Setting up a spanish will

Spanish wills is it not the case that if you buy your property as a UK  LTD company that the shares fall to the shareholders  ie ( family  ) when the parent dies thus avoiding inheritance tax.?

 Yes thats true, but the property has to be in that ltd company. If its in private names then it needs to be transferred which costs quite a bit of money including transfer tax.

If there is a mortgage taken out in Spain then you cannot do this as banks will not lend on shares only on private names.

 Sandran, The shares would form part of your estate. They could be subject to UK Inheritance Tax as they would have a value. I think you do have some problems in Spain. Last year I checked everything out and decided it was easier to put the property in the name of one of the kids with him granting me and his mum the right to use it for the rest of our lives without charge. He has done a Spanish will leaving the property to his brother. When something happens to us they will sell it and split the money as I don't think they will want to run a place abroad.

 Thats also true and I should have clarified. Most people doing this ´sell´ the shares to the family members thus avoiding the taxes. Its the Spanish tax you avoid by placing into a company name.

The main downside is that if you come to sell and the buyer doesnt want the ltd co, there may be a hefty capital gains liability. The old reason many bought in this structure was because they paid a lot of B money (cash) and so the property was underdeclared massively (usually with the large villas) Property would trade in this way and so the original declared value of the property would stay static. If someone bought out of the ltd co, then the difference to the original paid to the new amount paid could be huge thereby attracting a lot of capital gains.

Sorry to mention this but having been involved in Uk probate then the complcation of putting a property in a child's name solely is if the child dies before you . Re setiing up in a UK company there is a way that the property is transferred to a UK company that you are shareholders off without the tax being paid , see link in my details below, 

Many have tried to find a solution to this problem but if you use the link you will get a more detailed reply

David

EOS administrator-  Wincham have many paid adverts on the web site.

Sandra - see legal opinion on web site

 I hope my son is going to survive me, in any event he has made a will leaving it to his brother in Spain. I think your suggestion of setting up a company is a good one if you have a valuable property. However a modest villa of around 100,000 Euros would seem hard to justify the annual costs that would be involved in running a company. I suspect the remaining partner will ask my son to sell the villa when something happens to one of us. I don't think the remaining spouse is likely to want to keep it at that stage. It then seems even harder to justify setting up a company.

Will we have problems getting our son to do what we want? I doubt it as I'm sure he will want a share of all the other assets!

I agree there is no easy solution. However, I do think Spanish advisers should be much more proactive in the giving of advice and simply not reactive! From what I have discovered very few have understood the way things work in Spain. Most buy the property in joint names, leave their half to their spouse. When a spouse dies this would trigger a tax bill. Then when the remaining partner dies and the whole is transferred to the children a tax bill will be generated on the whole of the property value! How many property buyers have had that explained to them when they bought their properties? How many were given suggestions on how to mitigate any tax liability? I suspect not even 5%  have been given any proper advice? When I asked last year no one seemed to know. I'd love to know how many people feel they were given proper advice?

Hello Fellow Members,

I have been reading this post with interest and I would like to pass on my knowledge and findings after purchasing a property in Spain using a UK Limited Company so my Family do not have to worry about Spanish Inheritance Tax. We were fully aware of IHT in Spain before we bought and new it is always the Beneficiaries who are liable for the Tax in Spain unlike the Estate in other Countries, and after lots of research we found the only legal and credible way to remove IHT in Spain was to own in a UK Limited Company. The requirement of a Will in Spain is suggested by most Lawyers in Spain to have if you own a property directly in Spain but what they forget to inform you is that the Wills are registered in Madrid and the Taxes have to be paid within 6 months of death otherwise the Spanish Government can charge you interest on the Taxes if they are not paid in time. You are also not allowed to sell the property or raise finance against it to pay the Taxes and the deceased’s banks accounts are frozen in Spain as well. Now we own our property in a UK Company the shares in the UK Company can be dealt with in a UK Will and Company Shares are exempt from Taxation in Spain and may also be exempt from Inheritance Tax in the UK as well, therefore no Wills are required in Spain. It is also miss guidance to say that between Husband and Wife there is a huge allowance in Spain for IHT as it is different from region to region and you have to be proven to be Domiciled as the Beneficiary in Spain and Resident at least, for everyone else you are thrown into the other Spanish Tax band and the Inheritance Tax to the Beneficiaries is extremely high.

This message was last edited by Property On Finca Parcs on 27/08/2009.

This message was last edited by Property On Finca Parcs on 27/08/2009.

This message was last edited by Property On Finca Parcs on 27/08/2009.

This message was last edited by Property On Finca Parcs on 27/08/2009.

 I do not believe you are correct about my son being liable to Capital gains tax on the money we gave him in the UK to purchase a property in Spain. It may be subject to Inheritance Tax if we were to die in the near future otherwise it is a gift in the UK. He has left the property to his brother, so in the event of his death we would not be paying to get the asset back, again he is only 26 and we are hopeful that he will last a god many years yet! He is not married and when that time comes we will make sure that this asset is passed to his brother in his English will as well as his Spanish one. Yes, he will be happy to do this as I'm sure he will not want to be excluded from the rest of the assets we have.

