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Spanish Inheritance Tax

Spanish Inheritance Tax

Old Dec 9th 2006, 3:39 pm
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Default Spanish Inheritance Tax

The post about dying made me realize that this information maybe relevant to some people, Funeral costs can be expensive and so can Inheritance Tax.
Is there any Finiancial Advisors or people in the know that can explain the law a bit clearer.(please help this can't be right can it?)
I was frightened when I read how Inheritance here in Spain is much more costly than the U.K is this possible?
I have been with my partner for nearly 30 years and could n't believe that because we are not married our Inheritance Tax comes into the higher band.
Our property is in joint names, but even although, when one partner dies the other inherits the other half , and so is liable for Inheritance Tax.
Initial Inheritance Tax is based on the net value of estate .The bands range from between 8% - 34% depending which band you are under.
For Non residents it is calculated on Spanish assets only, but fo Residents it could be their wealth worlwide.
Inheritance Tax payable on property worth. (euros) 250,000 or 500,000
Class 1: Spouse, Children & Parents 38,874 or 106,021
Class 2: Uncles , Aunts, Nephews & cousins 64,606 or 172,147
Class 3: Common Law Spouses & Same Sex Parrtners 85,432 or 221,536
You have to pay within 6 months and you cannot sell the property to pay the Tax bill. (Crazy or what) where do you find that kind of money?
How is it best to avoid this high tax? any advice appreciated.
I hope someone can prove me wrong ,surely there must be a way out of this?
Regards :scared:

Last edited by guttyfeet; Dec 9th 2006 at 3:45 pm.
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Old Dec 9th 2006, 4:22 pm
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Default Re: Spanish Inheritance Tax

Fred James can tell you all about this but meanwhile could I suggest, assuming your relationship is based on total and absolute trust, that you grant each other mutually reciprocal powers of attorney so that in the event of (impending) death you can use it to sell one partners half to the other.

This will still attract the normal expenses and taxes of a purchase/sale but this would be for more expedient in your particular case.

Remember, however, that a power of attorney becomes invalid on the death of the granter, at least, once the death is registered with the authorities.
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Old Dec 9th 2006, 4:30 pm
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Default Re: Spanish Inheritance Tax

Maybe help here, or google your title.
Its very scary if you are not married, up to 90% I believe.
But there are ways round it.

http://www.idealspain.com/Pages/Info...tancetaxes.htm

http://www.idealspain.com/Pages/finances/wills.htm

http://www.marbella-lawyers.com/inde...nheritance-tax

http://www.marbella-lawyers.com/spanish-inheritance
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Old Dec 9th 2006, 5:00 pm
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Default Re: Spanish Inheritance Tax

Originally Posted by Beachcomber
Fred James can tell you all about this but meanwhile could I suggest, assuming your relationship is based on total and absolute trust, that you grant each other mutually reciprocal powers of attorney so that in the event of (impending) death you can use it to sell one partners half to the other.

This will still attract the normal expenses and taxes of a purchase/sale but this would be for more expedient in your particular case.

Remember, however, that a power of attorney becomes invalid on the death of the granter, at least, once the death is registered with the authorities.
Are you saying then not to register the death with the authorities until after you have sold the other half of the property to yourself!!!! Or am I barking either up the wrong tree or barking mad!
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Old Dec 9th 2006, 5:12 pm
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Default Re: Spanish Inheritance Tax

If its a joint bank account it will immediately be frozen on the death of a partner, and a no no to use it without telling of the death.
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Old Dec 9th 2006, 9:22 pm
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Default Re: Spanish Inheritance Tax

Originally Posted by jdr
If its a joint bank account it will immediately be frozen on the death of a partner, and a no no to use it without telling of the death.
Only if you bother to tell the bank and they couldn't care less.
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Old Dec 9th 2006, 9:38 pm
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Default Re: Spanish Inheritance Tax

Originally Posted by guttyfeet
How is it best to avoid this high tax? any advice appreciated.
I hope someone can prove me wrong ,surely there must be a way out of this?
Regards :scared:
I think you are being a bit pessimistic with your calculations.

If the property is worth 250,000 then the inheritance is only 125.000 and the tax will be half what you quote. There is also an allowance of 16,000 before the tax is calculated.

You are correct about common law partners being treated as non related but in Spain official civil partnerships are now possible for same sex or different sex couples.

If you are a resident, then if the survivor continues to live in the house for 10 years, then no tax is payable.

In Andalucia there are now significant extra allowances against IHT to the tune of 125,000 for resident beneficiaries with some restrictions on large estates.

