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How we helped save one family holiday home from the Spanish tax man

By Jaime Vives - Wed 24th Oct 2012

Our clients were aware of the problem that would face their family upon their deaths and the fact that they may have to pay Inheritance Tax both in their country of domicile and in Spain. Spanish law dictates that the beneficiary of your estate must pay tax on the amount that they inherit. The level of tax payable is not a fixed rate and is determined by the relationship to the deceased, their residency status and their existing wealth in Spain. In addition the estate of the Deceased could be liable to pay Inheritance Tax in their country of domicile.

The married couple owned a holiday home in Spain in their joint names with an approximate value of 256,000 Euro. They each had children from previous relationships. We provided them with a free illustration which highlighted that the potential Inheritance Tax due to be paid by their beneficiaries would be in the region of 78,424 Euro. Beneficiaries are unable to sell or mortgage the property to find the tax payable. The tax has to be paid within 6 months before additional fines and interest are added to the sum, this would prevent the children from ever inheriting the property unless they were wealthy in their own right.

What are the options to minimise the liability ? - The Wincham Solution.

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We assisted our clients to invest their Spanish property into their own UK Company (which was supplied by Wincham) of which they were the Directors and shareholders and had total control. Contrary to popular belief there was no 7-10% Property Transfer Tax payable on the transaction. Our method enabled them to utilise Spanish legislation to conveniently own and maintain their home within a corporate structure in the most tax efficient way. Although the use of an Off-shore Company creates an additional 3% tax burden each year a UK company is not classed as Off-shore and therefore UK companies are treated as Non Resident of Spain and as such cannot be discriminated against and are not required to pay the 3% Tax.

What Mr and Mrs O had to say at the conclusion of their transaction.

"My wife and I wanted to say how efficient, business-like and friendly we have found Wincham. We sought advice on the best way of holding our Spanish property principally with a view to protecting us from Spanish death taxes. Wincham fully explained the steps that needed to be taken and also very clearly set out the costs. They implemented the plan keeping us informed at every stage and stuck to budget even when additional questions arose. Following completion we are pleased to have appointed Wincham in an on-going administrative role of our UK Limited Company. Certainly from our perspective you did a good job and it is very good to see some glowing accounts which say a lot about the business. We continue to be impressed ! " Mr & Mrs O, Owners on the Costa de la Luz, Spain

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