You may be aware of this already, but it’s something many people who own property in Spain don’t know.
It’s about the taxes payable when an owner of property in Spain passes away.
If you have ever wondered about the details of inheritance tax, it’s simply this:
Your hard earned legacy may have to be sold off to pay crippling tax bills when you pass away?
Spanish Inheritance tax, death duties , legal fees - up to 40% .
So, right now, can you be absolutely sure that those you leave behind will have the money to cover those costs?
Of course we would all prefer our children and grandchildren to enjoy the property we’ve worked so hard to own, and not be forced to sell it to cover onerous tax demands.
Equally as worrying, did you know that in the UK system of IHT, a husband or wife is usually an exempt beneficiary?
But in the Spanish system...
Your husband or wife will not be exempt from Spanish Inheritance Tax.
It's a sobering thought, isn't it?
So, while it's not something we like to dwell on can I ask you…
"Have you considered what will happen to your dream of leaving something of value to your children when you depart this world"?
The harsh reality is that your gift could become a financial burden that your loved ones simply can't pay off.
How much debt? - When you take into account Spanish death duties, inheritance tax, legal, agency fees and accounting fees in both Spain and the UK, and other 'incidentals'....certainly 40%, but maybe as much as 50% of the value of your property!
What is the difference between Death Duties in the UK and IHT in Spain?
In the United Kingdom, it is the estate of the deceased that is subject to taxation. In Spain however, it is the individuals who inherit that are taxed. This means that if you don't plan ahead, and start now, the cold fact is that a huge chunk of your wife or children’s inheritance will go in taxes.
With that in mind, may I ask a final, pointed question?
"You know what happens if you don't plan, so are you happy right now with what you have done about it"?
I'm sorry if that question seems blunt, but we need to be realistic and take direct action to stop our hard earned money from being grabbed by the tax man.
But what action can you take today to protect the property you worked so hard to own, in the future?
The good news is that you CAN take a positive step, and do it right now!
Up until now, there have been very few legal strategies to side step Spanish Inheritance taxes.
Now there is a simple way to organise your property and keep the money out of the tax man's pocket.
This is how it works; ...
Introducing: The Investments Inheritance Tax Protection Strategy
To protect your property and ensure your loved ones will inherit it without incurring Spanish IHT there is a United Kingdom company established in 1994 to help people just like you minimize their tax liabilities who are fully FCA regulated and authorized in the UK and Spain.Their associates team consists of qualified professionals including UK Lawyers, Tax Consultants, Chartered Accountants, Gestores (Spanish Qualified legal Assistants), Economists, Abogados, (Spanish Lawyers) and Public Notaries
You can shield your children from those crippling debts through a simple, legal tax shelter that means it remains in the family, free of burdens like Inheritance taxes, death duties and legal fees in Spain.
You can build a solid wall of defense so that when the time comes, a simple declaration moves the ownership from you, to your loved ones.
No taxes or lengthy Spanish Will probate, no Spanish and UK legal fees... no being forced to sell.
You will maintain full control at all times. You can rent it, sell it, raise funds on it, just the same as you can right now.
You have the control to divide the property between beneficiaries in a much simpler format than normal Spanish Wills allow.
You can change the ownership percentages, without additional legal costs.
Your new structure is guaranteed safe and effective in transforming a potential tax bill of 40%- 50% of your asset value, to just a few percent now, and a little in the future.
Exactly how is this Spanish Inheritance tax protection created?
By forming a UK Company: The owners of the property form a UK Limited Liability company, in which ownership passes into the hands of the company. Each owner becomes a Director of the company.
As the legal company owner, you remain in full control of the company - and therefore the asset.
You do not relinquish any control or decision making power regarding the property.
You stay in absolute control of the shares of that company, and you have the final say in who owns those shares.
Therefore - Inheritance tax never becomes an issue. Because on your passing, the company still remains the owner of the asset, it's just the shares in the company that will change hands when the time comes.
It's simple, isn't it?
And it's totally legal too!
If you own property in Spain of any value, you should seriously consider restructuring your asset to protect it in the future.