You are correct that, for Spanish residents, that their world wide assets are subject to Spanish IHT, but in reality, only Spanish assets will be affected.
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Old Dec 9th 2006, 10:06 pm
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Default Re: Spanish Inheritance Tax

Originally Posted by glynis
Are you saying then not to register the death with the authorities until after you have sold the other half of the property to yourself!!!! Or am I barking either up the wrong tree or barking mad!
No further comment!
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Old Dec 10th 2006, 10:26 am
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Default Re: Spanish Inheritance Tax

Perhaps Gordon Brown is not the only highwayman with regards to tax, it seems that every financial transaction in Spain is taxed, buying and selling your house, buying your car and even dying. No wonder there is so much black money in Spain, and everyone is on the minimum wage but as said in earlier replies there are possible ways around the taxation, or as i keep getting told, to be a millionaire in Spain, arrive with two . Still you can't put a price on sunshine(present weather excluded) and health, i know where i would rather be.

Regards to all.

Paul and Les
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Old Dec 10th 2006, 10:36 am
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Default Re: Spanish Inheritance Tax

Hi,
"Inheritance - Spain and Your Will " in the Articles section up above.
Regards,
Carol
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Old Dec 10th 2006, 6:09 pm
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Default Re: Spanish Inheritance Tax

Originally Posted by PaulLes
Perhaps Gordon Brown is not the only highwayman with regards to tax, it seems that every financial transaction in Spain is taxed, buying and selling your house, buying your car and even dying. No wonder there is so much black money in Spain, and everyone is on the minimum wage but as said in earlier replies there are possible ways around the taxation, or as i keep getting told, to be a millionaire in Spain, arrive with two . Still you can't put a price on sunshine(present weather excluded) and health, i know where i would rather be.

Regards to all.

Paul and Les
I totally agree, the less u tel the lesss u pay. Why would anyone tell what there 'business is' / life style happenings unless there as daft as the goverment
!!!!!!
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Old Dec 11th 2006, 8:02 am
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Smile Re: Spanish Inheritance Tax

Originally Posted by guttyfeet
I have been with my partner for nearly 30 years and could n't believe that because we are not married our Inheritance Tax comes into the higher band.
Our property is in joint names, but even although, when one partner dies the other inherits the other half , and so is liable for Inheritance Tax.
I hope someone can prove me wrong ,surely there must be a way out of this?
Regards :scared:
My partner and I were in a similar position and decided to make Spanish wills that gave each other "usufruct" i.e. the power to remain in the joint house for lifetime without owning each other´s half, but left each half of the house to closer members of our own respective families after the death of both of us. Of course, if he decides to sell up and move, he´s only got the money from his half of the house but at least he won´t be faced with a high tax bill immediately on my death. Anything to reduce the percentage the tax authorities eventually receive...
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Old Dec 11th 2006, 2:07 pm
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Default Re: Spanish Inheritance Tax

You can now register a civil union with your town hall (the new law which gives rights to gay couples etc.) - much cheaper than getting married in Spain. Your partner is then accorded the same rights as a surviving spouse.

The Uso Fructo can be limiting cos´if the surviving partner needs to sell the property - for example if they need to go into residential care and have to realise the assets to pay for it - they then become liable for the full tax due.

Civil Union bypasses all this
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Old Dec 11th 2006, 10:22 pm
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Default Re: Spanish Inheritance Tax

Originally Posted by culchie
The Uso Fructo can be limiting cos´if the surviving partner needs to sell the property - for example if they need to go into residential care and have to realise the assets to pay for it - they then become liable for the full tax due.
A usufruct is only a right to use someone else´s property, so my partner never actually owns my half so can not be liable for tax on it even if he has to sell up. My children who inherit half the money from the sale will be liable just for my half, but they will pay tax at a lower rate because of their close relationship to me. That is the whole point of setting it up unless my lawyer does not deserve to be one! Why is a civil union much cheaper than getting married anyway? The registry costs are more or less the same.
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Old Dec 12th 2006, 8:19 am
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Default Re: Spanish Inheritance Tax

Originally Posted by Lis48
A usufruct is only a right to use someone else´s property, so my partner never actually owns my half so can not be liable for tax on it even if he has to sell up. My children who inherit half the money from the sale will be liable just for my half, but they will pay tax at a lower rate because of their close relationship to me. That is the whole point of setting it up unless my lawyer does not deserve to be one! Why is a civil union much cheaper than getting married anyway? The registry costs are more or less the same.
You're right, of course. I was talking to my lawyer about this recently - one can put a clause in the will allowing the sale of the property in certain circumstances (e.g. medical costs etc) where the recipient of the uso fruto can realise the value of the property but then becomes liable for the appropriate tax.

The same lawyer told me that the civil union is a good option as a regular wedding is more hassle to organize in Spain. Where we live most people go to Gibraltar to the registry office there. I don't think there's a huge amount of difference between the costs of a civil union or a registry office job.
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