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New laws regarding Inheritance- Advice?

New laws regarding Inheritance- Advice?

Old Jan 22nd 2007, 3:24 am
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Default Re: New laws regarding Inheritance- Advice?

Throw your bible away! This change in the law is as from 1st January 2007
Please tell us exactly what your solicitor said.
As far as I know, you don't have to have been resident for three years, and previously, yes, if the survivor kept the house for ten years there was very little to pay.
The three years does apply to roll-over tax relief on CGT when you sell your main home.
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Old Jan 22nd 2007, 3:52 am
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Default Re: New laws regarding Inheritance- Advice?

Originally Posted by Mitzyboy
Well, as always, things are as clear as mud after I read Rusticas post.

I agree, its clearly a good idea to take professional advice because what my solicitor is telling me, and what I read in my bible ( David Searl's You and the Law in Spain are differing to some extent.

The Bible says you can reduce your IHT to nearly nothing, but you have to keep the house for 10 years, be a resident card holder for 3 years, my solicitor says thats not necessarily the case.
I think my last post got lost, so excuse me if it does appear later.
Throw your bible away this law came into effect 1st. january 2007, so as Searl's book was written and published before then,it just cannot be up to date,can it?
What advice did you solicitor give? Or maybe she hasn't got all the details yet. The original press release didn't say it was only residents who benefitted,although it was the case, and there may be more to find out through experience.
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Old Jan 22nd 2007, 5:45 am
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Default Re: New laws regarding Inheritance- Advice?

Originally Posted by rusticasa-spain
I think my last post got lost, so excuse me if it does appear later.
Throw your bible away this law came into effect 1st. january 2007, so as Searl's book was written and published before then,it just cannot be up to date,can it?
What advice did you solicitor give? Or maybe she hasn't got all the details yet. The original press release didn't say it was only residents who benefitted,although it was the case, and there may be more to find out through experience.
Searls the 2006 / 2007 edition, so although its recent it can only be up to date to late last year.

The solicitor, as they do, wanted to clarify things with her financial partner first but basically she believes that IHT is abolished for spouse / daughter / son for Spanish nationals and British residents alike. She does not believe it is possible for Spanish Law to make a different law in this matter for ex pats and Nationals.
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Old Jan 22nd 2007, 7:32 am
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Smile Re: New laws regarding Inheritance- Advice?

Originally Posted by Mitzyboy
Searls the 2006 / 2007 edition, so although its recent it can only be up to date to late last year.

The solicitor, as they do, wanted to clarify things with her financial partner first but basically she believes that IHT is abolished for spouse / daughter / son for Spanish nationals and British residents alike. She does not believe it is possible for Spanish Law to make a different law in this matter for ex pats and Nationals.
Hi Mitzyboy,

I'm a devotee of Searl but I always cross check against others for a particular area ie for finance Blevin. Of course all of these have been outdated by a change as recent as 01/01/2007.

Your solicitor must have the most recent up to date knowledge, but the key thing for us would be the area of "tax residency" since Kath and I will not be resident for at least another year whilst the build progresses and the kids will not be at all. In all that time we will have a growing asset which could amount to a big IHT liability.

Any clarifications will be most welcome.

Regards,

John.
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Old Jan 22nd 2007, 9:48 am
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Default Re: New laws regarding Inheritance- Advice?

For sure I'll keep you informed as its a very important issue, and one I've found that many people don't look into fully before they move .... along with wealth tax.
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Old Jan 22nd 2007, 9:50 am
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Default Re: New laws regarding Inheritance- Advice?

Originally Posted by Mitzyboy
. She does not believe it is possible for Spanish Law to make a different law in this matter for ex pats and Nationals.
The key difference here is the question of a "Vivienda Habituel" which is your primary residence.

There is no difference now between residents and non residents with regard to CGT when it applies to a second home. A non resident, by definition, owns a second home in Spain as his primary residence is elsewhere.

