Malcolm Roach M.I.C.M

Director (UK)

Wincham Consultants Limited

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By Malcolm Roach M.I.C.M - Tue 21st Jan 2014

 

Tumbit Approved Partner

As of 11thJuly 2013 the Murcia region increased Inheritance Tax (IHT) payable by residents inheriting within this region. Before this time Group 2 Resident Beneficiaries (spouses, parents, biological & adoptive children over 21) of the Murcia community benefitted from a 99% exemption on assets they inherited within their region however, this has now been reduced to a standard allowance of 15,957 Euros. From 6th August 2013 Valencia resident spouses, descendants and ascendants had their personal free allowances upon inheritance, increased to 100,000 Euros, or reduced in the case of gifting. However, the exemption for assets inherited above the 100,000 Euros allowance was lowered to only 75%. There are no such exemptions for brothers / sisters / aunts / uncles / nephews /partners or friends.

Resident's Inheritance Tax in Spain is charged by the autonomous region they live within, however all non-residents who inherit assets on mainland Spain, The Balearic Islands and The Canaries are all taxed by the central Tax office in Madrid with a maximum allowance of 15,957 Euros per individual inheriting.

Many Spanish tax residents may now look forward to sizeable tax increases which have already affected Murcia & Valencian residents during 2013. It could be said that other regions may decide to follow suit in the near future. A concern for most beneficiaries is that bank accounts can be frozen on death leaving any money to pay this tax unavailable within the 6 months stipulated and in worst case scenario an embargo placed upon the property. Simply becoming non-resident, which has been seen as a solution to the recent asset declaration problem, would not work here as the IHT due for non-residents is significantly more and taxed centrally in Madrid.

It has been written that this is discrimination against non-residents of Spain and they will be taxed at a lower rate and in line with residents. As this may not be financially viable to the Spanish Government, residents may be brought in line and taxed at a higher rate along with non-residents.

The Wincham Solution

The owner of the property forms a UK Limited Company (Wincham can provide), in which ownership of the property passes into the company. In this way when he or she passes away, the company will be inherited meaning it will only be necessary to transfer company shares of the UK Company, which fall outside Spanish inheritance tax.

From the point of transfer/investment the Company owns the asset. As the legal company owner, you remain in full control of the company - in addition there is no Spanish Property Transfer Tax (7-10%) or Capital Gains Tax due in Spain for this transaction.

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