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saving for non-EU citizens in the spanish inheritance tax

INHERITANCE TAX NOW ALSO THE SAME FOR EU- AND NON-EU CITIZENS

Written by Gustavo Calero Monereo on . Posted in Andalusian, costa del sol, english speaking solicitor, heir, Inheritance Tax, judgment, lawyer, legal advice, NON RESIDENT, Sin categoría, wills.

saving for non-EU citizens in the spanish inheritance tax
Spanish inheritance tax now the same for EU- and non-EU members

As we stated in our post in February 2015, on 01/01/2015, the regulations governing Inheritance Tax were amended,  EU citizens began paying the same Inheritance Tax as citizens resident in Spain. From that time EU citizens were able to pay tax in accordance with the regulations of the Autonomous Community where the assets are located. Remember that these regulations are much more beneficial than national regulations on Inheritance Tax, which were applied to EU citizens until that date. This amendment left non-EU citizens out, which were required to continue paying tax according to national regulations.

Supreme Court rules in favour of Non-EU members

However, two judgments of the Supreme Court, in February and March 2018, referring to residents in non-EU countries such as Canada or Switzerland, determined that there would be discrimination contrary to the free movement of capital if non-EU citizens were not allowed to opt for regional regulations in the same manner as EU citizens. Therefore, these non-EU citizens should also be treated in the same manner as EU citizens in terms of Inheritance and Donations Tax, also being eligible to receive regional tax benefits.

We should add that the free movement of capital is enshrined in article 63 of the Treaty on the Functioning of the European Union, which prohibits all restrictions on the movement of capital between Member States and between Member States and third countries, making the limitations for non-EU citizens in terms of Inheritance Tax contrary to the regulations of the European Union.

Since September 2018, the Spanish Tax Agency decided to comply with these rulings and started accepting settlements of Inheritance Tax for non-EU citizens, applying the regulations of the relevant autonomous community to these.

Benefits of tax calculations by Autonomous Communities

This change in tax criteria represents significant savings in terms of inheritance for non-EU citizens, as it should be noted that, in most Autonomous Communities in Spain -including Andalusia-, a widowed spouse, children and descendants, such as grandchildren, barely pay any Inheritance Tax, as they are eligible for significant bonuses. These bonuses in Andalusia were explained in detail in our article from January 2018.

Possibility to reclaim tax until four years back

Suffice it to say that this tax change opens the door to claims from non-EU heirs who have paid Inheritance and Donations Tax over the last few years, if a comparison between national and regional regulations were to show that they paid much more than an EU citizen would have. This claim may be filed provided that the right to claim has not been time-barred, the deadline being established at four years after the payment was made.

Brexit and British citizens

As a last note, considering the consequences of Brexit for British citizens with properties and assets in Spain, fortunately, even if they remain outside the European Union and would be considered non-EU citizens, they would be able to continue to benefit from bonuses and discounts in Inheritance and Donations Tax in the same manner as before.

It should be noted that there are many British homeowners and buyers with properties in Spain and, at least, their heirs will not be harmed in terms of taxes payable in a future inheritance procedure.

 

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

Inheritance tax Andalusian

NON-MARRIED LONGEST LIVING PAYS HIGH INHERITANCE TAX

Written by Gustavo Calero Monereo on . Posted in Andalusian, costa del sol, english speaking solicitor, heir, Inheritance Tax, lawyer, legal advice, malaga, nerja, Sin categoría, solicitor, wills.

NON-MARRIED LONGEST LIVING
NON-MARRIED LONGEST LIVING

THE CURRENT SITUATION OF INHERITANCE TAX

On 1 January 2018, a new reform of Inheritance Tax entered into force in Andalusia, the main change of which was to raise the tax-exempt amount to one million euros. This new reform changes the reform introduced a year ago, which we explained in our post of November 2016.


Which heirs would be exempt from Inheritance Tax?

Heirs that meet each one of the following requirements would be exempt:

  • For the heir to be included in groups I and II as established in the regulation governing this tax, the heir needs to be the spouse, child, grandchild or parent of the deceased
  • For the value of the estate to be inherited per heir does not exceed one million euros
  • For the pre-existing assets of the heir to be less than one million euros
  • For the heir to be a citizen of a Member State of the European Union or, if they are citizen from outside the European Union, both the deceased and the heir must reside in Andalusia


What happens with other family members who inherit?

