4 conditions to pay 0 € for IHT in Andalucia

Legal tip 170. 4 conditions to pay 0 € for IHT in Andalucia
26 October 2009 @ 15:21

 

As expressed in a recent Andalusian decree dated September 2009: the reduction of the taxable amount will be total, which means you will be paying zero as IHT if:

Condition One) Being a resident in Andalucia:

Condition Two) you are, in respect to the deceased:



Group I: A descendant or an adopted children under twenty one.

Group II: A descendant or adopted children of more than twenty one years/old, a spouse, an ascendant or an adopter.

Or assimilated:

a. Domestic partnerships registered within the Register of partners of the Andalusian region. ( regarded as spouses)

b. Persons subject to a permanent or pre-adoptive foster care. ( regarded as adopted)

c. People who make a permanent or pre-adoptive foster care ( regarded as adopters)Condition Three) IHT Taxable amount does not exceed 175,000 euros.

Condition Four) The preexisting patrimony of the taxpayer falls within the first tranche of the scale set out in Article 22 of Act 29/1987 of 18 December. (402.678, 11 €)



The amount of the reduction of the taxable amount will consist of a variable amount whose application determines a payable amount of zero.

Handicapped will pay 0€ if the IHT taxable amount does not exceed 250.000 €.

An interesting point, which I hope Maria will confirm if I am correct, is that for the purpose of inheritance tax, the value of any property (in Andalucia) is calculated using the valor catastral, rather than the "market value". The Junta de Andalucia has a calculator here to find out the minimum value you should declare, by entering the valor catastral, the province and municipality, and year of the last revision of the VC.

In most cases, I imagine this valuation of property will mean the taxable base is considerably less than if you used the market value. Good news!

Full information for Andalucia here.

These index were for taxes payable in 2008. In short words the value of the house to the effect of the IHT is calculated by applying an index ( which is different according to each municipality) to the Catastral value.

http://www.juntadeandalucia.es/economiayhacienda/servicios/normativa/d-consejeria/2008/orden18-12-08.pdf

Maria, hi

I hope you can help me.  I have been contacted by a UK Will writing company who when they found out we had purchased a property last year in Murcia provided an illustration of how much we could expect to pay in Spanish Succession Tax on the death of either my partner or myself as joint owners. His illustration has frightened me half to death as because we are not married he says my partner and myself have no tax relief amount.  Based on a purchase price of €190,000 he has calculated the surviving partner would have to pay just under €30,000 in tax within six months of the date of death, He also says our spanish bank account would be frozen until the tax was paid and that the surviving partner would not be allowed to sell the property to pay the tax.  His answer to this is to set up a UK limited company.  There is no way either of us we would be able to meet such a high tax bill. Our spanish Will is currently set up that following the last death of either myself or my partner, the property proceeds would be split between a brother, a niece and a cousin which he says gives them quite a high tax bill to fund as well.

Is this right? 

If anyone else can add to this discussion I would appreciate your help.

Thank you

Sheila

Because we have no direct heirs, I once discussed this with a FA and he said an insurance policy can be bought to cover this tax.

So Sandra

Is the insurance thing true?

And have you done so?

 Sheila: Are you Spanish residents? Where do you reside?

Maria, hi - sorry I should have said we are UK residents.  Our property in Spain has been purchased  as our holiday home.

Regards

Sheila

Maria, have you been able to consider my question please.

Best regards

 Apologies Pumpkin.

There is no tax reduction applicable to your case in Murcia mainly because you are not using the house as first dwelling and you are not married.

Therefore, yes.. it is advisable for you to look to alternative ways.

Best regards,

Maria

Sheila

I have simi,ar concerns having bought a property with my brother where it is our childrens inheritance.

We cointacted wincham (www.winchamiht.com) due to them regularly advertising the set up of UK limited companies and magaing the process and annual requiremenst but at £5k plus monthly fees seemed quite heavy, so have yet to do any thing.

Regarding the insurance schemes. I may be a little cynical, but aren't these just saving schemes whereby you pay somebody a commission arrange the savings on your behalf? Perhaps they do cover you in the event of death, but I'm not pessimistic enough to worry about that.

The easy way out of this one is to take out a life insurance for an amount you consider would cover the costs.  I know many people who have done this and set the beneficiaries of the policy to be the heirs and that way they can cover the inheritance costs.

Thank you to everyone who has replied on this.  As others have also said, I am not comfortable with the UK limited company option - especially considering the costs involved, both set up and ongoing! The life insurance policy seems to be a route worth considering and I think we will check that out in the not too distant future. 

Best regards

Sheila