Inheritence tax question for non-residents.

Hi guys,

I'm asking for a friend of mine as she is without net access.

A long story short.

1. Her and her husband owned a holiday home in Spain

2. Neither of which were ever residents in Spain.

3. He has passed away and she assumed his share of the holiday home would goto her without any taxation.

4. Her laywer is saying she might be liable for as much as €12,000 in inheritence tax on the property.

Is she liable for inheritence or any other tax on her husbands share of the property?

Any help would be fantastic as she is very worried about trying to find €12,000 :(

Deiza.

Please tell your friend. STOP. She must have a multi mansion to be quoted 12.000 inheritance tax. So much misinformation around. Some taxes are at, wait for it! A big ZERO.

Oh dear, Hope I do not become to unpopular.

Dear  Delza:

Yes, she is liable of Inheritance on her husband´s half. Regarding the calculation of the payable amount,  I would need to see the deeds of the property.

Best regards,

Maria L. de Castro

Thanks for the replies, much appreciated.

How much would someone have to pay in percentage terms vs the value of the property? or is it not that easy?

It is not that easy as some deductions, reductions may be applicable. But roughly, here you have got a sum:

 Around 18.000 €  for a 150.000 € property.

Roghly speaking

Take the value of the estate being willed, and for propert it is catastral value

Deduct any mortgages off the estate

Depending on numberr of direct dependants but if just a wife them about €16,000 is tax free allowance. for each child it is €16k each too

then tax is paid on remainder

so if estate  , and remeber if in joint names then its only half the estate, is worth€200,000 ...and jointly owned, then €100,000 is being left. Deduct half of any morgage plus €16k for each person named in the will and you come to the value to be taxed .  And 12,000 sounds a typical value to me.

Hi Maria

Perhaps please you could answer a question for me (& likely many others too) although I'm sure you'll have posted many times about it so I apologise for not taking greater notice.

Is it true that if one dies the other joint owner (usually a spouse) has to pay the inheritance tax within a 6 month period AND cannot sell the property to acquire funds to do it ?

I know from what you said before that a joint a/c is also frozen after a death.

I'm rather confused as to how one would pay for anything (inheritance tax, funeral, household bills etc) IF they HAD funds in their joint a/c if they cannot access these funds.

In the case of Delza's friend (in 1st post) who 'is very worried about trying to find €12,000' however does she pay then ? 

Inheritance tax is a minefield and all cases have to be taken up depending on individual circumstances. If you go by the tables written up in many books on the subject most people end up paying too much. Misinformation and expensive service providers are making these taxes a worry and often residents and non residents pay more than they should. We have members who have been advised to take out second mortgages and all sorts of other nonsense investments to avoid a tax that may be quite low and on many occasions nil. As regards the 6 months limit this is also debatable. It depends when the authorities discover that a death has occured. It is always best to deal with this as soon as possible. As regards the banks, There are ways that the account is not frozen but I will not enter into this on a forum. I stand by my statements because I feel that on top of what is a very sad moment, if this issue is not handled with care and expertise, families are handed a substantial tax bill. I Hope this has been of assistance to the many questions that have been put forward on this tax.

This message was last edited by myra cecilia on 02/07/2009.

I believe there is a way around this and that is to put the property into the ownership of a UK ltd company and then the owners are the shareholders of the company. When one dies the shares are redistributed and no tax is paid. But it is expensive to set up.

John seriously in most cases you do not need to go that far. Inheritance tax is no longer as expensive as they are still being considered. Please note my last post on the subject

So, after reductions and deductions aplicable,  you have got a taxable amount of 100.000 € ( for instance). The calculation goes as follows:   9166,06 € plus the result of applying the 16,15%  to the rest ( diffrence between 100.000 and 79880,52): ( 16,15% of 20119,48):  3249,29 €

Total: 9166,06 € + 3249,29 €:  12415,45 €

The most important thing is to reduce the taxable amount as much as possible... that is the valuable work when you are producing your IHT numbers.

You can ask for a postponing of payment  and a payment through instalments too.