Savings on agents fees, legal fees and taxes means this structure is the perfect tax planning strategy for all property owners.
Interested? Here's what to do now.
You need more information and to be sure that this is a safe and legal way to protect what you have worked so hard to achieve, I understand that.
The first thing to do is request a free proposal, personalised to reflect your tax liabilities right now, and the benefits of restructuring under the plan. A case Manager will work out the figures for you with no obligation. If you decide to move forward and plan your inheritance using this simple system, they will tell you the way it will happen, what you need to do, how to divide the shares up, & what it will cost.
To get your free personal proposal, all you need to do is fill in the form on our contact us page and one of our associates will contact you, then having all the information, we'll send your quotation to you immediately by post, fax or email, whichever you prefer.
But make a decision to act today. Time is precious, another year is flying by, and none of us truly knows what tomorrow will bring.
Inheritance Tax may be payable in two jurisdictions by owners of Spanish Property - Spain and the UK.
In Spain it is the person who is inheriting the property that is taxed whereas in the UK it is the estate that is taxed. This means that on the death of an owner of a Spanish property, the surviving Spouse and/or any other Beneficiaries will need to probate the Estate in both Spain and the UK.
Inheritance tax laws in Spain provide that immovable assets such as property cannot be realised in order to pay the inheritance taxes due.
1. A Spanish Will negates the problem
Incorrect – a Spanish will can often complicate matters as it may conflict with an earlier Will prepared in the UK. A Spanish Will cannot be varied after death and therefore limits the options of the beneficiaries. If there is only a UK Will then with agreement of the beneficiaries the Will can be varied to accommodate the inheritors wishes. The only requirement of the Spanish authorities is to be presented with a death certificate and letters of administration from the UK, translated, notorised and apostiled.
2. Double taxation treaties between Spain and the UK will help with the tax being reduced.
While this is true in respect of identical taxes, Inheritance Tax is not subject to this rule due to two different entities being the subject of the Tax. In the UK it is the estate which is taxed and in Spain it is the beneficiaries who are taxed meaning that one tax cannot necessarily be offset against the other. Unilateral relief is potentially available in the UK but is complicated to establish and may only allow a small percentage of the taxes paid in Spain to be offset against UK inheritance tax.
3. Re-financing the property will avoid IHT.
If there is a mortgage on the property (Hipoteca) and a loan subject to that mortgage then effectively the property owner does not own that part of the property subject to the loan. Therefore inheritance tax is only payable on the net value inherited. Of course it may be that the bank have an insurance policy assigned to them which will clear the loan on death. This means the full value of the property will be inherited and full tax payable. The alternative would be that the beneficiaries have a loan on the property on which the payments will need to be maintained and the borrowing ultimately settled by the executor of the estate.
4. Joint ownership of the property with your children/beneficiary means they do not need to pay IHT.
Passing ownership of your property to your inheritors has many complications, and one has to consider the implications in respect of gift tax, transfer tax and capital gains tax in both the UK and Spain. Furthermore it is not advisable to dispose of your assets until you have completely finished using the benefit. If you transfer part of the asset probate will still be required on any balance you retain.
A second complication of using this tactic is that the asset could be at risk should there be a marital or financial issue with one of your co owners and of course it is always possible that a son or daughter could predecease their parents which would mean the parents would be at risk of losing control of part of their asset depending on the Will or marital status of the deceased person.
Palm Finance and its associates offers owners or prospective buyers of Spanish property legal and Taxation advice to structure the ownership of their Spanish property to significantly limit themselves and their Beneficiaries from Spanish inheritance tax liabilities and avoid acquiring an illegal or encumbered property.
Whether you currently own a property in Spain, are about to purchase one or own the property in an offshore or Spanish SL Company, Palm Finance and its associates have a solution and method to help to transfer your property into a UK Limited Company to avoid Inheritance Tax in Spain.
Not only have Palm Finance and its asociates, market leaders in the provision of Consultancy Services in respect of corporate ownership of Spanish property, been operating in Spain for almost 20 years, but we own a portfolio of properties using the UK Company structure which we advocate our Clients use.
