Fred James

I thought it was quite clear from Mitzy's original post that we are talking about inheritance tax in Spain - ISD.

The only relevance UK IHT has to the discussion is with regard to the fact that if you are Spanish resident but still are deemed by HMRC to have UK domicile, then you could be liable to pay the tax in both countries.

So far this has not been discussed.

EsuriJohn

You always used to be able to buy an off-the-shelf company for between £50 to £80 thats what we did for other purposes. The only other need is that the company docs include that it should be able to deal in property and related matters.

EsuriJohn

Thats the real benefit from company ownership it is only the shares that transfers and they can have a nominal value of £1 for each share allocated to holders. So there is no IHT involved in UK and no ISD in Spain.

Fred James

Yes but remember that Spain now charges an annual tax on properties owned by offshore companies of 3% of the catastral value which over a period could cancel out the value of any ISD savings.

Also this tax could be increased at any time.

chulo

To quote Mitzy,
My 1st reply contained info on paying to have a UK company set up to avoid IHT in Spain.

A British resident in Spain can set up a UK LTD company in Spain.

My 2nd reply was about gifts, I quoted £3000, I`m well aware this is the UK Tax rule, I have no idea if Mitzy daughter who is in the UK pays tax and the rules.

Also to quote Mitzy

Can we get move on.

chulo

You still can, the £50 is for same day service.

It is still possible, the rules though have become tighter, an Expat retired to Spain and setting this up is now likely to be viewed as avoiding tax, which if you think about it logically, you are.

The recent govt claims fiasco as highlighted that although rules excist, changing your circumstances to fit into those rules is likely to arouse attention.

The rules where designed for Companies, legitimate people with legitimate Tax issues and to help them.It was never intended to allow retired people to set up a company and transfer there property to avoid IHT.

After all the Tax man and Mr Brown have access to the net and if they spot people paying thousands of pounds to avoid IHT there going to act.

As they did in 2005.

Fred James

I'm sorry but you are still confusing the issue with references to the UK IHT situation which is pretty well irrelevant to most Expats in Spain.

In the UK there is no problem with transfers between spouses and the law was recently changed to make it even more beneficial.

In Spain there are no tax free transfers between spouses and at the state level a pittance of an allowance of 16k - in the UK it is 300k+.

If you do set up a UK company it is not the UK HMRC that you have to consider - it is Hacienda in Spain and whether Spanish law will allow such tax avoidance measures.

UK IHT law can apply to property in Spain if the owner is UK domiciled even though not UK tax resident. However with the relatively huge UK allowances and the tax free transfer rules only people in Spain with some fairly large assets are likely to be worried about that.

The reality in Spain is that most expats are not "wealthy" people but are concerned that the draconian ISD laws in Spain can severely affect them, when if they were living in the UK it would probably not be such a big issue.

chulo

I'm not posting there address but they state this.

The harsh reality is that your gift could become a financial burden that your loved ones simply can't pay off.


How much debt? - When you take into account Spanish death duties, inheritance tax, legal and agency fees, accounting fees in both Spain and the UK, and other 'incidentals'....possibly 40%, but maybe as much as 50% of the value of your property!

But it could be a lot more:

For example IHT in Spain differs from the UK. After an allowance (typically 15,957€) the balance is taxed at rates from 7.65% up to an incredible 34%.

It gets worse, when the inheritor is not a close relative of the deceased the tax can increase by 140%, that means a possible top rate of 81.6%!

In Spain however, it is the individuals who inherit that are taxed.


The other major difference is that there is no marriage exemption in Spain for non domiciled people.

When a property is in the joint names of a couple and on the death of one partner, the surviving spouse must pay inheritance tax on the value of the half he or she inherits. In the meantime the property and bank accounts are frozen by the Spanish government until all the taxes are paid.

This means that if you don't plan ahead, and start now, the cold fact is that a huge chunk of your wife or children's inheritance will go in taxes.

With that in mind, may I ask a final, pointed question?




Its is these scams I'm discussing and avoiding IHT impossed by the Spanish govt.

Fred James

I don't know what point you are trying to make but everything you have quoted is correct so where is the scam?

EsuriJohn

It applies to what are known as "tax havens" I don't think this is applied to another EU member state.

Fred James

I did point out that this applies to offshore accounts which are "tax havens".

I think you may find that it also applies to all company owned properties but I am happy to be corrected on this point as I am not wealthy enough to have to worry about such tax avoidance measures.

fionamw

I wonder if we're all that unusual in living half and half - ie I live here, in our house, resident, with our son. OH plies to & fro spending (at present though it's not ideal) less than 183 days a year in Spain. He has house in UK. All his funds, etc., in UK apart from the joint bank account for household expenses here. We both have Spanish wills, he has a UK will mine is currently out of date/unfinished. Nightmare scenario I guess?

chulo

The Anti avoidance rules that both Spain and the UK have implemented to prevent people avoiding paying Tax by setting up LTD, SL, SA.

I`m no expert on the Spanish legislation and am repeating advice given to me by a lawyer when we queried these companies concerning our personal circumstances.

So as I understand it paying a company up to £8,000 to set up a LTD or SL to avoid IHT is a scam.

It is over priced and could be challenged by both the Spanish and UK tax laws.

Please if you believe paying the money and setting up an LTD or SL to avoid IHT is not breaking Avoidance rules I`d be interested in reading them.

Fred James

Whether it's a scam or not, I can't comment - but it's certainly way overpriced.

Certainly setting up a company is simple enough but whether it really gets round the taxes I don't know - I was under the impression that it was a lot more complicated than that - trusts etc and all that.

From what I have read it is a complex area and for those still with UK domicile raises a lot of questions about how it affects UK tax.

It's not an area I have had any experience in and definitely don't wish to. I fully intend to spend my children's inheritance before I go!

erisaman

Approximately 20 years ago, when doing some freelance video work on the Sol, I was approached by a UK based agent who was selling 'Five owner's Club' apartments, involving a UK based Ltd Co, that would then purchase an apartment, and shares in that Company then sold to individual folk who each became a part owner of it's sole asset - the apartment - via their share holding.

The same principal could have applied to single owners - or couples - the principle being that, if and when it was decided to sell, the Ltd Co would remain the owner of the apartment, the shareholders being the only change. Hence various taxes were avoided - legitimately.

I would assume that such an arrangement would still serve the same purpose, however, if someone has owned for x number of years in his/her own name, then suddenly purchases a Ltd Co to harbour the ownership of the apartment, I again assume that such a move would be viewed as blatant tax avoidance and would be subject to extreme scrutiny.

I'm all for Tax savings - but not if those savings are drained by employing a tax lawyer to bail me (or my heirs) out of trouble.