Inheritance Tax for non-residents

As I have said elsewhere, as a result of my complaint to Brussels on the discrimination between residents and non-residents on IHT, the Spanish Government have been told to put their house in order.  They have failed to do so and the matter is to be referred to the European Court.  The rules will be altered, but how and when is another matter. 

I sought advice from Wincham UK.  Unfortunately much of what they told me was not ‘strictly correct,’ and they estimated the 'worst case' scenario.   This include no allowance for my spouse who is tax resident in Spain, thus her potential tax situation was as it would have been had she not been related to me and not tax resident in Spain.  After several exchanges I decided not to communicate further.

Based solely on my experience, I would not recommend them; others may have had different experience.

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.   ...

Surely if your joint owners and one dies, the living one hasn't inherited anything, have they?...Or are the Spanish laws on this that crazy.

Baz,  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.

Yes they do.

If the property was in UK, or elsewhere in the world  and the inheritor/s are tax resident in Spain, no matter what the family relationship,  they have a tax obligation in Spain.

But sorry again,  we are in Spain, so what happens in UK is of no relevance, especially to those here who no connection with UK. 

If the property was in UK, or elsewhere in the world  and the inheritor/s are tax resident in Spain, no matter what the family relationship,  they have a tax obligation in Spain.

But sorry again,  we are in Spain, so what happens in UK is of no relevance, especially to those here who no connection with UK. 

Not talking about any taxes due on property in the UK, not talking about house's in the UK,  just tax laws concerning a house in Spain which is in joint ownership 50/50, as I said the surviving party doesn't inherit anything because they already own the house 50/50...Don't mean a relative inherits the house...Only in joint ownership, like Aliton said.

But again are the Spanish tax laws this crazy?

I said "Yes they do."

She would inherit the other half of the property.

Well, I am abit confused by this thread because the discussion seems to be different from the title. Having said that the answertt o Bazs question relating to a house in Spain owned by a married couple 50/50 and one dies, is very simple.

I'm afraid Baz that you do inherit something, assuming its left to you, which will depend upon the will, you inherit the 50% that doesn't currently belong to you. If you are both spanish fiscal residents, then depending upon which AC you live in, the IHT due on the value over the exempt amount is relieved by  95% if you continue to retain the property. The exempt amount and the period depends upon the AC you live in. For example in some it is 10 years, which is the national allowance, for others, such as Valencia its 5 years. The national exempt allowance is €122,606, and that is fairly standard in a lot of AC's but in Valencia its €150,000.

 

Thank you KathysLad....Thank you Lobin...Now i see what Spain really means when you are joint owners of a house in Spain. 

With regard to joint ownership of a spanish property....

so if one half of the joint property holders dies then the other inherits the other 50% and pays inheritance tax on that 50%.

The tax due can be offset by the IHT allowance which varies by region and/or by keeping the property for a number of years which again varies by region.

By the way does anyone know the allowance and time to keep the property in the Murcia region?

With regard to also owning a UK property and investments then I suppose other measures such as:

          spending less than 6 mths in spain,

          setting up a company and transferring property to it,

          transfer to children, etc.

would need to be considered to minimise the Spanish IHT payable. These options are only required due to the extremely low spanish IHT allowance compared to the UK levels of £320k+.

I am happy to be advised otherwise if my understanding is incorrect