Hi

We are planning on moving to the Canaries and want some simple advice on inheritance tax.

I have been told that a surviving spouse only inherits 50% of the property the remaining going to the children who then has to pay 40% tax within 6 months.

Anyone have some advice please.

Regards

Sue x

Hi

You are confusing succession law with succession tax.

The succession law determines who you are allowed to leave your estate to. The surviving spouse actually gets nothing apart from the right to live in the house. The rest basically goes to the children. Actually, it's a little more complicated than that, but it's not relevant if you are not a Spanish citizen.

You are allowed to leave your estate according to the laws of your own country. In other words, if you are British you can do pretty much what you like with it. It is important to make a Spanish will where this is made clear.

Succession Tax (IHT) is very different to the UK. There is no concept of an estate as such. Each beneficiary is taxed independently. The rate of tax depends on the relationship to the deceased (if you are not a close relative the tax is double) and your personal wealth (rich people pay more tax).

The tax is on a sliding scale and 34% is the top rate (assuming you are a close relative), but it would have to be a bequest of over €800k to attract that rate.

There is no automatic allowance for spouses, unlike in the UK and nationally allowances are generally low so most of the inheritance is taxed.

However the allowance may vary by region and you will be pleased to know that in the Canaries there is a 99.9% deduction for spouses and children, but it only applies to people who have been resident in the Canaries for 5 years.

That is the current situation, but it can be changed without notice. This recently happened in Valencia and Murcia where previously generous allowances were scrapped.

Hi Fred

Many thanks for your reply. It sounds like a minefield. We feel that if we buy in the Canaries we are adding to the wealth of the island and as we will be resident there if one of us dies the other is nit left with paying a huge tax bill.

Again with residency do we become a Spanish resident or keep our British nationality.

We are going to a road show in London in March so will try and get more information then. We have been warned that more or less people will try and con you from solicitors, estate agents, money exchange, banks. So you can imagine how we are feeling.

Thank you for your reply.

Kind regards

Sue

Residency and nationality are very different.

You cannot become a Spanish national for 10 years and there is little reason to do so and you are certainly not obliged to at any point.

When you come to live in Spain, after 90 days (or before if you wish) you register on the central list of EU foreigners. This gives you the right to live in Spain. You should also sign on to the local town list of residents, called the Padron.

Once you have spent more than 183 days in one calendar year in Spain you become tax resident and pay Spanish income tax.

It just goes to show how unfair IHT is-a real post code lottery, where in one region you would pay nothing and in another, many thousands.This should not be allowed.It is too important to be left for a regional government to decide.The present state allowance is a disgrace;it should be scrapped and replaced with a more realistic allowance, similar to the UK one.Someone with a modest house and savings accrued over a lifetime of work would be left with an unaffordable IHT bill. All the methods commonly put forward to avoid have big disadvantages.
Another rule should also be made that a spouse should never have to pay IHT on the assets of the deceased husband/wife.They have built up and contributed to their assets together, and should not have to pay for something they have already paid for.
Murcia abolishing the regional allowance was the last straw for us-we will definitely not stay here, to lose our savings when we need them most; Thanks to the asset reporting law, the Hacienda now has a handy check list of assets to work out the IHT payable( if submitted of course!) How many others will be put off when they realise the implications of IHT? Many come here unaware, and when the inevitable happens, get a huge shock!
Talk about Spain shooting itself in the foot! Until Spain sorts out this injustice, many would be ex pats will remain holiday home owners only, and who can blame them? or else they will move to areas with a generous IHT allowance, only to find that the regional government abolishes that as well!

So that's all down to the Spanish government is it?

Inheritance law has been around in Spain for a very long time.

Just because it is different in the UK is no reason for Spain changing it.

If people can't be bothered to check out the implications of moving to a new country they only have themselves to blame - the information is freely available.

