There are two potential taxes here.

The first is on the transfer of the property and the transfer tax is 6% plus other fees etc. There may be some relief from this tax under certain circumstance, for instance if a couple own a property jointly then it is possible to put it in just one name and not have to pay the 6%. I don't know if it works the other way or with children.

However the second tax liability will be the Spanish "IHT" tax. As I said earlier it is a tax on "Inheritances and Gifts". The correct name is "Impuesto sobre Sucesiones y Donaciones." ISD for short.

If you transfer the ownership of an asset it is a gift so tax is payable at the same rates as an inheritance. There are allowances against it and they are even more complex than the allowances against inheritances. They also vary by region.

There are other ways of doing it by"giving" the property to the children while you retain a right to live there (a usufruct). As the property is worth less with a sitting tenant that reduces the value of the gift and reduces the tax.

It is a hellishly complicated subject and, as I said before, there is no substitute for good professional advice.

Absolutely agree with Fred. This is why it is so important to get property put into the 'right' names with the correct 'structure' when it is first purchased.

Don't simply buy it in one name thinking it can be altered later - it can, but at a cost!

Oh ... how I wish I had a crystal ball to determine whether a 15 year old lad would be a reliable co-owner 20 years down the line, then I too could have placed the properties into the 'right' names.

I think that neither I nor Dick Dastardly is seeking to have something for nothing, or expecting anything to be done as our 'right' - we have property in a foreign country and accept their rules and regulations, but we ask because...? Well because a forum like this gives us the spring board to make our enquiries.

The only thing I would add is that the law is changing rapidly in the regions and the move is away from any IHT apart from on large amounts of money between wealthy people - which probably rules out most of us

Oh boy - now I REALLY need that crystal ball .

Again as part of my preliminary research, I paid 35 euros for an Abogado to give me some advice on this very aspect, asking about the retention of the usufruct - and this is a quote from her response.

"If your heirs are all non resident, maybe you can simulate a sale of your property to your heirs and keep your right of use for you (it is named usufruct), the tax for sale of your property would be 7% of the value of your property minus the value of your right of use that you would keep."

Note that final portion of that last sentence - by becoming a 'sitting tenant' (via retention of the usfruct) you are diminishing the value of the property.

I am about to go back to the same lawyer (I'm allowed two clarifications under the terms of contact) to ask what percentage would the value drop by (because of the sitting tenant) and wouldn't ISD and/or CGT also play a part.

Calculation of the value of the usufruct is actually quite simple (for a change).

Take your age and deduct 20. Take that figure and deduct that from 70.

That gives you the value of the usufruct as a percentage of the value of the property.

For example :- age 65 deduct 20 = 45. Take that away from 70 = 25.

So if the property is worth 200k the value will be reduced by 25% ie. 50k.

That is brilliant - thank you so much.

Hey, who needs a 35 euro Abogado when we have Fred James to hand?

Update if I may - re the apartment to be sold - it was purchased in March 1989 and is obviously worth considerably more than the price paid. Hence an exposure to the 18% CGT, however, I now believe that there is an 11.1% allowance for every year, or part year, of ownership of properties purchased before December 1994. In my case - a 66.6% allowance .

I am waiting, with almost bated breath, to be assured that this allowance is applicable to non-residents as well as residents. It makes a huge difference to the net receipt, however, it's also good to know that our long term 'loyalty' to Spain is being recognised as such, that we are not seen and taxed as speculative .

There is also a knock-on effect on the apartment to be 're-structured' (ownership wise) as that was also purchased pre-1994 - but the savings won't be quite as significant. How does the Tesco advert go .

You are about right. It applies to non resident as well as residents.

You only get the 11.11% after the first 2 years but it applies up to 1996 so in your case that is 5 years at 11.11%.

You also get another indexation allowance of 1.2162 for a property purchased before 1994 but it is applied to the original net cost. The 11.11% is applied to the actual gain.

Remember that you can deduct the legal/tax/selling/commission costs of buying and selling to arrive at the gain, before you apply the correction factors.

It's very complicated and I won't bore you with the maths but you will pay a much reduced sum!

Thanks again - these calculations are turning out to be far more 'taxing' than I had thought (ouch, that pun was so obvious) but as you say, they do pull the final payments down substantially.

I'm off to Spain on Tuesday so I'll update you all when I get back (a 10-day stay).

Thanks Fred James - you are a mine of information .

Hi Fred,..many thanks for reply, Ref. Post 16...... Another idea,....
I added my Daughters name to one of my Spanish accounts a while back making it a joint account.
Other than a copy of her signature and passport, nothing else was required.
Could I,....
1,-Buy a property with those funds in joint names?
2,-Buy a property with those funds soley in her name?
3,-Buy a property directly from an offshore account in her name?

Other than the normal property taxes, is it likely that the Spanish taxman would need to be involved?

My Daughter is at present non resident.
I have over many years varied from time to time between resident and non resident,depending on time spent in Spain, without to date any undue hassle.
Many Thanks in advance for your words of wisdom.

Your current "cunning plan" is a lot better than the last one as it is so much easier to get round IHT by sensible planning at the time you buy a property rather than down the line and then trying to change ownership.

I can't see any obvious problems with any of the options but please do get some proper professional advice before you do anything - I'm sure there may well be other options that you could consider.