying here long enough to be tax resident

jonboy

At least take your jacket off! You have not arrived and you are talking about leaving already

Neptuno

Joking aside, it's definitely something to consider when thinking about being resident in Spain- something many regret by not doing so!

Pringle

The Spanish system seems a lot more complicated, and potentially costly to the spouse, than in the UK. It worries me to saddle my wife with financial problems when I pop my clogs. I'm assuming she will find it stressful enough dealing with my death and a funeral in a foreign country.

Thanks for the advise, I will speak to an accountant in the Costa Blanca area.

Tammydog

Please be kind enough to let us know your finding? We are also about th retire to in or around Alicante also. Seems a minefield. We will only be looking to spend around 250k and will have no UK assets. So it will be the home we buy jointly. And I would not want to be worrying about finance unexpected either in the same situation?

Rosemary

Hi and a warm welcome to the Spanish forum on BE. Myself and Fred James are the moderators for the Spanish forums whilst BEVS moderates Europe. Moderators are there to ensure that the site runs smoothly within the rules of BE. This is so that members gain the information that they are looking for and find their experiences on the forums to be friendly and worthwhile.

Problems and complaints should always be addressed to a moderator who will look into the matter and deal with it efficiently and fairly. Our members who post in the Spain Forums are usually friendly and helpful with a wealth of knowledge about the issues of living in Spain. I hope that you enjoy your time participating in the forums.

Please let me know if you need any further help.

Rosemary

Fred James

IHT in Spain can be pretty high with a few allowances apart from some exemptions on the family home. However, each region is allowed to allow additional rules and allowances over and above the state rules.

The Communidad Valencia is a good example. You get a basic allowance of €100k compared to the state allowance of €16k. The state rules apply to the family home where a 95% exemption applies up to €122k and in addition there is a regional allowance of 75% of the rest.

What that all means is that your investment of €300k jointly, will not result in any significant tax becoming due on the death of one spouse.

A BIG word of warning though - these regional allowances are subject to change without notice at any time. This happened recently in Murcia where a full 99% exemption was reduced to the basic state allowance of only €16k. In Valencia the previous 99% exemption was reduced to 75%.

Neptuno

It is a major concern
Some regions have generous allowances, others none, so in one region you could pay thusands in IHT , in another nothing- very unjust.
There is the state allowances, just under 16 k euros, which everyone gets , but it is measly when you consider the UK s 325k!
In the UK,spouses pay nothing on the others assets.
It seems immoral to me that, in Spain, a spouse has to pay IHT on assets that they have bought and saved for together over many years, with money that has already been taxed
Given my time again I would not have stayed long enough in Spain to be resident.
All the suggested methods of reducing IHT have serious disadvantages
The best thing to do is take professional advice.
Everyone quotes exemption on the family home, but you nang to hang on to this for 10 years, or IHT will be due.
Spouses tend to want to sell the property, downsize or move back to the UK, so this is no consolation, and would be a millstone round the neck for many

Fred James

You may think that, as a foreigner, but Spanish laws are designed for Spaniards, not expats.

Under Spanish succession law, most of the assets go to the children and the IHT is split among them - the spouse, in most cases pays nothing and has the right to remain in the family home for the rest of his/her life.

Luckily foreigners are no longer subject to that law (assuming they have ensured that their wills dictate that).

I imagine that most Spaniards would like to see both laws changed, but as foreigners, we had a simple choice - invest in Spain and take the tax consequences, or go somewhere else where the tax rules suit you better.

Neptuno

It's in Spain's interest to make its tax laws to be more tax friendly .
I'm sure the IHT rules put many off who would otherwise be investing in Spain.
As you say, many Spaniards would like to see a review of IHT rules too.
Apparently there are supposed to be an overhaul of regional allowances to make the situation fairer, which it certainly isn't at the moment with the vast differences making it a postcode IHT lottery.
The attitude " if you don't like it, leave" isn't really very helpful.

Pringle

I agree Neptuno, it is a major hurdle that some people who would like to live in Spain will not be able to overcome. It is making me wonder whether we should buy a small flat in the UK, spend part of our time in it and remain UK resident for tax purposes.

My wife then has the flexibility to move back to the UK on my death, or vice versa.

Tammydog

We're thinking that maybe this long dream might have to come to an end. Just want to retire and purchase a nice home in the sun. Yes expect to pay taxes. But not on a home we are living in. Then find you have no money left to live. As due to health problems have no life insurance either. But would have Spanish wills and Funeral plans in place of we came to Spain.

Neptuno

That is the best thing to do, in my opinion
As non residents, if you died, your wife would only have to pay IHT on the assets in Spain instead of the worldwide assets she would have to pay if a resident

Neptuno

It's a good idea to have wills and funeral plans and insurances in Spain, but you are still liable for IHT
Also life insurance is counted in the assets.