I would expect IHT to follow the same rules. If you are a Spaniard or tax resident Brit then your primary residence will attract tax advantages. If, however, it is a second home, then it probably will not.
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Old Jan 22nd 2007, 7:10 pm
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Default Re: New laws regarding Inheritance- Advice?

Originally Posted by Fred James
The key difference here is the question of a "Vivienda Habituel" which is your primary residence.

There is no difference now between residents and non residents with regard to CGT when it applies to a second home. A non resident, by definition, owns a second home in Spain as his primary residence is elsewhere.

I would expect IHT to follow the same rules. If you are a Spaniard or tax resident Brit then your primary residence will attract tax advantages. If, however, it is a second home, then it probably will not.
It is important for everyone to realise that this change applies to the Valencian Community only i.e. Valencia, Alicante and Castellon provinces, and that to benefit the beneficiaries must also reside in the Valencian community.

It is surprising that the Valencian Government is discriminating against those beneficiaries who reside in other parts of Spain or the EU. I wonder if they might be forced to change the rules?
For accurate, up to date advice, consult financial/tax planning experts in the area in which your property is located.
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Old Jan 22nd 2007, 7:17 pm
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Default Re: New laws regarding Inheritance- Advice?

Originally Posted by rusticasa-spain
It is surprising that the Valencian Government is discriminating against those beneficiaries who reside in other parts of Spain or the EU. I wonder if they might be forced to change the rules? .
It is exactly the same in Andalucia - the benefits only apply to residents of Andalucia.

Since these benefits are only available to tax residents it is worth remembering that taxes are now split between central government and the regions so by the same token it is becoming more likely that we will see regional variations to the tax system.
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Old Jan 22nd 2007, 7:53 pm
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Smile Re: New laws regarding Inheritance- Advice?

Originally Posted by Fred James
The key difference here is the question of a "Vivienda Habituel" which is your primary residence.

There is no difference now between residents and non residents with regard to CGT when it applies to a second home. A non resident, by definition, owns a second home in Spain as his primary residence is elsewhere.

I would expect IHT to follow the same rules. If you are a Spaniard or tax resident Brit then your primary residence will attract tax advantages. If, however, it is a second home, then it probably will not.
Hi Fred James,

In our case we will eventually be taxable in both Spain and UK since we both have Government pensions in UK and State pensions from UK and we intend to have property in both countries and to reside in Spain for 183 days with 182 in England except for leap years.

We will choose to be primarily resident in Spain since that is where the most valuable property will be sited and that will be the centre of our economic activity but we cannot escape the taxman in UK because he will not export the Government pension without first taxing it. There are lots of others in this situation so it cannot be unusual but I bet not many "advisors" will begin to understand the complexity of the situation.

Regards,

John.
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Old Jan 22nd 2007, 8:42 pm
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Default Re: New laws regarding Inheritance- Advice?

John, you're right - it is complicated. However there are an awful lot of people in that situation.

Most of the tax advisors who are used to dealing with ex-pat Brits are aware of the situation. Essentially the Crown pension is ignored totally with regard to your tax affairs in Spain. In theory it should be added to your income and the UK tax claimed back but that's not how it works in practice.

It has the benefit that, as you are taxed in two countries you get two sets of allowances and pay less overall tax than you would have done if you were taxed in one country.

You cannot "choose" to be primarily resident in Spain - if you spend more than 183 days in one calendar year in Spain you are deemed to be tax resident. Strangely, you are still tax resident in the UK if you spend an average of more than 90 days in the UK - not the 182 that you mention. It makes little difference in practice but in theory you should pay UK tax on your UK state pension in both countries and claim the UK tax against your Spanish tax under the dual taxation agreement.

In reality, the UK taxman is happy that you pay UK tax on the Crown pension and the Spanish taxman is happy to ignore the Crown pension and just tax the rest of your income - they both have bigger fish to fry!

You might find these links useful:-

http://www.hmrc.gov.uk/pdfs/ir20.htm
http://www.hmrc.gov.uk/pensioners/taxwhenleaving.htm#1
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Old Jan 22nd 2007, 10:13 pm
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Default Re: New laws regarding Inheritance- Advice?

