Spanish inheritance tax
 

Hi There

Can anybody advise me of the period between inheriting a property in Spain and paying inheritance tax, as I believe that if you do not register the property after a certain time, you may inherit with no tax payable.:)

Re: Spanish inheritance tax
 

You have 6 months from the death of the owner. You can apply for a 5 month extension so long as you apply before the initial 6 months is up.

I think you may be referring to the situation where you fail to register the death. If you delay that for over 4 years then they could not issue the tax demand as there is a 4 year rule in Spain.

However that is breaking the law and anyway, the 4 year rule does not apply when there is deliberate fraud involved.

Re: Spanish inheritance tax
 

Thank you for your info:)

Re: Spanish inheritance tax
 

As a small aside - I have read in several places that the EU has requested Spain to change their IHT taxes so that non residents are not penalised compared to residents.

This was also the case when NRs had to pay 35% against Residents 18% on CGT. This was harmonised and now stands at 19% for all.

Re: Spanish inheritance tax
 

Thank you for the info, I have decided to go ahead and clear the tax...can't be looking over my shoulder for 4 years!

Betty

Re: Spanish inheritance tax
 

That is correct but the major allowances apply to houses where the deceased has had it as their permanent home for a period of time. That is different from plain residency and is unlikely to change. Non residents, by definition, cannot have a "Habitual Residence" in Spain.

Some regions do give extra allowances for residents who inherit and that could be affected.

With regard to the changes to CGT - residents get a big tax break on the sale of their permanent home if they reinvest the money or are over 65. That has not changed and does not apply to non residents.

The problem was that non residents houses were treated as second homes and got no relief, just like second homes owned by tax residents. The difference was that resident got charged 18% and non residents were charged 35% - that has now changed but it still doesn't affect the principal home/holiday home difference and it never will.

Re: Spanish inheritance tax
 

Yes I agree and exactly what my Spanish wife said -

What confuses me though is -

How can they level the playing field because as you say the non resident cannot by definition have his primary residence here.

On the CGT I think the over 65s also need to have lived in the house for a number of years to qualify for exemption. (and of course have been fiscally resident)

Re: Spanish inheritance tax
 

Yes you are right - it all gets down to the fundamental point in Spanish tax law of the concept of "habitual residence".

To qualify as such you have to prove that you haves lived there for a significant period - 3 years.

You can only level the playing field so far - "true" residents will always get a better tax deal.

Re: Spanish inheritance tax
 

I know that this is a complicated issue, but I wonder whether Fred James or anyone else could give me a rough estimate of the amount of inheritance tax that would have to be paid, given the following scenario.

A close friend of ours died on Thursday. He owns a property here in Spain but has never been resident here. He has never been married, has no children and the sole beneficiary of his estate is his half-sister, who is a UK resident.

I know the house would have to be valued by an asesor, but as a rough guide to its value, it has been on the market for 110,000€ (unfortunately not sold before his death).

Any idea of the amount of inheritance tax she will be liable for?

Re: Spanish inheritance tax
 

I once asked the same question about a property valued at 150k I was told it would be about 10 k, sorry can't be more specfic

Re: Spanish inheritance tax
 

Yes, the property will need to be valued.

Assuming it is valued at €110k then the basic allowance for a sister would be €8000 leaving a taxable amount of €102k.

The tax on this would be €12719 but as a sister is not classed as a close relative that would be increased by nearly 60% giving a final tax bill of just over €20k.

There are special allowances depending on the region but most of these only apply to residents.

Hopefully it will be valued at a lower amount. In fact Hacienda have a simple way of calculating the minimum acceptable value for IHT purposes. They take the current Catastral value and multiply it by a factor to arrive at a value. The factor varies from town to town but is usually in the range from 1.5 to 4 times the Catastral value. In many cases this can result in a lower figure than you might expect.

Re: Spanish inheritance tax
 

Thank you very much Fred, at least now we have a rough figure to talk to his sister about. We will advise her to consult the same solicitor that our friend used to sort it all out, as I don't think she has a clue about Spanish property issues, although we will of course help her out in any way we can.

I'm sure it's been said before, but I am very grateful that knowledgeable people like yourself are willing to share their expertise via forums like this one.