If you want to pass your house to a relative (not spouse) then what are some of the ways of reducing IHT?
I have heard of putting the house in a trust and also making up a LTD company to own the house. Doesn't the LTD company attract yearly fees for filing accounts?
Any other options? The IHT seems quite high in Spain and if the people you want to inherit it cannot raise the funds they would have to sell the house as the only option.

I am led to believe they cannot sell till they pay the tax.

You can avoid IHT by some of these schemes but the costs can be quite high and there may well be a few scams around.

As the Captains Wench pointed out, you pay the tax first then you can sell - not the other way round.

Be careful.

and if you can't pay the tax? they just take the entire house?

Well I am sure there are ways round that - a loan should solve the problem and I am sure there are other ways.

There is nothing to stop you finding a potential buyer and you have up to 11 months to do it before the tax is due.

That's the thing though, the benefactor shouldn't be forced to take out a loan/re-mortgage.
Imagine if they didn't want the place and found out about it.
On a big house, you could end up paying 25%.
I guess the only way round it is for the deceased to have some form of life insurance that pays for the IHT.

Probably not but that's the law so not a lot you can do about it.

"sell it" to them. Just don't cash the cheque.

In Spain it is different you have to agree to accept the inheritance if you don't want it or can't afford it you just say no thanks and you owe nothing.

Yes but you till have to pay the costs of selling which could be nearly 12% depending where you live.

Correctly me if i'm wrong, but 12% (and more likely 10% in our part of Andalucia) is far cheaper than paying IHT FOR A NON RESIDENT.

Anyway, it's the only option AFAICS.

I think you'll find that it's more like 13% now. From August 1st ITP went up to 10% in some (most?) areas. Plus you then have notary fees, land registration and (maybe) lawyer fees - PLUS the dreaded EPC (CEE).

The percentage due in IHT doesn't depend on the size of the house, it varies according to the degree of relationship between the deceased and the beneficiary. Someone who is not related in any way to the deceased could end up paying as much as 80% in IHT, I believe.

As far as this suggestion of pretending to sell the house to a relative in order to avoid IHT is concerned, what happens if you have more than one heir (ie 3 or 4 children)? Do people not think Hacienda might smell a rat if the house is "sold" to multiple purchasers? And if a "sale" went through with the approx 13% associated costs being paid, if the beneficiary(ies) wanted to sell the property after the original owner's death, all those costs would have to be paid all over again, would they not?

The residency issue is likely to go away as the EU has told Spain that it is discriminatory and they will have to offer the same deal to both residents and non residents.

They have not changed the law yet but people have taken this issue to court and won the case.

http://www.eurojuris.net/node/41548

Another couple of (possible) complications occurred to me about the scenario of "selling" your house to a relative in order to try to avoid IHT.

1) The "buyer" would then become liable to pay non-resident taxes each year as the owner of a property in Spain
2) Say the person "sold" their house for €200,000 but didn't bank the cheque. When they submitted their tax return for the following year, how would they account for what had happened to the money if they don't include it in their tax return? Hacienda would know the property had been "sold" as the transfer tax would have been paid on it.