This is where the confusion starts for me .... solicitor says it makes no difference if the beneficiary is outside Valencia or indeed Spain. In that way she says that if her daughter lived in Western Spain then she would be liable for full IHT, which she is not.

I have to assume there is some basis to what she is telling me, being a Spanish solicitor and versed in the laws of this country we that all find ourselves in. But you lot seem so sure of what you are saying, and I have learned to take notice especially of what Fred says ..... so where does this leave us. Where did you get your info from Fred / Rustica?
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Old Jan 22nd 2007, 11:54 pm
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Default Re: New laws regarding Inheritance- Advice?

Originally Posted by Mitzyboy
Where did you get your info from Fred / Rustica?
I bet you can guess - from a lawyer.

Now we have another lawyer, admittedly from a different area saying different. It tends to confirm my distrust of lawyers - this would not be the first time I have had conflicting advice!

One thing seems pretty certain, to get the 95% deduction the survivor (or children) has to be a resident and keep the house for 10 years.

So where does that leave us? Well not a lot wiser it seems
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Old Jan 23rd 2007, 12:19 am
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Default Re: New laws regarding Inheritance- Advice?

Originally Posted by Fred James
I bet you can guess - from a lawyer.
So where does that leave us? Well not a lot wiser it seems
Ahhhhh ... its a rollercoaster of human emotions ..... frustration being up there most of the time as the answer to most legal questions seems to be dependent on the solicitor you speak to!!!

Back to plan A ........ life insurances to try to cover the IHT
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Old Jan 23rd 2007, 12:48 am
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Smile Re: New laws regarding Inheritance- Advice?

Originally Posted by Fred James
John, you're right - it is complicated. However there are an awful lot of people in that situation.

Most of the tax advisors who are used to dealing with ex-pat Brits are aware of the situation. Essentially the Crown pension is ignored totally with regard to your tax affairs in Spain. In theory it should be added to your income and the UK tax claimed back but that's not how it works in practice.
Yes I understand that.
It has the benefit that, as you are taxed in two countries you get two sets of allowances and pay less overall tax than you would have done if you were taxed in one country.
I am counting on that!
You cannot "choose" to be primarily resident in Spain - if you spend more than 183 days in one calendar year in Spain you are deemed to be tax resident. Strangely, you are still tax resident in the UK if you spend an average of more than 90 days in the UK - not the 182 that you mention. It makes little difference in practice but in theory you should pay UK tax on your UK state pension in both countries and claim the UK tax against your Spanish tax under the dual taxation agreement.
I only mean choose in the sense that if we have accommodation available in UK and Spain we will choose to spend more than 183 days in Spain but probably also more than 90 days in UK. (We find temps much above about 32* C a bit hot)
In reality, the UK taxman is happy that you pay UK tax on the Crown pension and the Spanish taxman is happy to ignore the Crown pension and just tax the rest of your income - they both have bigger fish to fry!
In using the term "centre of economic activity", I mean that pensions apart, the only additional income we may have would be rental income in Spain from the villa - so it is beneficial to be "tax resident".
You might find these links useful:-
I have looked at these websites before but these may be pages I have not read so I will scrutinise them carefully.
http://www.hmrc.gov.uk/pdfs/ir20.htm
http://www.hmrc.gov.uk/pensioners/taxwhenleaving.htm#1
Regards,

John.
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Old Jan 23rd 2007, 9:14 pm
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Default Re: New laws regarding Inheritance- Advice?

Originally Posted by John & Kath
Regards,

John.
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http://www.gva.es/c_economia/web/htm...s2007_SD_c.htm
This is my source, and I suggest anyone in the VALENCIAN COMMUNITY whose solicitor or fiscal advisor is unsure, should direct them to it for reference.
It is an updated web page belonging to the Valencian Government,so no hearsay or out of date sources!
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