The IHT allowance in Murcia has only recently been abolished-who could have foreseen it? Previously, the allowances were generous.
There certainly IS justification for overhauling the IHT law;it's long overdue, and not only the British disagree with the present unfair situation. Many Spanish have suffered because of it.The present state allowance has not been reviewed and increased for many years.
Of course the Spanish government aren't in a hurry to change it, it's a real golden goose. They don't seem to realise it's a major factor in deciding not to be a resident here, or for going back to the UK .
Someone on here once said it's a tax for the wealthy-is someone with a modest house(his only house) and hard earned savings in the bank, wealthy? If they want to tax the wealthy, at least attack real wealth!

Yes but so long as the family house is not sold for 10 years there is no tax to pay. For the average Spanish family the rest of their wealth will either be under the mattress or covered by the basic allowances.

Obviously those with real wealth or very valuable properties will pay but that seems to be what you are saying.

That's no comfort. How many people would want a millstone round their neck for 10 years? Most would downsize, sell and possibly move back to the UK.even if you don' t have to live in it, you would have the taxes and maintenance on it.then, when selling, CGT !"
When I refer to wealth,it's not, I repeat, Mr Average with one modest house and some savings, but someone eligible to pay wealth tax!

You keep talking about IHT from an expat point of view. To a Spaniard, keeping the family house is not a problem at all.

To you Mr Average seems to be a Brit with a house in Spain who wants to move back to the UK when their spouse dies and do you really think that Spain should change their laws to suit Mr Average (Brit).

Perhaps the UK should accept Sharia law just to suit the immigrants who are used to living under it. I doubt that many in the UK would accept that.

If you don't like Spanish law don't move to Spain.

I disagree, inheritance and what to do with a property is one of the biggest causes of problems within Spanish families.

No, I think Spain should change its laws to be fair to ALL.

Also are the problems you mention with Spanish families caused by the succession laws concerning who you can leave the property to or by the inheritance tax?

I am sure there are problems with both but what is the major problem? I can see the succession laws creating problems within families and personally could not cope with the idea of having my will determined by the law. Or is it the tax as such?

Luckily the succession laws don't apply to expat Brits but the IHT rules do and I can understand why they don't like them but I can't see the law changing just to suit us.

So, I would really be interested to know a bit more about this from a Spanish perspective - so fire away (please).

Thanks Fred

We certainly have a lot to learn

Sue x

I personally know of trouble with both the sucession laws and tax issues.

Sucession is a bugbear, for many many families, the situation where one child has more or less taken on the care of the parents full time, and other siblings gone moved away to better prospects

If the laws were different, then the carer child would receive the house or assets, but then the others have a right to the LEGITIMA even if they are disinherited.

Most parents would not disinherit their children as they do not want to deprive them, but they may want to give more to one or another child, which the way the law stands is not possible.

Also where a property is the only asset, and not all of the family agree on if it should be sold or not, then the fall out can cause family fueds that last forever.

An Aunt of mine, died about 10 years ago, 5 children inherited the house, it is in a small hamlet, 2 sons who live in Cuenca like to go and spend holidays there, 1 would like to sell as she lives about half an hour away in the city and would enjoy the cash.

One lives 2 doors down, and has to keep an eye on the place, and tries to keep it in good nick, puts in a lot of hours tidying the garden and such, but the others don´t see why he sould be paid anything towards the expenses, because after all he does own 1/5 of the property.

Last year the fireplace needed some work done, a contractor did the work, the one that lives nearby had to threaten one of the sisters for her share of the work, as far as I know, she still has not paid. I have every sympathy for her as she is not as flush as some her siblings.

She does not see why she should pay for her share of the upkeep, on a house she wants to sell.

One brother has enough to buy her share, but does not want to because he can still have the same use of the property with only a 1/5th share, so why should be pay for another fifth (his reasoning)

All this has caused no end of trouble, it has filtered down a generation so now the cousins are at war.

I would go as far as to say that for every group of family members that go to what was their childhood home where they were brought up, to celebrate fiestas and holidays, there are at least as many, if not more, that are carrying on fueds of that can never be ended.




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