Inheritance tax in Spain the facts and fiction


Why if you own property in Spain should you write a Spanish Will.

Over the years there has been much confusion about the validity and necessity of having a will in Spain if you hold assets there. Many buyers or owners of assets in Spain were led to believe that unless a will specified what should happen to the asset in Spain the law in Spain may mean that the asset would not go automatically to the immediate beneficiary OR stipulated beneficiary from a Will outside Spain. This is not the case but there are other very good reasons for making sure a Spanish Will is in place.

Why should there be a Will written in Spain

Even if there is not a will in Spain, finally in terms of beneficiaries, the beneficiaries will be those that would normally inherit as specified by succession law in the country in which you are deemed to be domiciled. This is the case even if you live in Spain at death it is country of which you are domiciled ( born) that counts not residency. There are significant benefits however to writing a Will in Spain for Spanish assets. Firstly if you wish to do something different with the Spanish Asset to assets you hold elsewhere this can be clearly specified. Secondly if a Will is held in Spain it is not necessary,and neither does the beneficiary incur the cost of getting a probate from the UK to Spain before the assets can be dispersed and the process in Spain take place. Any Will in Spain should work in conjunction with and not against any specified wishes in the UK or country where domiciled.

Differences in application of IHT in Spain

It must be remembered that differences in Spanish succession laws apply and there the fundamental differences as to what, and how and at which point IHT (inheritance tax) becomes payable for assets held in Spain. For instance for Spanish assets there is no spousal exemption, this means assets held by a husband or wife become immediately liable for IHT on death of one partner. Unlike the UK where the estate is responsible for the inheritance tax and an asset can be sold to pay for the tax due, in Spain it is the beneficiary who is responsible for paying the tax and any tax due must be paid before the asset can be moved, in terms of ownership, to the person inheriting. IHT tax levels vary from region to region in Spain but like the UK is in bands depending on the level of the value of the asset.

Often the tax bill is not huge unless significant assets are held, but consideration must be taken as to the fact whatever the bill is, it has to be paid upfront and the beneficiary must be in a position to pay this. Careful planning with a Lawyer who is an expert in this field is therefore essential. Understanding upfront the possible implications of tax on death will allow a buyer in Spain to make sure sufficient funds are available to the beneficiaries, or that they understand fully to inherit the asset, what tax implications they will have to consider. A number of solutions can be put in place ranging from life cover policies, raising short term credit from a Bank, holding a Spanish mortgage or savings held by either the deceased outside Spain or by the potential beneficiaries.

The process of Succession.

In Spain in order to claim an asset from a deceased relative there is a process that must be followed. Often at death things like Bank accounts, if the Bank is informed of the death even in the event of joint accounts, are frozen. This can be particularly upsetting and difficult where a husband or wife dies, they live in Spain and this is the only Bank account. Until the probate is finished it may remain the case that the account is frozen with no access to liquid monies so it is a good idea to consider this when living in Spain and thinking at purchase about how your finances should be set up. Maintaining single bank accounts as well as joint ones or having single saving accounts, or maintaining some form of liquid account in another country could be sensible.

If a Will has been written and held in Spain the first steps are that the beneficiaries must obtain if not already held a NIE number. An NIE is a fiscal number that allows the authorities to track any financial or asset acquisition dealings an individual has in Spain. A certificate called the “last will certificate” must be obtained and with these documents the beneficiary can go to the Notary and take out a title deed acceptance of IHT. The beneficiary, before then having the asset transferred, has up to 6 months from death to make any tax payments due before fines would apply. Each month subsequently that the tax bill is not paid, beyond the 6 months a fine will be applied. The fines unlike the IHT itself are high and will eat away very quickly at the value of the asset.

What happens if there is no Will in Spain

If there is no will in Spain first a probate from the UK must be obtained. Not just must this obtained, but it will need official translation to Spanish to be accepted and will require the stamp of the Apostille de Hague, adding to both timescales and costs applicable to the Inheritance process. Failure finally to pay an IHT bill due in Spain, will instigate the asset being sent to Subasta or auction to enable to tax authorities to take the tax due plus fines. If an asset ends up at Subasta it is highly unlikely any surplus monies will be left. Pre-planning when buying in Spain for the event of death, correct split of ownership of assets in the first place and a professional legal adviser who is already abreast of the current and future situation, to offer support at what is a very difficult time for those left behind, is worth the time invested and the small upfront costs.

Using a Spanish Lawyer

Appointing a Spanish lawyer as executor of the Will to ensure all obligations are met in the quickest timescale removes from beneficiaries is the risk of incurring fines and having to deal with Spanish Bureaucracy at a point in time when they are least equipped to do so. Contact us today

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