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Canarian Weekly
20-11-2011, 15:10
By Vera Liprandi INHERITANCE tax is an important consideration for anyone who owns property in Spain, or is thinking of purchasing. The autonomous regions are allowed to set their own inheritance tax levels and allowances. However, these allowances apply only for the estates of people who have been resident in that region for five years, [...]

More... (http://www.canarianweekly.com/inheritance-tax-spain-set-change/)

Peterrayner
20-11-2011, 15:25
The Commission has, therefore, decided to send the latest complementary, reasoned opinion requesting Spain to make additional changes to its legislation to ensure full compliance.

How Spain will respond, when this will be and how this will change the inheritance tax burden for non residents is not yet clear. The Spanish Government is in financial difficulties as it is, and will be reluctant to give up this lucrative, if unjust, stream of revenue.

However, it is now on notice, and to delay the matter may lead to claims from those beneficiaries adversely affected by Spainís failure to comply.

This seems the relevant pert of the article. Lets hope the new government sees the sense in compliance with this latest request.

timmylish
20-11-2011, 23:54
Very interesting and pertinent to most Tenerife home owners on this Forum, I suspect!

Balcony
24-11-2011, 08:55
For non-resident property owners it is important to make a Spanish Will. Although there are are dictats regarding willing to people, generally, non-risidents can be treated slightly differnt from a resident.

So too for residents of course it is very important to draw up a Will.

candy2411
20-12-2012, 10:57
can anyone please tell me if there has been any change in the Inheritance Tax for the Canaries?

I think the regulations are different depending on residency or non-residency, but am unsure of what the situation is if a resident leaves a property to a non-resident.

I imagine the tax implication is huge if a non-resident leaves everything to another non-resident ?

Medanoman
20-12-2012, 12:22
You should seek expert advice, but a simple example is inheriting a small property. which will not incur much of a tax penalty until that is, you decide to sell it, when you would be liable for the capital gain. Since you inherited the property the gain is max. and so the tax. If you did not reinvest the proceeds into another main residence here then capital gain at 22% would be levied. So yes if you are a non resident it is hard to reduce the tax burden re investing into your main residence so Tax will be huge

Norm de Plume
20-12-2012, 15:20
As a result of my complaint to Brussels some 3 years ago, Spain was told to get its house in order. It has failed to do so and, as I understand it, is about to be the subject of proceedings in the European Court. There has been no change in the present discriminatory rules as yet.

candy2411
20-12-2012, 15:44
thanks for replies both, if the European court ruling is imminent I will bide my time for now .

Every article I've ever read regarding property purchase has emphasised the importance of making a Spanish will, but it's only recently the full implications of inheritance tax on a non-resident has become aware to me and quite frankly I'm flabbergasted.

Goldenmaniac
21-12-2012, 13:42
Have a look here for current situation http://www.diana-mcglone.com/#inheritancetax

candy2411
21-12-2012, 14:18
Have a look here for current situation http://www.diana-mcglone.com/#inheritancetax


thanks for that link.
I find it quite amazing . For example ,if there's an elderly couple living in a property jointly owned and one passes away, how does the remaining spouse find the money to pay the inheritance tax if they have no considerable savings. Does the Government actually make the surviving person sell their home to pay the tax or does the unpaid tax remain as a charge on the property until that person also passes away and the home eventually sold?

Goldenmaniac
21-12-2012, 16:05
Historically one strategy was not to inform the authorities of the spouse's demise and wait out the 4 tax years (5 years and 3 months in actual time) that the Spanish Hacienda can go back. This has become much more difficult in the advent of better computerisation and in any case was never a legal strategy.
Some people take out a small life policy just for the purpose of paying the taxes - if you are none fiscally resident and are thinking of doing that take it out in the UK otherwise it becomes part of the Spanish inheritance and can not be accessed until tax is paid!!
Other's have to get bridging loans to pay the taxes before the property can be sold - because it can not be sold until the tax bill is settled.
The difference here is that the tax is owed by the person(s) inheriting not by the deceased estate as in the UK so the charge would have to be applied to something the beneficiary owned in Spain - not necessarily the property that was being inherited.
The other thing to take into consideration is that Plus Valia (the local authority tax payable on the increase on the value of the land) will also be payable by the beneficiary and of course there are the normal Notary and land registry fees and most likely an accountant or gestor's fees - unless you want a trip to mainland (assuming you are non resident)
Death and taxes as they say :(

