How To Safeguard Against Spanish Inheritance Tax

[Wincham]

Hello Fellow Members,

By owning a property in Spain via a UK Limited Company you have no requirement for Lawyers in Spain anymore as it is all dealt with back in the UK. This is because under EU law a Company from an EU country can own a property in another EU country and decide which jurisdiction it wishes to be taxed, this can be the jurisdiction of the property or where the Company is registered. The Company only needs a CIF number in Spain appose the individual owners having an NIE number themselves. The Companies from EU countries like the UK are not charged the annual Tax of 3% for offshore companies, like Gibraltar, Isle of Man, etc. It is extremely important to understand the difference between offshore and not offshore, only offshore Companies who are NOT part of the EU are charged this annual tax.

The main reason to own via a UK Limited Company is to protect again Spanish Inheritance Tax. In Spain it is the Beneficiaries who pay the taxes whereas in the UK it is the Estate which is taxed. You also need to be aware you cannot offset one Tax against the other as they are not identical Taxes so both may have to be paid. There are some benefits for being over 65 if you are Resident in Spain but not IHT in Spain, as it is the Beneficiaries who pay the Taxes. You could be 165 and they still have to pay the Taxes when you die.

There is no 7% transfer tax in Spain when you move the property to a UK Limited Company unlike to an individual; this is because you gift the property to the Company so no 7% has to be paid. The whole point of owning in a UK Limited Company is to remove Taxation in Spain so the last thing anyone would do is own in a Spanish Company (SL). The only people who benefit hear are the Spanish born and bread, the Spanish Tax Authorities and the Lawyers in Spain.

Once the property is owned in the UK Company it can simply be the sale of the shares that take place in the UK appose to the property its self in Spain, so no 7% sales Tax for the buyer and no 3% withholding Tax to the Seller. Only a UK sale & purchase agreement is required which costs about £1500 and any UK Lawyer can produce this. Any Nationality in the world can own and buy a UK Limited Company, even the Spanish. Finally by owning a property in Spain via a UK Limited Company removes the requirement to have a Will in Spain as you only require a UK Will to leave the shares of the UK Company to your Beneficiaries.

If anyone else has suggestions of how to remove IHT in Spain then it will be great to hear them but my research shows this is the only true legal way around it.

[Gosh!]

Hello. This is a very useful post, thank you! This may sound a silly question, but if the property is mortgaged does this make the process much more complicated? Thx.

[Wincham]

Hello,

If a property in Spain has a mortgage in Spain then it does not stop you owning it via a UK Limited Company. This is because in Spain you have a mortgage which is the charge on the property from the bank and the loan which is the monetary value borrowed. It does not matter if the property is owned by the UK Company or the individuals directly as the bank would simply reposes the property if the repayments were not made. A big advantage in owning a property in Spain via a UK Limited Company is that you can claim Tax relief on the interest which you cannot do if it is owned in your own name, this also goes for rates, electricity, pool cleaning, etc.