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Bearing in mind that if you live in Spain more than 183 days you are regarded as tax resident for the whole year, if you go to live in UK in 2013, having spent more than 183 days here, and a spouse dies there, would IHT have to be paid to Spainthe following year in 2014? If so anyone care to bet how many would actually pay it.The tax office , due to the new assets law would(if complied with) would know exactly what your world wide assets would be!
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If you did have to pay tax in Spain it would be deducted from the uk tax due as there is a double taxation treaty. But this is only if you have property in Spain. How would Spain know that the spouse had died? If you are in UK the death would be registered in the uk not Spain. If you are back in UK and you are British, you would be classed as UK resident and Uk domiciled from the day you land as long as it is planned to be a permanent move. Spain would have no rights over the property in UK.
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Daniela & Lee
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As I understand it the double taxatioin treaty does not apply to IHT-you can pay in both countries.
As the limit in UK is £3254000 , and in Spain it is 16,000 there is unlikely to be any IHT paid in UK
Of course the tax office would find out about the death.In 2014 you would have to do a tax return to Spain for 1913, as heving spent more than 183 days in Spain in that year, you are considered tax resident for the whole year even though, as you say, you are tax resident in UK from the moment you step foot on British soil. It would have to be explained why the deceased was unable to sign the tax return!
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So no one knows, then, not even Maria?
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There is a good reason as to why you can be liable for IHT in both countries. This is because the two countries treat the tax differently and as such there is not the usual offsetting for double taxation. It is important to stipulate in your wills that only assets in each respective country be treated as assets in that country when there is a death. Another important point is that, I believe, in 2015 the rules are yet again changing as laid down by our Lords and Masters of the E.U. This will make it a little easier for citizens of one country who reside in another country to have their estate 'handled' by the country of choice of the deceased. So best advice is ........... don't die yet!
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Stephen
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Wills only clarify to whom you want to leave your assets; IHT will be paid on your worldwide assets,.
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Actually, Camposol, if you are a citizen of one E.U. country and a resident in another under present law if you stipulate in your wills that only assets of each country are dealt with by that country so then you only pay IHT on the assets in that country. You do have to make certain that this is clearly stated in your wills in each country and with the help of a specialist lawyer who will draft the correct wording then what I said earlier is correct.
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Stephen
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If you leave assets to a fiscal resident of Spain, then they are subject to IHT in Spain, irrespective of where the assets situated, or where you live, or are a citizen.
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Steone-as I said before, all a will does is clarify who you want your assets left to, and is nothing to do with tax. IHT is payable on your worldwide income, if you are a tax resident of Spain.Even if you stipulate you want your will dealt with by the laws of your nationality, not your country of residence, you will still be liable for IHT on your worldwide income. If people think they can avoid or lessen their spouse'sIHT liability by making a will they are sadly mistaken!
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I really cannot see the point of this thread.
Camposol asks a hypothetical question but appears to know all the answers: so why bother asking for the opinions of others?
The whole thing comes across as Camposol trying to be the expert on these matters and I am sure she did not intend this.
Probably the best way to get a definitive answer is to pay an expert for their opinion, and if that opinion does not suit, keep trying other experts until you get the answer you require. LOL
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It's a problem that may well affect ex pats, and all the "experts" on here do not appear to know the answer, even the lawyer- I am certainly not paying anyone! It's a simple enough question to which I do not know the answer, but surely someone does?
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The technical answer is clearly yes, as I think you know. I would agree, that if you had returned to the UK to live, then most people would not declare it. Whether it would be picked up, is debatable. If there were no assets in Spain, then it would only be picked up if the spouse submitted a model 720' assuming the assets were worth more than €20,000. If you didn't then, it is still possible ( but illegal) to submit a tax return, either as a joint return, or individual, as they do not have to be signed when they are submitted to the Hacienda, as generally they are submitted electronically. If you both have a digital ID then you can just submit them yourself online from the UK. If, however, there are assets in Spain, then you would be unable to avoid it.
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IHT in Spain is applied following the criteria of location of assets, regardless nationality of residency of either deceasor or heir.
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Maria L. de Castro, JD, MA
Lawyer
Director www.costaluzlawyers.es
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I wished I lived in Andalusia, as there would be no tax to pay. However, I live in Murcia, which has just abolished it's regional allowance, meaning that there is only the state allowance of just under 16000 euros, and that wouldn't go far against the average estate! How on earth would someone pay the IHT on an estate eg of 200,000 euros, which is not an unusual amount by any means.It seems very unjust that the regions vary so wildly.How can Murcia be allowed to just abolish it? Once again, hit the ex pats!
Is is it fair that such an important tax should be subjected to a postcode lottery? It should be state governed,with one large allowance, perhaps set at the threshold for wealth tax.
My original question however has not really been clarified., but, .as Kathyslad wrote, the tax would be payable, but how many who have left Spain after spending 183 days there, would even notify the tax office in Spain of their spouse's death in the UK?
What do you think, Maria?
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Why "Once again, hit the expats"? Do these taxes not apply to the Spanish?
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Camposol:
I do not know if I understand your question. Can you please clarify please?
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Maria L. de Castro, JD, MA
Lawyer
Director www.costaluzlawyers.es
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Well I am confused.
If we live in spain for less than 183 days per year then we would not be tax resident and therefore not liable to IHT? but when we sell the spanish property we would be liable for spanish IHT on the gain less 16,000 allowance.
We are in Murcia by the way
If the above is correct we need to rent for the other 182 days per year in another country such as Portugal, Florida...... and spend our money in their economy
Kerry
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Maria-What I meant was how can it be fair that where you live affects how much IHT you pay so dramatically.Why doesn't the Spanish government just increase the state allowance to a decent level? It hasn't been increase for years, and even on on modest inheritance wouldn't be much help.
bobaol-I'm sure you know that assets are normally left to several members of the family, and even with the pitiful individual allowances, usually there would be no tax to pay. With the usufruct agreement, Mum could stay in the house till death. That's fine if Mum is very old!
The Hacienda knows English ex pats normally have "mirror" wills, each leaving the other everything, then it all goes to the children when both are gone.That means there is a nice big inheritance on which the state allowance won't go far, just below 16,000 euros.With the Murcia allowance abolished, the amount of IHT could be huge on a modest property.With Andalucia, you're laughing-no IHT to pay unless you are stinking rich!
Methods of reducing IHT all have big disadvantages.EG:
Leaving it to children is very disadvantageous to the remaining spouse, who may have many years left, and will probably want to go back to UK or downsize-they need the money.
Investing the house into a UK company seems to be favourite at the moment, but who on earth should have to go to those lengths.
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