All other heirs, such as siblings, nephews, nieces, uncles, aunts and cousins of the deceased are included in groups III and IV of the Inheritance Tax and will continue to pay the same amounts.

In other words, these heirs will pay inheritance tax from the first euro they inherit except for heirs in group III, who are able to deduct an amount of 7,993.46 euros. This means, for example, that if John leaves his nephew his Nerja property valued at 240,000 euros as inheritance, his nephew will have to pay about 63,000 euros in Inheritance Tax.


What happens if you inherit from your best friend?

You would be included in group IV of this regulation. This means that if John, instead of leaving the 240,000-euro property to his nephew leaves it to his best friend, he or she will have to pay about 80,000 euros in Inheritance Tax.

 

How are property values calculated for Inheritance Tax for non-married longest living?

Every year, the Regional Government of Andalusia publishes a regulation that establishes certain coefficients to update the values of urban properties located in Andalusia. These coefficients are applied to the cadastral value of the property; this you can find in your Property Tax receipts. The result of applying these coefficients to the cadastral value is what we call the minimum taxable value.

The regulation explained above deals with the minimum taxable value of urban property but, in the case of rural property, this isn´t applicable. Therefore it is necessary to obtain a valuation from the technicians of the Regional Government of Andalusia to calculate the minimum taxable value. However, the Regional Government of Andalusia in the province of Malaga uses the coefficients published every year by the College of Architects of Malaga to calculate the value of rural properties.

Regarding the means used by the administration to calculate the minimum taxable value of properties in Andalusia –as well as other Autonomous Communities–, there is much controversy in general and there is the possibility to challenge those values in the event that the person liable to pay the tax deems them excessive or not adjusted to reality. This topic is complex enough to be covered in a whole new article.


NON-MARRIED LONGEST LIVING OR UNREGISTERED COUPLES IN ANDALUSIA

Who are we talking about?

In the event that a couple is not married –either in their country of origin or in Spain–, if one of them dies and leaves the other member of the couple as an heir, for the purposes of Inheritance Tax this person would be considered to be in group IV. In other words, in this case the partner is considered to be just a friend putting the person in the group with the highest rate of Inheritance Tax.


What happens to common-law partners registerd in Andalucia?

In Andalusia, couples registered in the Registry of Common-Law Partners of Andalusia are equivalent to married couples for the purposes of Inheritance Tax, for which reason they would benefit from the deductions for spouses explained above.


What happens to common-law partners registered in another Member State of the European Union?

In this case, the Regional Government of Andalusia does not recognise such registration for the purpose of Inheritance Tax, for which reason those couples would pay tax as though they had received inheritance from a friend, leaving them in the group taxed at the highest rate.

If John leaves his partner Mark 50% of the property they both purchased in Almuñecar in 2005 and if the fiscal value of that 50% is 120,000 euros, Mark, the heir, would have to pay about 30,000 euros in Inheritance Tax for inheriting 50% of that property.

If John and Mark had been married or registered in the registry of common-law partners of Andalusia, Mark would not pay a single euro for inheriting 50% of the property from John.


What should be done in this case?

If you have property in Spain with your partner and you would like him or her to inherit your part and you are unmarried, we advise that you get married (either in Spain or in your country of origin) so that you can benefit from Inheritance Tax reductions. Those who don´t want to get married, can register themselves in the Registry of Common-Law Partners of Andalusia (Registro de Pareja de Hecho) and then the status would be equivalent to that of a married couple.

Property owners who are not citizens of a Member State of the European Union

In this case, heirs may not benefit from reductions for spouses, children, grandchildren and parents of the deceased, so they would pay Inheritance Tax in the event that they inherit. They can only avoid this if both the deceased and the heir are resident in Andalusia.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

ARVSSKATT I ANDALUSIEN: FÖRÄNDRINGAR I SIKTE

INHERITANCE TAX IN ANDALUSIA: CHANGES AHEAD

Written by Gustavo Calero Monereo on . Posted in costa del sol, english speaking solicitor, estate, heir, Inheritance Tax, malaga, nerja, wills.

inheritance tax paid by the heirs
inheritance tax paid by the heirs

On 1 August, the Regional Government of Andalusia approved the first of two reforms of inheritance tax in Andalusia. This reform and the upcoming one aim to improve taxation for heirs.

