Spanish Inheritance Tax: How much is it?

[aflores]

Dear Susanna,

If you are not married you will in the least favourable group. Your children will come under group 2 in any case, unless of course one of the children not related to one of the owners does inherit.

With regards to the sum on which the tax will be applied it is the amount being bequeathed, which means that if you inherit from your partner, or viceversa, you will have to pay taxes only on 50% of the value of the property.

You may wish to change you will whereby your children will receive the bare ownerhsip of the property while you both retain the life interest. This will reduce the exposure on IHT quite considerably.

[Susanna K]

Dear aflores
Thank you very much for your valuable advice. Please permit me one more question: When we are married, would any step-child be considered as if they were your own child? None of the children have been legally adopted. As mentioned before, the house is in Alicante district and we are non-resident at present. Thank you once again. Regards, Susanna.

[steffi]

My husband and myself are thinking of buying a property and moving to Spain on a permanent basis. I have concerns about IHT due to be being a few years younger than myself I could be the surving spouse. We have no children so I would probably leave the property to my nieces and nephews who are blood related to my husband what category would they be appropiate for IHT.

[Lawbird Lawyer]

Dear Steffi

They would be classified in Group IV.

Yours sincerely
Raymundo LarraÃ*n Nesbitt

[Rosemary]

If I make a Power of Attorney over to my son, so can he sell my apartment after my demise, on the Costa del Sol without having to pay tax to take it over first. It's impossible that he could raise sufficient cash to pay the tax on the property.
Thanks a lot

[Lawbird Lawyer]

Dear Rosemary

It would be an excellent idea if it weren't for a small detail.

You still have to file and pay taxes on selling the property. And it would be you through your legal representative who would be doing this.

He, knowing fully well that you have passed away, would have to pretend you are still alive on selling. This may cause him legal problems with the Spanish Authorities if caught.

The POA is no longer valid on you dying if the proxy knows you've died. A son, your son, would logically know you've died on selling the property. Its a risk he's taking.

In any case let me write once more that Spanish Inheritance tax has been grossly overblown over the last couple of years by a minority with vested interests in scaring people to hire their services to waive paying IHT. Normally this service is a one-trick pony, meaning they only give you THE one and only solution. When in fact there are many legal tools available to mitigate exposure to Spain's dreaded IHT:

Ways on How to Avoid Inheritance Tax on Spanish Property - 22nd June 2005

IHT is high for the follwing groups of beneficiaries:

1. Non-relatives (i.e. friends)
2. On inheriting large estates
3. On the inheritor being non-resident in Spain (i.e. domiciled in the UK) and therefore cannot take advantage of lenient regional tax allowances in combination with one or both points above. This bars them from benefitting from generous regional tax allowances in lieu of the more draconian State law. However some regions in Spain require you have taken resident status for a number of years prior to the death, i.e. five years.

Please read my article on IHT in Spain for more details:

Spanish Inheritance Tax: Advantages of Making a Will in Spain - 3rd September 2009

Sincerely
Raymundo LarraÃ*n Nesbitt

[Talia]

Dear Sir/Madam, my father passed away in December. He jointly owned an apartment in Mazarron with my mother. It was on he market before he died for 90,000 euros. Before we can sell it we obviously need to pay IHT. The beneficieries are my mother, myself and 2 siblings. I am extremley worried we cannot afford to pay inheritence tax as we have no savings whatsoever. (siblings are both at university and I am a single mother.) I dont even know how much it is? What would happen now? Can we just give up the apartment to the spanish state? It is not ideal but I am scared of us all owing huge amounts of money,
Thank you.

[Talia]

Dear Sir/Madam,
I forgot to mention that my mother and father were not resident in spain.
Thanks again

[Rosemary]

Thank you so much Raymundo for taking so much trouble with my query.
Maybe a POA would be helpful in the meantime, in case I degenerate slowly + cannot take care of my own affairs. Would a POA need to be made in Spain ? Thank you so much for your reply - I'm now going to read your articles.
Kind regards - Rosemary

[Lawbird Lawyer]

Dear Talia

On a property that is worth only 90,000€ and you are 4 beneficiaries inheriting presumably 25% each you are worried on paying a high IHT?

You do NOT need to give away the property much less to the Spanish Tax office (!) unless you love them for some bizarre reason.

I repeat once more, there is a minority of unscrupulous people that have vested interests in scaring the wits out of foreigners (particularly non-residents) into hiring their services (which is basically only one) blowing Spain's IHT out of all proportion. I've even read brochures in which they advise that normally it will be neccessary to sell the Spanish house to pay off the high IHT tax bill (!!) unless you hire them as on average Spain's IHT is 40/50% or even more of the value of the estate. This is highly misleading if not downright false.

Please read carefully the articles I quote in my prior post above. Spain's IHT is only high when inheritors are:

a) non-relatives (i.e. friends) or distant family members
b) and or the estate bequeathed is of a high value.

In your case you are close relatives (next-of-kin) and the value of the estate is very low.

Your tax liability will be nil or close whether all of you are resident or not in Spain.

And even if you had something to pay you can pay in installments and/or request a deferral on payment paying over the next 5 years.

But this won't be your case, rest assured.

Yours sincerely
Raymundo LarraÃ*n Nesbitt