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Spain has now been referred to the EU Court of Justice over its discrimination against non-residents on Inheritance Tax rules. See www.tenerifenews.com for a full explanation by Blewins Frank.
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Inheritance tax is a real problem in Spain.
My wife is considerably younger than me.
If I leave my apartment to my two children with the condition that my wife can use it until she dies, it means that my children will have to pay the tax within six months of my death (at up to 32% with only about a €16,000 exemption) but may not be able to use/dispose of the property for many years.
On a property worth 300,000 that means each son would have to pay around €40,000
It may also mean that my sons might die before my wife, but they would be the owners of the property so their inheritors would also face an immediate tax bill, also of around €40,000 at today’s value.
PS I can’t afford to die, unless maybe property values fall a lot more !!!!!
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The bid recuctions in inheritance taxes come when the property your heirs are inheriting a commun home. I mean the house heirs are receiving is their home and was the deceased´s home. In these cases, in Andalucia, there are 99,9% reductions.
Of course there are also reductions just becuase of the heir being a direct relative: descendants, spouse or ascendants
_______________________
Maria L. de Castro, JD, MA
Lawyer
Director www.costaluzlawyers.es
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Maria, Could you please expalin what you mean. It may be just me, but I did not understand it.
Thanks
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I was discussing this problem with my Spanish friend who happens to be an aesoria and to my understanding any inheritance tax is based on the catastral value which is considerable less ( 1/10 in our case) than saleable value as used in the UK and the value I think you are applying to your apartment johnzx .
Consequently nil inheritance due between my husband and I. Plus for 2nd generation inheritors if the property isn´t sold for 10 years then there is either nothing to pay or at the most minimal.
I live in Murcia and would appreciate Maria confirming or negating what I have understood the situation to be.
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floella
thanks for that but I beleive the ' better deal' is only in respect of family who are resident in Spain. My wife is but I did not want to leave the property to her, but to give her the right to live in it unttil she dies or decides otherwise.
My children are not resident in Spain thus get an allowance of less than 16,000 euros each and then the rate goes up to 32%.
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Floella: The property value which is taken for calculating any tax in Spain is that of applying the catastral value to a rate which is indicated individually for eacn municipality.
Johnx: I was trying to explain ( apologies the bad use of English) that, if heirs inherit a home, which also was the home of the deceased, the reduction on the tax quota is of 99,9% in Andalucia.
This old post might be of help:
Legal tip 170. 4 conditions to pay 0 € for IHT in Andalucia
26 October 2009 @ 15:21
As expressed in a recent Andalusian decree dated September 2009: the reduction of the taxable amount will be total, which means you will be paying zero as IHT if:
Condition One) Being a resident in Andalucia:
Condition Two) You are, in respect to the deceased:
Group I: A descendant or an adopted children under twenty one.
Group II: A descendant or adopted children of more than twenty one years/old, a spouse, an ascendant or an adopter.
Or assimilated:
a. Domestic partnerships registered within the Register of partners of the Andalusian region. ( regarded as spouses)
b. Persons subject to a permanent or pre-adoptive foster care. ( regarded as adopted)
c. People who make a permanent or pre-adoptive foster care ( regarded as adopters)Condition Three) IHT Taxable amount does not exceed 175,000 euros.
Condition Three) The preexisting patrimony of the taxpayer falls within the first tranche of the scale set out in Article 22 of Act 29/1987 of 18 December. (402.678, 11 €)
The amount of the reduction of the taxable amount will consist of a variable amount whose application determines a payable amount of zero.
Handicapped will pay 0€ if the IHT taxable amount does not exceed 250.000 €.
_______________________
Maria L. de Castro, JD, MA
Lawyer
Director www.costaluzlawyers.es
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Legal tip 652. Inheritance Tax Andalucia. Reductions
12 December 2011 @ 10:44
1) IHT Andalucía is reduced by 99.99% for spouses, descendants and adopted children who used the family home as their permanent dwelling at the time the decedent passed away.
2) IHT Andalucía is reduced to 0€ if
i) The beneficiary is a Group 1 or Group 2 relative of the decedent.
ii) The amount of the inheritance is not greater than 175,000€
iii) The existing wealth of the beneficiary is less than 402,678.11€
The effect of the deduction is to reduce the net payable tax to zero.
3) Disabled people are exempt in 250.000€ when inheriting estates. If the disabled heir is not a close relative of the decedent .Should the disabled beneficiary is in Group 3 or Group 4 then their personal preexisting wealth should be taken into consideration.
4) IHT Andalucía is reduced by 99, 99% when inheriting a private business. It requires the continuing of residency in Andalucía for five years.
_______________________
Maria L. de Castro, JD, MA
Lawyer
Director www.costaluzlawyers.es
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Hi Maria,
do you know if there is any allowance between husband
and wife in the murcia region.
we are both resident , and are also fiscal resident.
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Formentera Costa:
Spouses have a 99% deduction in the tax quota in IHT Murcia
_______________________
Maria L. de Castro, JD, MA
Lawyer
Director www.costaluzlawyers.es
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I wonder does anyone know if this 99% spouse deduction applies in the Elche / Alicante/ Valencia region ??
Many thanks, Bill
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Hi Maria,
thank you for your reply.
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