How to avoid Spanish Inheritance Tax

Dear Cormona & others,  if you own your property in a company you have to pay the Spanish Taxman 3% of the Valor Cadastral and in Estepona that has just increased fourfold.  Any comments on this would be welcome.

Dear Angell & Members,

The below statement is correct for a property in Spain owned via an Off Shore Company, e.g The Isle of Man. The UK Limited Company I used does not receive this Tax in Spain for Ownership as under EU Law it is Taxed solely in the UK, and not Spain, therefore this Tax you talk about is irrelevant and incorrect in this case.

Also if I wish to sell the property, I will not have to pay any 3% Withholding Tax which none Spanish Domiciled People have to pay when they sell a property on, Secondly anyone who wishes to purchase the property from me do not have to pay the 7% Transfer Tax. This is because when I sell, I will not be selling a property, but will sell the UK Limited Company which owns the property, so no Taxes are payable to the Spanish Government.

Regarding having a Spanish property in a UK company, I have checked with three top Abogados in Spain and they all confirm my previous message that if a Spanish property is owned by ANY company apart from a Spanish company the 3% tax on the Valor Catastral is payable every January.  I have just paid 6.678 Euro

Dear Angell,

Your Tax Advisor's are 100% in the wrong and it sounds like you own a property via a Company yourself and I think you need to take advice from a Professional Company who specifically deals in Corporate Property Ownership. If you send me a private message I will send you my Consultants details so you can contact them directly for their advice. If you own your property in Spain via an Off Shore Company, e.g The Isle of Man then the annual Tax at 3% is correct and should be paid. If you own a property via a UK Limited Company then you have a CIF number which is the equivalent to an NIE number but for a Company, Under EU Law that Company then decides if it wants to be Taxed in Spain or the UK as it is only Taxed in one jurisdiction and the 3% Tax is not charged.

If you own via a UK Limited Company and you have paid €6678 then that is not correct and you are being completely given the incorrect advice and robbed. Also if your Abogados only understand the Spanish Law and not EU Law then how can they advise on it, and it looks to me you are only getting advice from one ruling, the Spanish Side. My Consultant I can put you in contact with understands the Spanish, UK & EU Laws so can give you advice from all 3 jurisdictions and how to use them to your best advantage. If you have paid €6678 in Tax then have you been given a receipt for the money from the Spanish Government which has been paid as the Abogados may have simply kept it. There is no reason for a Spanish Lawyer or Accountant to help you structure via a UK Limited Company and be Taxed Solely back in the UK, as there is no future Taxes to pay in Spain, so they end up losing your Business and gravy train of Taxes in Spain.

.

This message was last edited by Property On Finca Parcs on 3/15/2009.

Hi

Have read this thread with interest as my company offers advice on the avoidance of Spanish succession tax. First of all, for the vast majority of property owners the actual amount of tax ultimately payable is negligible - see the blog on my site that tackles this subject for more detailed information.

If you buy via a company: -

Neil

In reply to your post I make the following observations . We are Spanish Tax Advisor's with offices in Spain and the UK.

1) Only offshore companies such as IOM, Gibraltar ,Jersey  pay 3% tax on the value of their assets and this type of company is no longer suitable for property ownership,But a UK Company is not an offshore company to Spain and therefore under EU law does not pay tax in Spain.

2) Benefit in kind tax for directors of UK Companies owning Foreign property was abolished in April 2008

3) Capital gains tax is 18% in both Spain and the UK on the sale of property or Shares so no difference  to a non domiciled Spain owner. But the company can claim tax relief on its attributable expenses including travel of the directors and mortgage interest also all property expenses ,this will reduce the tax payable on the sale of the company or property. With regards to the disposal of the property your option is to sell the property from the company exactly the same as selling from yourself  or to sell the Shares this method saves the 7% for the buyer and and the 3% retention for the seller.you can use a UK professional to deal with the Sale and Purchase and obtain suitable warranties in respect of the property and company .this is much better protection than you would normally get from a Spanish transaction.

4) I agree that some benefits may not be open to a corporate owner such as no CGT for over 65 but in our experience IHT is far more important to client than CGT as most end up resident back in the UK sooner or later. and need to take advantage of the UK NHS ,they then leave their property to their UK inheritors with massive IHT problems in Spain, if the property is in a UK Company then no IHT in Spain and no probate in Spain .

OWNING THE PROPERTY IN A UK LTD COMPANY MEANS NO TAXES IN SPAIN DURING OR AFTER YOUR LIFE .

You can leave your property in your UK Will to a UK company and no IHT in Spain another option.

It is much easier to deal with a UK Company in the UK through your UK Will ,no need for your inheritors to obtain NIE numbers no 7% if 1 inheritor wishes to sell their inherited shares to the other inheritors ,no need for your inheritors to deal with the Spanish legal system .

I would be interested in hearing of how you would reccomend UK Domiciled Clients avoid Spanish IHT and other taxes