DrStarsky

Hello,

if I receive a gift in the form of a bank transfer from a family member abroad, am I liable to the Spanish gift tax? I tried to read the law but it's a bit "taxing".

thank you.

keithwalters

I don't know the answer to the question, but I have received gifts in the form of money without being taxed here. I didn't declare it of course.

The biggest worry was for my mother in the UK who was the person sending the gift as she told me that she can officially only send something liike 3000 pounds a year without being taxed. She sent a bit more than this amount but neither of us have been taxed on it.

DrStarsky

Well, I suppose if you don't declare it you won't get taxed, and chances are you won't get caught either. Still, I'm under the impression that Spanish law requires to declare it, but I'm having a hard time finding out for sure. It also depends on the Comunidad Autonoma (I gather in Madrid they eliminated the gift tax altogether). Incidentally, I know that in some other countries gifts are tax free below a certain cap. I'm surpised that in the UK they tax the donor!

Agnes

The £3.000 gift allowance refers to UK Inheritance Tax. Each person has an annual allowance of £3,000 per annum, if you have not used the allowance for the previous year you can carry forward for 1 year. Any amount above the £3,000 limit, up to seven years before death, is added back into the estate and reduces the Inheritance Tax threshold. Should your mother live for the seven years after giving you the money it will not be included in her estate. Each person domiciled in the UK can also gift £250 to as many people as they like, no limit. As for Spanish tax on gifts I don't know

keithwalters

Yes, that sounds like what my mother was trying to explain to me in her muddle way!

So if I understand it correctly, my mother can send what ever amount she wants to me, tax free, PROVIDED she lives for another 7 years after giving the gift. Should she die die beforehand, I would be liable for inheritance tax on any sum over the 3000 pounds per year.

Agnes

Any gift above the £3,000 annual allowance in the previous 7 years, the value will be added back into her estate, and will effectively reduce the Inheritance Tax threshold. the level at which you start to pay IHt at 40%. You will start to pay Inheritance tax at 40% at that new level, i.e the threshold level minus the value of the gifts over the previous seven years. If your mother's estate is below the threshold you will not pay Inheritance tax.

EsuriJohn

Hi Agnes,

It's a bit more complicated than that. You can make regular gifts of any level if they come out of your regular income and do not reduce the donors normal living standard.

Regards,

John.

Agnes

That is very true, IHT planning is very complicated. Regular gifts can be made from income, but they must be on a regular basis, and not reduce the donor's capital or normal standard of living. In this case they were talking about gifts and the annual allowance. Also in some cases the Inland Revenue can go back 14 years.

Fred James

Looking at the Spanish implications of the gift (which was the actual question), if the giver is not a Spanish resident and the assets given were not in Spain then there is no liability for Spanish gift tax.

If the giver was non resident but the money was in a Spanish account then there could be gift tax to pay.

If the giver was resident, then even if the gift was from outside Spain then gift tax would be applied.

If the giver was non resident then there may be gift tax/IHT implications in the givers home country.

The important difference between Spanish and UK IHT is that in the UK the estate pays the tax, in Spain the beneficiary pays the tax. In Spain that creates real problems as you, as the beneficiary, have to pay the tax before you get the asset and you cannot use the asset for security against a loan.

Agnes

Fred, In the UK probate is not granted until the IHT is paid, and you have no access to the estate until pobate is granted, therefore the estate cannot be used to pay the tax. Only monies written into a trust can be used before probate is granted.

Fred James

In Spain the beneficiary of a large bequest may have to find a huge amount of money BEFORE he gets anything from the estate. If he does not pay, he will incur interest and fines. That is not the case in the UK.

EsuriJohn

Hi Agnes,

I think there is now a concession from HMRC that if for instance the major asset was the family home and the only way to move forwards was to realise the asset (sell) in order to pay the IHT bill then the executors are allowed to sell in order to pay IHT and settle the estate.

Regards,

John.

Agnes

John

Excellent news. I think that it is disgraceful if the major asset is the family home that IHT should be paid at all.

Regards

Agnes

DrStarsky

Fred, thank you for the detailed answer. In my case, the giver is not resident in Spain nor had any relation with Spain ever, and the money is not in a Spanish account. You seem to be knowledgeable about this, I wonder if you could point me to the relevant sections of the Spanish law, or some other authoritative source ? (not that I don't believe you, I just need to be able to refer to the law)

Also, in the country where the money is, the donation would not be subject to inheritance tax as it's below the cap level when inheritance tax kicks in. I can always open an account there and receive the donation there, and then transfer it myself to my spanish account. Would this be preferable perhaps?

Fred James

I don't think it will make much difference how you transfer the money.

For more details about IHT/Gift tax in Spain look here http://tinyurl.com/hs4jw