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Spanish inheritance tax on uk estate for brit living in Spain.

Spanish inheritance tax on uk estate for brit living in Spain.

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Old Mar 12th 2018, 10:47 am
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Default Spanish inheritance tax on uk estate for brit living in Spain.

My mother, who lives full time in Spain, had a sister in England who died and left her estate to my mother. The estate might be in the region of £250,000 so there will be no uk inheritance tax to pay, but will she have to pay Spanish Succession Tax (or inheritance tax) which could be about 25%!? Is there anything we can do to reduce this? Does she have to pay it within 6 months of the death - she might not have the money by then! What happens if she leaves the money in England? Can she decline the inheritance and pass it to her children?

Sorry lots of questions – it’s all very complicated! Anyone been through this.

Thanks
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Old Mar 12th 2018, 10:52 am
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

Hi and a warm welcome to the Spanish forum on BE. Myself and Fred James are the moderators for the Spanish forums whilst myself and BEVS moderate Europe. Please read the Site Rules Site Rules | British Expatriate Community adhere to them so that the site runs smoothly. Moderators are there to ensure that the rules of BE are maintained. This is so that members gain the information that they are looking for and find their experiences on the forums to be friendly and worthwhile.

Problems and complaints should always be addressed to a moderator who will look into the matter and deal with it efficiently and fairly. Our members who post in the Spain Forums are usually friendly and helpful with a wealth of knowledge about the issues of living in Spain. I hope that you enjoy your time participating in the forums.

Please let me know if you need any further help.

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Old Mar 12th 2018, 1:03 pm
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

In the UK you should be able to arrange a deed of variation to pass your mother's inheritance down to her children (or whoever). I am not an expert but would have thought that would negate any Spanish tax.
If I were you I would go to a UK lawyer with a knowledge of Spanish inheritance laws.
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Old Mar 12th 2018, 2:07 pm
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

Originally Posted by zoorangerman View Post
My mother, who lives full time in Spain, had a sister in England who died and left her estate to my mother. The estate might be in the region of £250,000 so there will be no uk inheritance tax to pay, but will she have to pay Spanish Succession Tax (or inheritance tax) which could be about 25%!? Is there anything we can do to reduce this? Does she have to pay it within 6 months of the death - she might not have the money by then! What happens if she leaves the money in England? Can she decline the inheritance and pass it to her children?

Sorry lots of questions – it’s all very complicated! Anyone been through this.

Thanks
Where does your Mother live in Spain and is she a tax resident / resident? This is important.
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Old Mar 12th 2018, 4:32 pm
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

A deed of variation is no more complex than a letter, agreed between all of the beneficiaries to a will, consenting to a change in the will proper. It has the power of the original will. If, by making a deed of variation, there are liabilities created for any of the beneficiaries - CGT etc, then the HMRC must be informed. The relevant form can be found on their website - just search deed of variation. Any competent family solicitor should be able to draft a DoV at little cost.
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Old Mar 12th 2018, 4:47 pm
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

Yes, but a DoV in the UK could be viewed as tax avoidance here, truth. Been there. Also, the original will and account of the estate has to be produced, translated and Notarised. Doesn't take a genius to work the numbers after that.Awaiting news on where the lady lives. Obviously she is not a 'first line' relative, but the true answer depends on which AC she resides, if she is resident of course.
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Old Mar 13th 2018, 5:23 pm
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

It is possible to renounce an inheritance in Spain. The deceased might have been left an estate with debts in excess of assets so no one would knowingly accept the inheritance.

The renunciation has to cover the entire entitlement and must be expressly stated before a notary. Under Spanish law the estate passes to the next persons entitled, but in your case English law and any Deed of Variation would govern the distribution of the estate. But also renouncing the inheritance in Spain would remove any ambiguity for Spanish tax purposes.

You could approach a Notary directly as they have a standard form of wording and he can tell you what information and documents he requires.
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Old Mar 13th 2018, 6:10 pm
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

A friend of mine had this problem recently. A deed of variation solved the problem and the Spanish authorities seem happy with it.
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Old Mar 13th 2018, 6:31 pm
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

It always amazes me that one can do a deed of variation and completely go against the deceased's wishes!

