Inheritance Tax

[**JOHN**]

Hello!!

I just can recommend you a lawyer I contracted when I came to Spain, really professionally. you can see the side:

(SNIP)

[ColinCarter]

I haven't given up on this subject. In fact, I have obtained a lot of info from my notary. But the loose ends will not be nailed down until I visit the Registrar of Testamentos in a few days time. It appears to be general practice to let a foreign will (eg, UK will) prevail but this is potentially open to appeal by heirs under the Spanish system.

More to come in a few days (the Registrar in my town is being replaced).

colin

[STalbot101]

Hi all, the best way to avoid Spanish Inheritance tax is to set up a UK limited company. The advantages of doing this are numerous. Firstly, when you do pass away, under a UK limited company, there is ZERO tax for the beneficiaries to pay, you simply transfer the shares in the company, it means that there is no need to deal with any Spanish tax, or any Spanish lawyers accountants etc.. plus you don't have to pay any legal fees. Another advantage is that Capital Gains Tax is halved, should you want to return to the UK.

[Stravinsky]

Originally Posted by STalbot101

Hi all, the best way to avoid Spanish Inheritance tax is to set up a UK limited company. The advantages of doing this are numerous. Firstly, when you do pass away, under a UK limited company, there is ZERO tax for the beneficiaries to pay, you simply transfer the shares in the company, it means that there is no need to deal with any Spanish tax, or any Spanish lawyers accountants etc.. plus you don't have to pay any legal fees. Another advantage is that Capital Gains Tax is halved, should you want to return to the UK.

Does the limited company own your assets in Spain then, including your property? Presumably if you make a profit on your home in Spain then, you have to pay tax on it in the UK . Who would the directors of the limited company be, bearing in mind the "owners" would not be UK residents.

[STalbot101]

Originally Posted by Stravinsky

Does the limited company own your assets in Spain then, including your property? Presumably if you make a profit on your home in Spain then, you have to pay tax on it in the UK . Who would the directors of the limited company be, bearing in mind the "owners" would not be UK residents.

The limited company owns the property certainly, as for the other assets, it depends what they are. As for profit, you must first understand how the system works. When you sell the property, you take the money owed to you from the company as a directors loan, the value of property when you originally invested it in the company, then you sell your shares in the company, dependent upon the profit. For example, the house has risen in value by €100,000 and there are four shares, €25,000 per share. The buyer buys the company not the house, so the shares represent the rise in value. This is the clever bit, because you are a limited company, if you put flights and other expenses through the company, the tax in the UK would only be 9%rather than the usual 18% Capital Gains Tax.
The directors of the company would be for example, you, your wife and your two kids. One share each. But you are completely free to decide. So when your kids come to inherit your share, it would be free.

[ColinCarter]

Ha! I know this one well. Back in the 80s many estates on the Costa del Sol were selling shares in Gibraltar-based companies which in turn owned your unit.

Naturally, that is illegal for Spanish residents (ie, expats) and creates all kinds of problems. For example, the AEAT would like to see rental payments for the property you occupy and expect the foreign company to pay tax on income earned in Spain.

Furthermore, the Spanish authorities are constantly closing loopholes of this kind - including the latest move to kick Gib banks out of international banking circles if they do not co-operate fully on money laundering and tax fraud.

However, in some special cases this approach would be useful and legal.

[STalbot101]

Originally Posted by ColinCarter

Ha! I know this one well. Back in the 80s many estates on the Costa del Sol were selling shares in Gibraltar-based companies which in turn owned your unit.

Naturally, that is illegal for Spanish residents (ie, expats) and creates all kinds of problems. For example, the AEAT would like to see rental payments for the property you occupy and expect the foreign company to pay tax on income earned in Spain.

Furthermore, the Spanish authorities are constantly closing loopholes of this kind - including the latest move to kick Gib banks out of international banking circles if they do not co-operate fully on money laundering and tax fraud.

However, in some special cases this approach would be useful and legal.

We are not talking about Gib based companies. You can set up these companies in the UK, 100% legally. Plus, the company is in your name, nobody elses. You can even go as far as writing your own shareholders agreement. There is no fraud or money laundering involved !

[ColinCarter]

Thanks. I take your point. But as you know, expats - as residents in Spain - have to identify the property they occupy (datos catastrales), its owner and the amount paid in rent. I may be mistaken but I think that will force the UK company to pay Spanish VAT and income tax on the rent less maintenance (must be a reasonable amount - whether actually paid or not). That could make the foreign company approach decidely less attractive.

Would you agree?

[STalbot101]

you can go to a Spanish Lawyer and a Spanish notary, neither will advise you to put your property into a UK limited company because firstly, it is out of their jurisdiction, and secondly because should you need to go to probate, they stand to earn thousands !

[Stravinsky]

I have to make it clear to everyone that the reason this poster has been so proactive about this method of IHT protection is that he has a vested interest in the product, therefore if you do intend to investigate any further then caution is advised as the poster already has not been completely honest with us in declaring his association with the product