Free Testamentary Disposition for UK Citizens: Only if You Own Property in the UK
It has been widely believed that British citizens who own property in Spain will invariably be subject to English law, which determines freedom of disposition of assets, as opposed to the more restrictive Spanish inheritance law where children will get 2/3 of the estate and the spouse the life interest of one third (and who may not be the preferred choice of the testator/testatrix!).
The reason for this is that under Article 9.8 of the preliminary title to the Spanish Civil Code, succession to all property, whether movable or immovable and wherever situated is determined by the law of the deceased’s nationality, in our case, English law, which takes relevance but surprisingly, it conversely stipulates that for property located abroad it will be the laws where the property is located which are to be applied. And in Spain forcible inheritors will almost always challenge a will if they don’t receive what they are supposed to get according the Spanish Civil Code, unless of course there are more debts than assets!
The above legal quarrel between both legal systems is now resolved by the Spanish Supreme Court, in various rulings, to the effect that if a British testator dies in Spain and:
- has moveable assets and property only in Spain then Spanish law applies.
- has property in the UK and Spain then English law applies.
- has movable assets in Spain only then English law applies.
- has property in Spain and assets in the UK (but not property), then Spanish law applies.
It normally happens that if no inheritor challenges the application of English law, which is normally typed into the will as the governing law, it will apply regardless of the above.
Dear Antonio
My husband and I are hoping to spend a year, possibly longer, living in Spain. We will be renting and retaining our UK property. We are concerned that, in the hopefully unlikely event, of anything happening to either of us during our time in Spain, the surviving spouse would be liable for Spanish Inheritance Tax on our UK property; is this correct?
Hello,
If you are living in Spain on rented accomodation for an extended period of time and you do not apply for residency for tax purposes, you will still be classed as a non-resident unless a very zealous tax inspector, either highly unlikely or even pertaining to fiction, spends 1 full year investigating your movements.
That said, if you have children that go to school here you could be presumed a tax resident of Spain.
Where property is concerned, Spain and the UK do not have a special proviso for IHT in the Double Taxation Agreement so it is the norm that taxes are paid where the property is located.
Dear Antonio,
My wife (73 years)and I(77) have jointly owned a small apartment in Costa Del Sol since Agosto 1979.
Q1. On the death of either of us will the other have to pay Capital Gains Tax (Plus Vaillia) AND inherit the whole?
My son (52) is keen to aquire the property and my daughter (51) has expressed her wish NOT to inherit the property and has provided a letter(whitnessed in UK) to that effect. We propose writing a will in Spain specifying this arrangement.
Q2. Can the surviving party choose a future date to transfer the property to our son and what taxes /liabilities will arise to our son?
Dear Antonio,If an owner of a property in spain leaves it to a relative are death duties incurred by the relative?I am told they are 99% roughly.If the owner decides to give his property away to a non relative are there taxes to pay? If it was sold to a non relative for a small amount,is this ok and are there any consequences?