candy2411
21-12-2012, 21:08
thankyou for that information Goldenmaniac, it more or less confirms what I have discovered.

I find it something of an anomaly that Spain can administer such regulations so very different to the UK when we're all supposed to be Europeans and treated fairly and the same!?!

cainaries
21-12-2012, 21:53
Whilst not very relevant ... I believe the UK is the only country in the EU which allows people to disinherit their own (blood) children. The Spanish I have told this to have been amazed.

essexeddie
04-01-2013, 19:03
Its about time Spain stopped dragging their feet on this issue and conformed to EU law.
I can see compensation lawers rubbing their hands soon if its not sorted out. They would be in the UK.

essexeddie
13-09-2013, 21:06
This article was in the Canarian Weekly today, although it was Friday 13th.


"INHERITANCE tax is an important consideration for anyone who owns property in Spain, or is thinking of purchasing.

The autonomous regions are allowed to set their own inheritance tax levels and allowances. However, these allowances apply only for the estates of people who have been resident in that region for five years, and the beneficiaries are similarly resident.

If both the deceased and beneficiaries do not satisfy the residency requirement, then the national state rules apply.

There is a vast difference between the state inheritance tax rules and the regional allowances. Several regions, including the Canary Islands, the Balearics, Madrid, Valencia and Murcia, have virtually no inheritance tax between spouses or between parents and children; others have less generous allowances.

As previously stated, these allowances apply only where the deceased and beneficiaries are residents. If not, the much-less-generous state rules apply, and these simply allow a deduction of just under 16,000 euros from the gift for tax purposes for spouse, children and parents of the deceased.

This can mean that non-resident beneficiaries pay many thousands of euros more tax than they would if they were residents.

However, help may be at hand for those thousands of non-resident, holiday-home owners or residents of Spain, whose principal or reserve beneficiaries (such as their children) are non-residents.

On 16th February this year, the European Commission asked Spain to amend its tax provisions on inheritance and gift tax on the basis that they impose a higher tax burden on non-residents, and on assets held abroad.

The Commission felt the provisions were incompatible with the free movement of workers and capital, which are required under European law.

In particular, the Commission considered that there was a breach of the Treaty on the Functioning of the European Union (Articles 45 and 63 respectively). The request takes the form of a complementary “reasoned opinion”.

Spain has been given two months to respond, and, if there is no satisfactory response, the Commission may decide to refer the case to the EU’s Court of Justice.

However, this may take some time. The Commission previously sent a reasoned opinion to Spain on 5th May 2010 and, although Spanish legislation has been amended slightly, it is still not fully compliant with EU law.

The Commission has, therefore, decided to send the latest complementary, reasoned opinion requesting Spain to make additional changes to its legislation to ensure full compliance.

How Spain will respond, when this will be and how this will change the inheritance tax burden for non residents is not yet clear. The Spanish Government is in financial difficulties as it is, and will be reluctant to give up this lucrative, if unjust, stream of revenue.

However, it is now on notice, and to delay the matter may lead to claims from those beneficiaries adversely affected by Spain’s failure to comply.

This could lead to a similar situation to Capital Gains Tax, which was also discriminatory and, ultimately, amended to be the same for non-residents and residents alike.

This also led to a deluge of claims for compensation from people who had paid the higher rate of tax as non-residents.

If and when the inheritance laws are changed, it would be well worth all those with a property in Spain to consult their lawyer or accountant to see whether changes should be made to their wills to reduce or eliminate inheritance tax."



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