Our team of qualified professionals includes UK Lawyers, Tax Consultants, Chartered Accountants, Gestores (Qualified legal Assistants), Economists, Abogados, (Spanish Lawyers) and Notary Public.
Offering a full legal service in the UK and Spain, specialising in property, Wills, probate and company sale and purchase we also provide –
Taxation services – advising clients on income tax, capital gains tax, inheritance tax and purchase tax in both Spain and the UK.
Accountancy services – providing corporate clients book keeping, final account preparation and the submission to both HMRC and the Spanish hacienda where applicable. We are also able to provide personal Taxation services in both the UK and Spain
Company secretarial services – to include the provision of registered office, the filing of annual returns, maintaining statutory books, dealing with share transfers and company formations.
Debt collection services – this is a specialist service available to the mangers of Spanish apartment blocks where there is a requirement to collect unpaid community fees, from UK owners of Spanish properties.
FX (Foreign Exchange) services – the company provides a highly competitive FX service from Sterling to Euros and Euros to Sterling. No commissions are charged and the company offers highly competitive corporate rates to all our Clients.
Our associates are fully FCA regulated and they hold a money laundering licence issued by HMRC and also Professional Indemnity Insurance.
Priding ourselves on a professional, friendly and informative service, you will always receive communications in your native language wherever possible and undertake to respond to enquiries in a prompt and courteous manner
Contact us for Help & Advice
If you would like to understand more about our services we offer, or you are worried about your Tax implications in the UK or Spain then please go the contact us section and fill out our enquiry form. Our Consultants will then advise you of the benefits we offer. With Spanish taxation on the increase there are many benefits to restructuring your assets now, saving you and your beneficiaries, money in the future.
Providing solutions to your problems.
Spanish Wills will not protect you from Spanish IHT
Non-residents purchasing properties in Spain are often urged to set up a Spanish Will in the belief this will shield them from Spanish IHT.
This is unfortunately untrue and a Spanish Will can often complicate matters as it may conflict with an earlier Will prepared in the UK. A Spanish Will cannot be varied after death and therefore limits the options of the beneficiaries. If there is only a UK Will then with agreement of the beneficiaries the Will can be varied to accommodate the inheritor’s wishes. The only requirement of the Spanish authorities is to be presented with a death certificate and Grant of Probabte from the UK, translated, notorised and apostiled.
A Spanish Will is registered in a central location in Madrid and once it has been registered you cannot proceed to change it without going through the process of cancelling the old one through the Notary that dealt with your original Will. This can be time consuming and very costly.
In the UK if you wish to change your Will you simply write a new one stating that the old one is revoked.
In order to obtain a Spanish Probate you will require an Abogado (Spanish lawyer) and beneficiaries will be liable to pay any inheritance tax personally. Unlike the UK the inheritance tax is paid by the individual beneficiary based upon their circumstances not by the Estate. Inheritance tax laws in Spain provide that immovable assets such as property cannot be realised in order to pay the inheritance taxes due.
If you are married or you have a joint account in Spain then it means that your Spouse or joint account holder will be unable to access funds in that account until probate has been completed in Spain. This often leaves them in the position of being unable to make funeral arrangements or return to the UK as they do not have access to their funds.
To deal with the sale of the property or to arrange for the transfer into their own names each beneficiary will need to attend Spain personally to obtain an NIE number and deal with Notaries and Spanish authorities often in a country that they are not familiar with.
We can assist with every step and guide you through the whole process with the assistance of our multi-lingual staff based in our Spanish office.