The first reform affected the acquisition of a person’s usual residence by heirs and a series of reductions were approved, ranging from 100% to 95% when the value of the home exceeds €242,000. The reduction in inheritance tax in this sense is very significant.

However, it should be noted that only in estates inherited from parents by children (whether biological or adopted), spouses, relatives in the ascending line and persons related collaterally (siblings, cousins or grandparents) over the age of 65 can an heir in Andalusia opt for the reduction for the acquisition of the usual residence. Likewise, the following requirements must be met:

  1. Having lived with the deceased person in the usual residence during the two years preceding death.
  2. Maintaining ownership of this residence for 3 years.

Furthermore, the Regional Government of Andalusia has announced that it would complete a second reform of Inheritance Tax, which will enter into force on 1 January 2017.

In this case, the minimum exempt from Inheritance Tax in Andalusia will be of €250,000 per heir. I.e. heirs inheriting assets valued at an amount equal to or smaller than €250,000 will not have to pay Inheritance Tax in Andalusia.

As explained in a previous article, this exemption only applies to descendants or adopted children of the deceased person, as well as their relatives in the ascending line or adoptive parents and spouses, provided the pre-existing assets of the heir are equal to or less than €402,678.11.

Lastly, another substantial change should be noted as, for estates with a value of between €250,000 and €350,000, a minimum value of €200,000 is established. I.e. if the inheritance received by a child or widowed spouse is valued at more than €250,000, the first €200,000 would be exempt from inheritance tax and only the remaining amount would be paid, provided that the total value of the estate does not exceed €350,000. If this amount is exceeded, inheritance tax would be payable on the entire value of the estate, without the possibility to apply any exemption.

Lastly, I would like to remind you that the best way to plan your inheritance begins with your will, for which reason it is always best to go to an appropriate professional who can examine your situation and give you personal advice.

 

Author: Gustavo Calero Monereo, C&D Solicitors, Malaga, Andalusia.

 

 

DON'T FORGET YOUR WILL IN SPAIN WITH THE NEW EUROPEAN REGULATION

DON’T FORGET YOUR WILL IN SPAIN WITH THE NEW EUROPEAN REGULATION

Written by admin on . Posted in Andalusian, english speaking solicitor, estate, heir, Inheritance Tax, PROBATE LAW, wills.

Renewing Spanish will 2015
Renewing Spanish will 2015

We wouldn’t want to ruin your day by talking about the “other life”, which we hope is a long way away (fingers crossed). However, because of the European Succession Regulation approved on 27 July 2012 and its upcoming application for the succession of people who die after 17 August 2015, I think it convenient to dedicate a few words to foreigners with assets in Spain.

As a starting point, this regulation establishes which jurisdiction applies to the assets of a EU national in a country of the European Union. The law applicable to the succession of a EU national, according to this Regulation, would be that of the country of habitual residence, with the ability to choose to apply the Law of his or her nationality provided that the deceased has stated this clearly and unequivocally in his or her will.

When it comes to Spain, if you are a national of a different country in the European Union but you reside and own assets in Spain, you must know that, if you do not have a Spanish will that clearly and unequivocally states that you would like the law governing your succession to be that of your nationality at the time of death, Spanish law will apply to your inheritance. What does this mean?

In Spain, there is no liberty to leave your property as inheritance to whomever you want. In Spain, the assets of the deceased are divided into three parts. Two of these parts belong to forced heirs, as follows:

  • The first part goes to each of the children in equal parts or, in the absence of children, to parents or, in the absence of the latter, to siblings.
  • The second part goes to one of the children or, if nothing has been set out, it is divided among all children in equal parts as well, as explained above.
  • The third and last part of an inheritance is the freely disposable part and this is the part that the deceased can leave to whomever he or she wishes but, to do this, there must be a will establishing this because, in the absence of a will, it will also be divided among the children in equal parts.

In Spain, a spouse comes last among forced heirs and would only inherit in the absence of these. In other words, if you are a foreigner in Spain and you reside and hold assets in our country, be aware that, if you die without a will or your will doesn’t clearly state that you would like the law of your nationality to apply, your spouse will probably inherit nothing.

The best way to prevent problems of this type is for you to execute a will in Spain and clearly state the Law you would like to apply at the time of your death.

