Bringing estate proceeds to Spain

[Unregistered]

My mother recently passed away, she was a UK resident but left me everything in her will, assuming all inheritance taxes have been settled under UK Tax law do I face any additional taxes if I bring the proceeds into Spain, I have Spanish residency for tax purposes. - Thank you

[Lawbird Lawyer]

Dear Sir or Madam,

If you are tax resident in Spain you will be held liable to pay tax on your worldwide income, which includes the UK's inheritance.

As both countries have a Double Taxation Treaty you can always offset what you've already paid for the estate in the UK and deduct it from the Spanish tax bill.

Yours faithfully,
Raymundo LarraÃ*n Nesbitt

[Unregistered]

Thank you for the prompt response, in the UK the Estate settles the inheritance taxes but in Spain I understand it's the beneficiary, therefore would the tax suffered by the estate be deductable by me under the tax treaty? Also, because in the UK there is an allowance (currently £325,000) before any tax is due does this transfer under the tax treaty or will I also be liable to pay Spanish IHT on this portion too? Thanks

[Lawbird Lawyer]

Yes, correct.

You may not have to pay in the UK on the nil-rate band but you will have to pay it in Spain following ISD (Impuesto de Sucesiones y Donaciones, or IHT for simplicities' sake). The double taxation relief will be only on the part of the tax already paid in the UK which credit you will be able to deduct in Spain on filing ISD.

So basically if you are tax resident in Spain, as you write, I'm afraid you will be expected to pay inheritance tax on the nil-rate band, yes as Spain does not have such generous provisions on its non-taxable threshold (a paltry €16,000 for Groups I and II).

The Double Taxation Treaty of 1976 does not include IHT because as you correctly point out the way both taxes are calculated differ so much. Consider it a unilateral relief provision.

Yours faithfully,