The information given
below is to be used only as a guide as legislation relating Property
laws and to Spanish Tax is subject to change.
There are ways to reduce any liability to Tax matters and
professional advice should always be sought.
All Residents in Spain for Tax purposes are liable to Spanish
Inheritance Tax (IHT) regardless of the country in which the
inheritance is located. Any person not resident in Spain is liable
to Tax on assets inherited which are physically located in Spain.
In the case of a foreign resident in Spain, or having property or
assets in Spain, it is strongly advised to make a Will in Spain to
dispose of assets in the event of death. Assets in another country
will require a separate Will that should be made in the country in
which the asset is located.
Spanish Inheritance Tax is charged on its value after the first €
15,000 and at present there is no exemption as may be found in some
other countries. However, being a resident of Spain give the
possibilities to claim a 95% reduction in the value of the asset for
Inheritance Tax purposes. When no Will exists in Spain for the
disposure of assets, a Will in another country will apply under the
Law of the country in which the Will has been lodged.
Under Spanish law the property of nationals upon death, degrees that
two-thirds of the estate is inherited by the offspring. However, a
foreigner is able to nominate who will be the inheritors of the
estate but this does not exclude the estate from being subject to
normal Inheritance Tax.
A Spanish Will is made in two parts. The first part is in the
Spanish language and the other in a language of choice. It is
checked by the Public Notary to be correct and in his presence it
is signed by all concerned with three witnesses. This type of Will
is named a Testamento Abierto. The Notary will keep the
original in his files and upon request supply certified copies.
The Inheritance Tax payable depends on the relationship to the
deceased and the amount inherited. Within Spain there is no
exemption for a spouse. Tax is payable on all inheritance and there
is a Tax threshold allowance. The Tax law states that under certain
criteria the value of a family home can be reduced by 95% subject to
total figure involved.
Financial companies and Banks in many countries as well as in Spain
are prepared to lend money to purchase a selected property. A loan
is either secured by a property in the purchaser's home country or
on the intended Spanish property. Spanish Banks are prepared to lend
funds to non-residents to purchase properties. The normal practice
is to lend up to 60% of the purchase price value.
Advantages and disadvantages in obtaining a mortgage in Spain
instead of the UK should be considered in depth and financial advice
should be sought.
In Spain there may be high set-up costs and these could be in the
region of £1,000 - £2,000. Also, the buyer may have to pay extra taxes
and fees to the country where the property is located. The buyer
will pay the local interest rates which may be lower than those
applied in the UK.
If repayment for your Spanish mortgage is from a UK source take into
consideration the exchange rate. It is advisable to commence
enquiries about a mortgage prior to choosing the actual property.
When deciding the name or names of ownership it is also good to take
legal advice due to the many influencing factors.
Prior to making a property purchase it is advisable to consider the
various types of ownership. It can be purchased in an individual's
name, with a partner, or, in a company name. These different methods
should be considered with reference to the future, when reselling,
and the question of possible Inheritance Tax.
Spanish laws relating to the rental of properties are extensive and
we specially recommend that when considering long-term rentals legal
advice should be sought. Below are some points to be considered.
When the Landlord request a Rentor to leave the property which is
has a two year contract known as a Vivienda Contract, an
extension to the Rentor may be obtained through the Courts for a
further five years period.
If the Landlord decides to sell the property during the period of
the Contract, the Rentor has an option on the sale of the property
for the same price as officially registered in the sale.
Short term or holiday rentals are subject to different laws and this
type of rental is normally conducted by using a Contract by the name
of Temporada. Under some circumstances it may be necessary to
establish from the beginning which type of Contract will be used.
The law permits a Landlord to hold a suitable cash deposit against
possible damages. When considering an unfurnished property it is
normally equivalent to the rent for one month. In the case of
furnished properties (such as a temporary or holiday rent), it can
be equal to the sum of two months rent. This deposit is known as a
Fianza, and should be held by a third party in case of any
UK Inheritance Tax related to Overseas Assets
The worldwide assets of a UK expatriate are also liable to Tax in
the UK. When the deceased is not domiciled in the UK, the Tax is
assessed on UK sited assets. As many UK expatriates in Spain retain
their UK domicile so they are therefore liable for Tax in the UK
and in Spain.
The Tax in the UK is assessed on the total worldwide wealth of the
deceased. Currently the first -
£ 234,000 is exempt from Tax -
this is known as the nil-rate band. A single rate of 40%
applies to the excess. An important point is that no Tax is payable
on transfers between spouses providing that the surviving spouse is
also a UK domicile. A non-UK domiciled spouse enjoys a Tax allowance