If you happen to have a will in Spain already, it is important for you to review it and verify that it complies with the provisions of the European Succession Regulation or, in other words, that the will you have signed clearly states that your will is for the law governing your succession to be your personal law, i.e. the law of your nationality at the time of your death.

In my opinion, wills that state that “this will is valid pursuant to the personal law of the testator and said law does not cover the concept of forced heirs…” or contain similar words may cause problems under the New Regulation and, in these cases, my recommendation is to execute a new one that clearly states that you would like your succession to be governed by the law of your nationality.

I would like to clarify something that is often confused in these matters. The law governing the succession of a person in Spain is one thing, which depends on what has been explained in this article, but the tax consequences of succession in Spain are an entirely different matter. In this case, we’re referring to Inheritance Tax, which is regulated as explained in our post from March , as payment of that Tax will be due from the fact of inheriting an asset located in Spain, regardless of the Law governing your succession.

Lastly, we wish that you live for many years and you don’t have to worry too much about such unpleasant matters.

Author: Gustavo Calero Monereo, C&D Solicitors (Lawyer)

Torrox-Costa (Malaga/Costa del Sol/Andalucia)

SPANISH INHERITANCE TAX: POSSIBLE CONDEMNATION AND CHANGES

SPANISH INHERITANCE TAX: POSSIBLE CONDEMNATION AND CHANGES

Written by Gustavo Calero Monereo on . Posted in Andalucia, Andalusian, english speaking solicitor, Headline, heir, Inheritance Tax, malaga, nerja, NON RESIDENT, taxes, wills.

Did you pay too much Spanish inheritance tax?
Have you paid too much Spanish inheritance tax?

Last 27th of March 2012, the European Commission pursued an action against Spain for the breach of the Treaty on the Functioning of the European Union and the Agreement on the European Economic Area, as a result of the discrimination in respect of the Spanish inheritance and gift tax, since non-residents pay more taxes than residents under the same personal conditions.

Spanish inheritance tax is managed by Spanish autonomous regions, so there are significant differences from one region to another in respect of this taxation. Each regional administration has regulated this tax in a different way. However, if the taxpayer is a non-resident, the Central State Tax Administration Office is the competent body to collect this tax payment instead of the regional government tax office. Regional government regulations are much more favourable for taxpayers than central government tax rules, since regional administrations have established tax exemptions and reductions for the inheritance and gift tax.

However, these discriminatory situations between residents and non-residents in Spain also arise between residents of the different autonomous region. In fact, last 8th of May 2013, a court order from the Spanish Supreme Court established the illegality of the inheritance regulations of the Valencian autonomous region, because these regulations allow heirs residing in this region to benefit from tax reductions against those residing in other Spanish regions who do not enjoy from this benefit.

It is expected that in the future the Spanish Constitutional Court itself rules in this respect. Furthermore, upon consideration of this inequality legal situation, it is likely that the inheritance tax may be reformed in the medium and long term in order to balance differences among the different Spanish autonomous regions.

Regarding the action against Spain, last 8th of January the hearing for this proceedings was held before the Court of Justice of the European Union. It is very likely that a judgment may be pronounced in a few months in regards of this case. If this court order condemns Spain because of this discrimination, it may give rise to a right for reimbursement of undue taxes paid to all those non-residents in Spain who paid in the last 4 years the Spanish inheritance and gift tax, provided that this payment had been higher than the tax payment corresponding to residents belonging to this Spanish region under the same circumstances.

Taxpayers may claim within 4 years. This period starts to run from the date of tax payment. For this reason, in the event of a possible ruling condemning Spain in this regard in the following months, it is very important that all those non-residents in Spain, who paid inheritance and gift tax in the last 4 years,  check if their payment was higher than the one made by a resident in the same Spanish region. If that were the case, they should claim for the refunding before the end of this 4 years period. Once this period expires, they will not be entitled to it. The submission of this tax refund claim shall stop the 4 years expiry date while it is decided if Spain is condemned for this issue.

Our law firm is at your disposal to assist you in this matter. We would offer you our service on the basis of a “no win-no fee agreement” for the submission of the aforementioned tax refund claim before the Tax Authorities, that is, you would pay nothing to us if the public administration declines this first claim.

 

Author: Gustavo Calero Monereo, C&D Solicitors (Lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

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