| We have many clients who have either bought in | | | | NO spousal exemption. So if you jointly own a |
| Spain or the Balearics, or are thinking about doing so. | | | | property, and one of you dies, the surviving spouse is |
| In the past few years, there have been some changes | | | | subject to tax on the half value! |
| in how the Spanish government tax those who are UK | | | | Rates of tax range from 7.65% on up to 7,993 euros, |
| based and have a Spanish property, although with a | | | | to 34% above 797,555 euros. It is then subject to |
| change of government this could alter again. | | | | another calculation based on the heir's relationship to |
| Here we will look at two aspects - Wealth Tax & | | | | the deceased as well as their own wealth. |
| Inheritance Tax. | | | | So, as a rough example, if the deceased spouse's |
| Wealth Tax | | | | share was worth 160,000 euros, then the IHT would be |
| This applies to ownership of assets less any allowable | | | | circa 23,000 euros. |
| charges or debts. Assets include immovable property, | | | | A very important action point here is to ensure that |
| cars, cash, shares, jewellery etc. Therefore wealth tax | | | | you have a Spanish Will, and that you inform your UK |
| is calculated on the net wealth of an individual less | | | | solicitor of the fact to ensure the Wills are linked. Then |
| properly registered mortgages, charges and loans. | | | | Spanish law deals with Spanish assets and UK law |
| Non-Spanish residents are liable to wealth tax solely on | | | | with UK assets. |
| assets located in Spain. It also means that any | | | | The main benefits of making a Spanish Will are: |
| allowances that Spanish residents qualify for do not | | | | - there would be delays, extra work and costs |
| apply to a non-resident. So tax commences on all the | | | | involved in relying on a UK Will for the disposal of your |
| assets held in Spain for a non-resident. | | | | Spanish assets |
| The way the property is valued, and most wealth is | | | | - If you do not have a Will and die intestate, then the |
| normally held here, is based on the higher of: | | | | assets will be distributed as per the intestacy laws. |
| - the rateable value | | | | This means that third parties decide who inherits your |
| - the acquisition cost | | | | assets, and many countries favour children over |
| - official valuation undertaken by the tax authorities | | | | spouses |
| There are special rules for valuing bank balances as | | | | - If you are a non-Spanish national your Spanish Will |
| well as other assets. | | | | can also specifically state that you wish your Will to be |
| So what are the rates of tax? | | | | regulated under your own nation's laws |
| Well, they are annual and range from 0.2% (up to | | | | It should also be noted that having a loan held against |
| 167,129 euros) to 2.5% (exceeding 5,347,998 euros). | | | | the Spanish property would reduce the taxable IHT |
| Perhaps the most common bandings might be 167,123 | | | | element. |
| to 334,246 euros where the tax is 0.3%, and 334,246 | | | | This is based on our current understanding of Spanish |
| to 668,499 euros at 0.5%. The tax is graduated, so | | | | Law. The advice above is not meant to cover all |
| you do pay the lower amounts up to the next banding | | | | aspects of buying in Spain, and please ensure you |
| level and then the higher level on the next etc. | | | | take reliable professional advice. |
| So if you have a property valued at say 400,000 | | | | Key Considerations: |
| euros, your annual tax bill would be 1165 euros. Not the | | | | If you plan to invest abroad, make sure that you take |
| end of the world, but important to keep in mind. | | | | all factors into consideration - informed choice every |
| Inheritance Tax (IHT) | | | | time. |
| This tax is assessed on the recipient - the heir - and if | | | | ACTION POINT |
| a non resident would normally be taxable on Spanish | | | | If you have a Spanish property, look to have any |
| assets only. | | | | borrowings based in Spain, and if you do not have a |
| One of the main things to grasp here is that there is | | | | Spanish Will, do it now and link it to your UK Will! |