Non resident beneficiaries of a will

[katy]

The downside is that even if you have the cash to pay the forward taxes would you want to. Many houses take years to sell. You could find yourself having the upkeep and the hassle of having the property for years before it is sold. Also the property will probably be overvalued by the tax authorities too.

[El Cid]

Actually, Katy, the official valuations can go either way. Based on the valuation method the tax office uses, our house is valued at 20% of its current market price.

Sid

[nevillewillmott]

As always there is conflicting information on this subject from various third party sites but it appears that there is now a 99% discount after applying the formula for calculating the tax due. This only applies to those in groups 1 and 2.

Hi

I read on an abogado's blog that the nil rate band for inheritance tax in Andalucia is €1,000,000, which, if true would exempt many estates from Spanish inheritance tax. Is this what you meant when you wrote 'a 99% discount after applying the formula for calculating the tax due' (groups 1 and 2)? They could amount to almost the same thing

Of course once a third country ???

Un saludo

[katy]

Actually, Katy, the official valuations can go either way. Based on the valuation method the tax office uses, our house is valued at 20% of its current market price.

Sid

Congratulations

[nevillewillmott]

Hi

It may be more straightforward when inheritance is within Groups 1 and 2. I read on an abogado's blog that in Andalucia the nil rate band before inheritance tax kicks in is €1,000,000 for groups 1 and 2, which, if true, would exempt many estates from Spanish inheritance tax. This may be what Beachcomber had in mind when he wrote 'a 99% discount after applying the formula for calculating the tax due' (groups 1 and 2). They could amount to almost the same thing?

Of course once a third country ???

Un saludo

[El Cid]

Of course once a third country ???

Good point. According to the tax rules at the moment, the €1m threshold only applies to EU/EEA beneficiaries. However, I beieve Beachcomber has looked at this and was advised that the €1m would still apply, but as always, this ultimately comes down to decisions made by individual tax offices. I certainly would not bet on it being allowed.

Also stepchildren are in Group 3 so they would not get it even if EU residents.

Sid

[katy]

Not according to this re. third countries.


In 2014, a European Court of Justice decision ruled that this unfavourable treatment for non-residents was discriminatory. In response to the ruling, Spanish legislation was amended, allowing EU–residents outside of Spain to benefit from the favourable local rates. However, this did not extend to non-EU residents and in 2018, following the appeal of a Canadian resident taxpayer, the Spanish Supreme Court published a judgment confirming that the Spanish succession and gift tax rules breached the free movement of capital established by the EU Treaty in relation to non-residents.

Following this judgment, guidance has been published in Spain confirming that the regional rules should be applicable to all non-residents, regardless of whether they reside in an EU/EEA member state or a third country.

This decision, whilst made back in 2018, will no doubt spark more interest for UK nationals with relatives in Spain in light of the UK’s exit from the EU.

For more information about effective estate planning please contact a member of the Private Client team.

[Beachcomber]

The one million euros allowance and the 99% discount are not the same thing. The allowance does not apply to donations but the discount does. Also, if one exceeds the allowance the 99% discount is applied to the tax on the balance.

As far as the third country situation is concerned I posted this a while ago:

https://www.andalucia.com/forums/viewto ... 2&p=393065:

To repeat the link in the above post:

https://www.notariosyregistradores.com/ ... unitarios/

Check specifically:

2- CONSULTA DGT V3151-18, DE 11/12/2018.

particularly the Paragraph called 'Tercera' which is actually the fourth paragraph which states:

En consecuencia, no ha de tenerse en cuenta la exclusión de los países terceros ajenos al EEE en relación con el ámbito de aplicación de la disposición adicional segunda de la Ley 19/1987, de 18 de diciembre, del Impuesto de Sucesiones y Donaciones. Por lo tanto, el régimen regulado en dicha disposición adicional resultará aplicable en relación con todos los no residentes, con independencia de que residan en un Estado miembro de la Unión Europea o del Espacio Económico Europeo o en un país tercero.

I read this to mean that it will apply to all non-residents, regardless of whether they reside in a European Union Member State, in the European Economic Area or in a third country.

(I was writing this post when Katy made hers but it looks as though it boils down to the same thing and I think her information is from a web site called Wedlake Bell.)

Just to add one other point, taxes on donations and inheritances in respect of non-residents are handled centrally so individual tax offices have no say in the matter.

[nevillewillmott]

'Also, if one exceeds the allowance the 99% discount is applied to the tax on the balance'

Jeez, does anyone pay much inheritance tax in Andalucia?

Hypothetical example - a €5,000,000 property is inherited by people in groups 1 or 2. There is a €1,000,000 nil rate band so inheritance tax of 1% is levied on €4,000,000. Therefore, the princely sum of €40,000 (<1%) is paid in inheritance tax on a €5,000,000 property. Could HMRC learn from this?

[Beachcomber]

This all came about when the Ciudadanos/PP coalition wrenched the running of the Junta de Andalucía from the death grip of the PSOE.

[elusive]

Is there many properties in andalucia worth such huge amounts? Putting aside large houses/blocks in the main cities.Its not like the south of england where grannies ex council house that was bought for peanuts is now worth 500k and many people have become very rich for no other reason than the luck of where they came from. Then they go to spain buy loads of properties and think they are something they arent and never will be!. To me the bigger problem was having to pay the tax before you got the house/money.leaving many properties empty and left to rack and ruin.imo it was a pretty illogical way of doing things.

[dxf]

Hola

Yes there are properties worth in excess of that. i don't normally go to these areas and they are not "your normal" areas

Davexf

[katy]

Most people who have property and assets over a million have avoidances schemes. That is why the tax is unfair. Like being taxed twice.

[maureenscot]

Thank you all so much for this information