Our associates Executor & Trustee Company provides a professional Will writing service for new and existing clients. Our legal department has all the expertise you need to prepare a Will that is suitable and fit for the purpose. We also offer an Executor service to help with Probate and the form filling and bureaucracy involved when an individual passes away. You and your family can continue to enjoy the future in the knowledge that all your affairs are completely taken care of. You can buy cheaper on the web, but we do not recommend these. Estates are too important to have everything reduced to a simple and standard common denominator, and a Will intended as a catchall may not catch anything if individual circumstances are not established and properly catered for in the Will. A Will is an important document and can affect people’s lives. Our Associates Executor & Trustee Company Limited provide a bespoke Will service which supplies a considered and appropriate tailor made Will prepared at an affordable price. You may think you know what you need in a Will, but the help and advice offered by Palm Finance Group quite often leads to clients re-appraising their Wills. The most important part of the process is the estate planning as work may need to be undertaken now to provide the best outcome later and you cannot always rely on the contents of the Will.
Spanish Taxes on the Increase
Our associates has received almost 1500 enquires in the past 12 months from owners of Spanish property who are concerned about Spanish Inheritance and Taxes in Spain.
Over 95% of these owners have spoken with one of our Spanish Tax Consultants and have received our free illustration and proposal demonstrating the potential Spanish Inheritance Taxes they or their Beneficiaries will face upon death. Within our proposal we supply details of the process and of owning a property in Spain in a UK Limited Company structure which help avoid Taxes in Spain.
Many of our clients tell us that they have been advised by other professionals that Spanish taxation is likely to decrease in coming years and that Inheritance Tax should not be an issue. However, this may not be the case, as the new Spanish Government try to bring financial stability to the Country.
Capital Gains Tax (CGT)
From January the 1st 2012 CGT for non-resident property owners in Spain will stand at 21% across the board. This follows a previous rise in 2010 from 18% to 19%. In 2007 the European Union put pressure on Spain to lower the CGT rate of 35% for non- residents (15% for residents) to 18% - deeming it to be an unfair penalty on non-residents. A subsequent rise of 1% in 2010 passed relatively unnoticed but it is now followed by a further 2% increase.
Spanish Residents will also feel the sting with CGT figures rising to 21% up to 6000€, 25% between 6001€ and 24,000€ and 27% on higher figures.
It is very important not to confuse CGT with Inheritance Tax as many people do. CGT is payable on profit made from the sale of assets. Inheritance Tax in Spain is paid by the Beneficiaries of a property on death of an owner.
It should be further noted that UK Residents are obliged to submit a tax return in respect of CGT to HMRC. The current CGT rate in the UK is 28%. Relief against this tax can be claimed in respect of taxes paid in Spain as long as a suitable certificate from the Hacienda (Spanish Tax Office) has been received. The 3% retention retained by the buyer on sale cannot be claimed as relief from UK CGT.
A further potential liability to a UK resident is the capital gain incurred in respect of the exchange rate gain made by the seller. This is calculated based on the exchange rate when the property was purchased against when the property was sold. This can create a CGT liability in the UK, even if the property was sold in Spain without a profit.
Wealth Tax Reintroduced
Wealth Tax is usually charged as part of the annual tax declaration which is submitted by all residents and non-residents of Spain. This is based on the value of your assets held in Spain. Although it had been reduced to zero for a number of years it was reintroduced in late 2011 and will begin to affect those with assets in excess of €700,000.00.
Non Resident Income Tax Increased
From January 2012 Income Tax charged to Non-Resident property owners on the rent they collect in Spain has been increased from 24% to 24.75%.
Spanish Resident Income Tax Increased
Not only are non-residents being taxed higher in Spain but Spanish Resident Income Tax has already increased in 2012 for Higher Rate Tax payers which has risen from 45% to 52%.
Contact Palm Finance for Help & Advice
Title Deeds Insurance now included for ALL Pal clients
Palm Finance are delighted to announce that from the 7th March 2012 all Clients who use our services to purchase or invest a Spanish property into a UK limited company will now be covered by Title Deed Insurance through our associates. We are the only company to offer this cover as standard for all our clients which provides up to 360,000 € cover.
As market leaders and with combined professional experience of over 65 years, we understand that security and peace of mind are foremost in the minds of our clients – particularly where the property in question may not be used as a permanent residence but for rental and occasional use.
With this in mind we will now be providing all our clients with a brand new insurance product offering our clients a complete guarantee and minimising future risk for 20 years.
The policy covers amongst many other benefits the following: