Fred James

That would be pretty normal but when there are stepchildren involved it gets more complicated hence the solution I suggested.

How much tax? That depends on how much the house is worth plus any other assets, money, cars, stocks etc.

Send me a PM if you don't wish to give those details on the forum.

funinthesun

Sorry what I meant was if she was my mother what percentage of tax would be payable.

Fred James

It depends on the amount of the inheritance - it is on a series of scales from 7.65% to 34% which is why I asked the value.

You can see the tables here together with more information.

http://www.eyeonspain.com/spain-maga...e-tax-law.aspx
http://www.expatica.com/es/finance_b...tance-tax.html

funinthesun

Thank you.

Neptuno

It's not really a solution.It could be a millstone round the neck, having to pay out taxes and maintain a property you no longer want, for 10 years.
Also the usufruct arrangement-that's not a good solution either;the mother would then not have the money from the house sale needed to live and plan her life, perhaps move etc, may not want to live in that house for the rest of her life!
There is no decent solution to the dreaded IHT, signing over ownership, transferring it to a company etc -they all have serious drawbacks;what is required is a thorough overhaul of this tax, eg exemption for a spouse so that he/she can enjoy the things that they both owned and saved for together without being penalised for it.
How can it be fair that Valencia can have such high allowances when Murcia's regional allowance has been abolished?
There should be no regional variations where tax is concerned -it affects too many lives adversely and should be set as one proper allowance(Not the paltry sum it is now) by central government.
Also Scribble, are you aware IHT has to be paid on ALL world wide assets, not just those in Spain?
Could be a considerable sum!

Neptuno

As I thought, no one has come up with a painless solution because there isn't one.
Until central Government comes up with a decent allowance(the present one is pathetic and hasn't been increased for years) and abolishes the unfair regional allowances, IHT will continue to be a nightmare.IHT is too important to be left to the whims of regional governments-it should not be a postcode lottery, as to how much tax to pay.
Of course, only those registered on the Spanish tax system and making yearly tax returns would be eligible.Those who have enjoyed living under the radar should pay the full wack.

Fred James

I don't understand your comments about the regional governments.

All they can do is increase the allowances - what's so bad about that. Also what is unfair about them when the allowances are better than the state rules?

If the regions had not implemented additional allowances all you would get is the draconian state rules.

Neptuno

I thought I had made it clear enough!
I am saying that inheritance tax is too important to be subject to the whims of regional governments;in one state you may pay nothing, in another a huge amount-Is that fair?I imagine most retiring to Spain do not do a survey of which region has the highest allowance!
At the moment the government allowance is pathetic and hasn't changed for many years;it needs for regional allowances to be abolished, and the state allowance to be vastly increased to a realistic level, so that those eligible( registered with the Spanish tax office) get a fair deal and not be subject to a postcode lottery.
As for regional allowance being increased,According to Murcia Today, it has been abolished and other regional allowances reduced.

Fred James

All I said about the regional allowances is that all they can do is INCREASE the state allowances, they cannot reduce them.

Murcia and Valencia have run out of money so they have reduced their regional allowances.

You are right, the state rules should be improved but at least with the regional government allowances some are better off.

Neptuno

That's the point-SOME are better off.
As the regional allowances depend on the fact that the house has to be retained for 10 years it's a poisoned chalice-if you sell it you end up paying the IHT;if you keep it it's a millstone round your neck.The fact is most, after bereavement want to downsize or go back to the UK. Better, as I said for the state allowance to be hugely increased.
Anyone thinking of moving here should consider the IHT first;if they did, how many would come here?

Fred James

Yes but you have to remember that the Spanish IHT rules were designed for big Spanish families where by law the property had to be left to the children.

Most Spanish families do not have huge assets and the state allowances, spread amongst the family plus a little help in some of the regions mitigate the tax to a large extent.

Hanging on to the family house is not an issue as you do not normally leave anything to the surviving spouse apart from the right to live in the house so that it effectively cannot be sold anyway and no one wishes to throw their father/mother out on the streets. Expats always compare the rules in the UK where bequests to spouses are almost exempt but in Spain the spouse never gets left anything so it is not relevant.

If you are used to the UK rules then you are quite correct, you should check out the Spanish rules before investing in Spain - unfortunately most do not and at the time they invest the last thing on their minds is death!

Everyone thinking of moving to Spain has the same choice - if you don't like the rules/taxes then go somewhere else - the Spanish are not going to change the rules to suit you. Sadly most potential expats are more interested in the weather than taxes!

Neptuno

[QUOTE=Fred James;10853957]Yes but you have to remember that the Spanish IHT rules were designed for big Spanish families where by law the property had to be left to the children.

Most Spanish families do not have huge assets and the state allowances, spread amongst the family plus a little help in some of the regions mitigate the tax to a large extent.

Hanging on to the family house is not an issue as you do not normally leave anything to the surviving spouse apart from the right to live in the house so that it effectively cannot be sold anyway and no one wishes to throw their father/mother out on the streets. Expats always compare the rules in the UK where bequests to spouses are almost exempt but in Spain the spouse never gets left anything so it is not relevant.

I do realise that Spanish families benefited from IHT, but nowadays Spanish families are smaller, children leave the family home, people live longer, more women work so it is not as appropriate as it used to be. The usufruct arrangement might have worked well when a widow was very old when bereaved, but if a woman in her sixties is widowed now, she may have another 30 years to live, and would need the money from the sale of the house to have choice and control over her life.If the house is owned by the son, she wouldn't have that;another point to consider, if the son dies before her, and his wife inherits, she may not be sympathetic to the widow's cause. The house still needs maintaining, and when eventually sold there will be CGT-considerable for the owner who is probably non resident;you can't win!So, the present IHT law is now an anachronism, and needs updating to meet modern day demands, both for the Spanish people and others who live in Spain.
It seems that all the methods to reduce IHT, are flawed and involve cost, sometimes considerable cost.
The solution, as I said before is obvious- remaining spouse or partner should be exempt from IHT, relatives should have a decent allowance.

Lynn R

It would be nice if your solution were adopted, and also, as I've suggested when the subject has been discussed before, it would be good if inheritance tax could be paid from the proceeds of the sale of a property (could be witheld by the notary to make sure it is paid).

However, there is very little point in we expats telling each other what the solution is - the Spanish authorities aren't going to read it let alone act on it!

Neptuno

Therefore, anyone thinking of moving to Spain should be looking at this subject before thinking how nice it will be to pick your own lemons etc.How many would continue with their plans? It's often a case of-"if I knew then...."

Lynn R

Of course they should - Fred James is quite right about that. We should all have the sense to find out the situation regarding all kinds of taxes before we take the decision to move to another country (Spain is by no means the only one that has a very different IHT position to the UK). Of course, you can only make a decision based on the facts as they are at that moment in time, things can and do change, sometimes for the better and sometimes not.

But how many times do we read on the forum questions like "what do you mean about non-resident taxes, I bought a property XX years ago and I've never heard of it", and the like?

I could have understood it better years ago when this kind of information would have been harder to come by from the comfort of your own armchair, before the advent of the internet, but there is no excuse now.