Inheritance Tax for non-residents

 Can someone help me please? I've been searcing numerous websites but failed to find a decent answer!

I'm considering buying a holiday apartment in Mallorca and will be non-resident. Let's say the apartment will cost €150,000 and will be a cash purchase. In the event of my death, how do I calculate how much IHT my wife would be liable for?

Thanks!

If you want to know for sure asked a gestor, or better still  a qualified Spanish Accountant.

This can be  a minefield and almost everyone has a different idea.

However, the person or persons who inherit  is/ are the one/s liable to pay the tax, it is not a liability on the estate as would be the case in UK.   You will find that the amount an inheritor has to pay varies with which Regional Authority the deceased is 'resident for the purposes of inheritance tax'  (N.B. not as in tax resident ) and on the wealth of the inheritor too. 

In your position I would think very carefully about putting your money in Spain. If you really want to do it, seriously consider, with good legal advice, whether it would be better to put the property in the name/s of those who would stand to inherit.  Of course if one of owners dies before you, then there would be inheritance tax due on that death.

This may help :)

http://www.eyeonspain.com/blogs/costaluz/10199/Legal-tip-944-IHT-on-my--usufruct-as-widow.aspx

Legal tip 944. IHT on my usufruct as widow? 
10 May 2013 @ 17:40 

"P1030200.JPG", by jtatam, at flickr.com 

 Maria. Thank You. That is the first explanation that I have been able to understand.

Age perhaps has it's wisdom

JB

Happy to hear that!

I also remember when I was trying to understand it the first time!

Maria

My property in Spain is in the name of myself and my two sons.  Should I die would they not be the owners of the property as it is in both their names???

Some guidance on this would be much appreciated.  We also have Spanish wills drawn up to leave the property to the survivors.

Pinot

As I understand it. The inheritance tax would involve your share. As the property in your part is in 1/3rd ownership.

Just as if a property is in Joint ownership between Husband and Wife being 1/2 ownership. With children named in a Spanish will.

 Pînot:

Once you die, your sons will have to start the title transference to their names.

If you have Spanish wills which do not contravene the UK one, the Notary will authorise a new deed where property shares are transmitted to your sons according to that Spanish Will. Just is you are spanish resident, having estate asset just in Spain, UK law will have no intereference in the process.

Once this new deed is obtaines, taxes are paid and their new property shares are registered in the Land Registry.

Yous sons will be paying Inheritance taxes in propertion to the value of the shares they are acquiring

Maria:

Many thanks for your prompt reply.  The value of the shares - is this linked into the value of the property?  Obviously we are all aware that property values have fallen drastically in Spain and throughout Europe.

We were told initially that as long as we all made Spanish wills and the property was in all three names, no inheritance tax would be incurred.  Obviously this has changed but thank you so much for your reply which is most helpful.

Pinot

We were told initially that as long as we all made Spanish wills and the property was in all three names, no inheritance tax would be incurred.

You misunderstood something.   It is not correct, unless the value was below the tax free allowance and even with property prices as they are,  that is just about impossible.

John - many thanks for explaining it all to me.  I now understand completely.

Pinot

 Great answer John!

Thank You Maria

Can anyone explain if after completion of the transfer of the property ownership to the inheritors (non residents) and payment of the IHT the beneficiaries decide to sell is CGT also then due and if so how is it calculated?  Does it make a difference if the deceased was a resident or non resident, does it make a difference how long after the death the property is sold?

Thanks.

CGT is exempt if you sell your habitual dwelling and reinvest this money in a new habitual dwelling within 2 years.

Thanks Maria, does this mean if the non resident beneficiaries sell the house immediately they will also incur CGT as well as the IHT? How will the CGT be calculated, will it be based on the total value of the property with no allowance, can the IHT be offset against the CGT?

Thanks.

IHT and CGT are two different taxes for two differnt taxable events so yes, both transmissions are taxed.

Capital Gains is calculated on the difference between price of acquisition-selling

Thanks again Maria. A double whammy for non resident inheritors it seems, and as there is no aquisition cost CGT on full  sale price.Think I'd better sell before I die, pay the CGT and give the kids the cash and save them the IHT!

Just to clarify for NON RESIDENTS . If a husband and wife buy a house in Spain and both names are on the property deeds as 50 / 50 owners > One of them dies and so the survivor inherits the partners share ( covered by a spanish will ).

Does the survivor have to pay inheritance tax because in UK they would take ownership of the property and no tax would be payable if it was worth less than £324,000.   ....