Inheritance Taxes due & Plus Valia

Hi,

My grandmother died who was a joint owner of a property in Tenerife (with grandfather) and my grandfather is still alive. Despite having a spanish Will (which was understood to solve a lot of issues) , it didn't seem to and so we have just started getting the legal bills in from a soliticor that was local to my grandparents.

My Grandfather isn't in a very good way at the moment and so I'm trying to pick up some of this and doing some double checks to ensure that he is paying correct and fair amounts.

They bought the property in 1986 (i'm trying to get the amount it was bought for) and we have received a solicitors bill including €2,500 inheritance tax and €1650 plus valia tax.

We understand the current property is being advertised for sale currently at around €70,000.

For inheritance tax, could someone point me to how this inheritance tax works and how the calculation should be made?

For PlusValia, there is an article on this site belegal.com/articles/showArticle/taxes-when-selling-spanish-property which implies that as this was bought before the end of 1986 there should be no plus valia tax to pay. Is this still the case? Otherwise could someone let me know how this tax is calculated (especially as the property would have been bought in pesatas and how this currency conversion should work)

Many thanks for any help!

I have recently inherited a property in Spain and know how hard it is to understand all that happens. While I am no expert, let me share what I have learned. I will assume you are a non-resident and non-citizen of Spain.

Firstly, you can only accept the inheritance within 6 months of the persons death. I am guessing that your grandmother left her share (50% of the villa) to your grandfather. You also said its for sale for 70K, so we'll assume your grandmother left an inheritance valued at 35K.

Upon accepting an inheritance in Spain, you pay Spanish Inheritance Tax. Its a complicated calculation based on a table, which I have. But it goes like this. The first 16K (the true figure is 15,956.87 euros) is tax-exempt. This leaves 19K subject to Spanish Inheritance Tax. According to the table, the first 15,980 is subject to 9.35% tax (equaling 1,290 E). The remaining 3020 is subject to 10.2% tax (equaling 308.04 E). Grand total of Spanish Inheritance Tax would be 1598.04 E. Now your bill might be less or more, depending on what the "declared value" of the villa was. The lawyer in Spain, when handling the inheritance, would have to calculate a property value (called valor catastral in Spain).

Plus Valia - is essentially the tax on the increase in the value of the land from when it last changed hands. Changing hands occurs when a property is bought or inherited, so in your case, it sounds like it last changed hands in 1986 and now in 2011. Plusvalia is calculated using local government tax rates, multiplied by the number of years between changing hands, and applied to the change in land value. Your 1,650 E sounds about right.

I finalized my inheritance in November 2011 so I;m new to it, but I will answer any questions you have, if I can (confidently). I also really strongly recommend a book called You & The Law in Spain by David Searl. Buy it from the co.uk amazon site, not the US one. You'll still need a lawyer in Spain, but at least you'll know what's going on when you speak with them.

Hope this helps.

Hi,
I read with interest your post about IHT.
Could you clarify what value is taken for IHT, is it the Valor catastral you mention of the actual value received when the property is sold ?
Also my mother is becoming concerned about the amount of IHT I would have to pay on her property on her death and one solution mentioned is to transfer the property to a Spanish company - have you heard about this and do you know if this is kosher/legal ?
Many thanks for any advice you can give

Dear Maisymoo,

The value taken for IHT is the minimum taxable value, that is calculated after the Cadastral Value.

The taxes are the same regardless of being a legal or personal entity so transferring the house into a Company's name is no longer a means to lower IHT. If your children inherit company shares, the value of them will be calculated based on the value the assets has been set in the company deeds and therefore the amount of IHT does not vary.

We can make an approximate calculation of the inheritance costs, so please feel free to contact me by e-mail ( click on my profile ) if you wish to look into it.

Regards