I understand it may be financially advantageous to do it but a DoV can also change who gets what!
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Old Mar 13th 2018, 9:11 pm
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

Yes, I was surprised by that when I first found out about it. You do need to get the agreement from all other parties involved.
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Old Mar 14th 2018, 11:21 am
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

Originally Posted by snikpoh View Post
It always amazes me that one can do a deed of variation and completely go against the deceased's wishes!

I understand it may be financially advantageous to do it but a DoV can also change who gets what!
We had to arrange a DoV when a relative died. This was to correct a will that had been drawn up incorrectly by a lawyer!
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Old Apr 5th 2018, 10:25 am
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

Hi there

First time user here ( I think), and could use some advice.

I am UK national but living / resident in Spain (Madrid), have been here 15 years.

My father passed away nearly two years ago, and he left the house to myself, my brother and our mother.

We sold the house and the proceeds went 3 ways.

I'm now trying to square this off with my SPanish accountant for my Tax Return here.

I am told that Inheritance Tax was paid by my fathers estate, and that therefore the proceeds of the sale were paid to us net of tax.

However I'm unclear how this is supposed to be recognised in my Spanish tax return - I've told my accountant that Tax has already been paid but he's saying the Spanish authorities may not agree and may tax me here in Spain.

Any advice welcome!

Thanks
mark
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Old Apr 5th 2018, 1:03 pm
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

You are liable for IHT on the bequest as being tax resident, just like income tax, it applies to your world wide inheritances. Also the Double Taxation Agreement does not cover IHT so it may be possible but more complicated to offset any tax paid in the UK.

Hopefully there is someone here who has done this recently who can add more detail.
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Old Apr 5th 2018, 1:39 pm
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

Originally Posted by MarkusWelby View Post

My father passed away nearly two years ago, and he left the house to myself, my brother and our mother.
The first problem you have is that inheritance tax (IHT) is due within 6 months of the date of decease. So, you are likely to incur a fine and interest charges.
Originally Posted by MarkusWelby View Post
I'm now trying to square this off with my SPanish accountant for my Tax Return here.

I am told that Inheritance Tax was paid by my fathers estate, and that therefore the proceeds of the sale were paid to us net of tax
IHT is declared on a separate return to income tax, and as mentioned above can be submitted at any time during the year. The amount of IHT payable depends upon the amount you inherited, your own personal net worth and where you live. Madrid is quite generous with its allowances compared to some other regions.

The ability to claim relief is not actually in the DTA, but the actual tax legislation, but it’s not straightforward.

Surprised that your accountant didn’t explain this detail.

Last edited by CapnBilly; Apr 5th 2018 at 1:45 pm.
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Old Apr 5th 2018, 2:08 pm
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Default Re: Spanish inheritance tax on uk estate for brit living in Spain.

Originally Posted by MarkusWelby View Post
Hi there

First time user here ( I think), and could use some advice.

I am UK national but living / resident in Spain (Madrid), have been here 15 years.

My father passed away nearly two years ago, and he left the house to myself, my brother and our mother.

However I'm unclear how this is supposed to be recognised in my Spanish tax return - I've told my accountant that Tax has already been paid but he's saying the Spanish authorities may not agree and may tax me here in Spain.

Any advice welcome!

Thanks
mark
Hi and a warm welcome to the Spanish forum on BE. Myself and Fred James are the moderators for the Spanish forums whilst myself and BEVS moderate Europe. Please read the Site Rules http://britishexpats.com/site-rules/ adhere to them so that the site runs smoothly. Moderators are there to ensure that the rules of BE are maintained. This is so that members gain the information that they are looking for and find their experiences on the forums to be friendly and worthwhile.

Problems and complaints should always be addressed to a moderator who will look into the matter and deal with it efficiently and fairly. Our members who post in the Spain Forums are usually friendly and helpful with a wealth of knowledge about the issues of living in Spain. I hope that you enjoy your time participating in the forums.

Please let me know if you need any further help.

Rosemary
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