I don't understand how you believe an asset with a value  which surely the shares in the company will have, will be exempt from UK Inheritance Tax? Are you suggesting that all stocks and shares are exempt! Lots would dash out to buy them to make sure they avoided UK Inheritance Tax! . I'm sorry all your assets will form part of the estate for Inheritance Tax. True you may not have to pay IT if your assets are not sufficient to reach a level where tax is payable in the UK. I also think if you make enough money on the sale you could be liable to CGT in the UK when you come to close the company. This would be the same as any other asset you dispose of. I still think the buyer would have to pay the 7% purchase tax in Spain as there would be a change of ownership on the deeds if it was sold out from the company. If purchasing the company to buy the property, one would have to carry out a lot more work to check on the status of the company make sure tax returns had been done and carry out due dilligence. As the seller of the company you may be required to give plenty of assurances and guarantees to the buyer. I would want them if buying a company!

You make no mention of the costs of setting up and running the company nor of the charges your Consultants will levy, actually surprisingly quiet. Unless the property is very valuable I think it might prove to be a pointless exercise. From what you have detailed I think I am happy to pass on this and not want to follow up with your advisors! Thank you. 

 You are taking what I said out of context. If you sell a property here in Spain, and the buyer wants a mortgage then it HAS to come out of the company name. There is then a cgt liability - I know as I have been involved in sales of the same.

If you transfer the shares of the company then there isnt. Just as there is no transfer tax or anything, its very simple and quick.

When you buy a property in Spain there is a declared value of the proeprty. In the old days one would under declare and pay the difference in cash. This does still go on but no where as badly when people where paying 7'% in cash! That meant both buyer and seller gained by paying less tax. It still had to be a reasonable amount and an increase on the original declared value.

This value is stated on the escritura and is registered at the notary offices and land registry so cannot be changed or ignored. The declared value of the new purchase was and now very much is annexed and related to the catastral value of the property.

Dear Kev2006n,

 Thanks for your information and time spent in writing. I am a qualified accountant and do know what and what not to do to make sure I do not put myself, my partner or my children at any risk of commiting fraud in the UK.  If I am unsure then I would seek proper professional advice and pay for it be it in the UK or any where else in the world. I do not intend to discuss the arrangements and agreements we have made with our children in the UK. That is a different discussion.

I do not intend to argue with you over the UK tax law. It is there for everyone to read and understand. It is available on the Inland Revenue site without spending vast sums of money to research.

The weak part of the way we have set up our purchase results in Spanish inheritance tax being paid by our other son in the event of our youngest son dying. However as one is 26 and the other 28 it was a risk worth taking in our view! We do not intend to keep the property for ever. Probably a maximum of 10 years.

I do not understand which Annual Spanish Taxes you end up saving? However, I am not an expert on Spanish Tax! Most of the taxes I've encountered so far would still charged if the property was owned by a company or an individual. The property has only been owned for a few months so there maybe more to come. However, I was not able to unearth any other when I have tried to find out.

I'm sorry to not agree with the scheme you propose. I'm sure there are certain circumstances with a very expensive property that it may prove worthwhile. However, one cannot help but wonder if you have some interest in selling this scheme to others. I have simply told others of the way we have set things up after discussing extensively with our Spanish Lawyer. I have no intention of giving anyone any names or pushing anyone towards a certain company to carry out work. I just believe that Spanish lawyers are reactive rather than proactive. Others, after reading the various posts on this site, may chose to review with their lawyer the way they have things set up. Others that are thinking of buying might care to do some research before getting off the plane and just buying a property in the heat of the moment!

After searching for 30 seconds on the internet I discovered that you do seem to write on the same subject on a large number of sites. You are no doubt running a business and in my view not to declare yourself openly is rather a poor show. It does seem to be a thinly veiled disguise as it only took moments to discover your 'advisor', which was yourself!!! It was also interesting to note other members of your team who seem to make a lot of postings on this site!

This message was last edited by kev2006n on 28/08/2009.

This message was last edited by kev2006n on 28/08/2009.

This message was last edited by kev2006n on 28/08/2009.

This message was last edited by kev2006n on 28/08/2009.

Dear Kev2006n,

 For your information I have already paid my taxes for last year which amounted to 6.36 Euros and I believe will reach a staggering 40 Euros for this year. No great savings to be made there. I had them sorted and paid before the 30 th June.

I was not looking for a solution. I am happy at the way the matters have been set up at the current time.

I do object to you under a very thin veil making out you have made a purchase of a property when in fact you are making a living doing this and selling this solution. Be man enough to declare your true position. If it is that wonderful then you will gain clients. I have read your reponses on other web sites and they are almost word for word the same as you have posted here. They also seem to generate a lot of arguement! I am not going to mention the name of your company if that is what you are hoping for.

As far as I'm concerned I was advising other members of this forum to look at their position to make sure they did what they could to legally reduce their tax exposure, for no gain to myself! If you want to sell a solution then you should use the appropriate channels to market it. I think the subject has had more than its fair airing on this web site and I will not continue with this banter for you to gain publicity. You seem to have others that write and advise on this site working for you. I suggest to any one on here that any advice offered for free should be treated with great care and caution and before you say it including my own! End of!