| If
you are a UK expatriate, resident in Spain then
you should be aware of these points:
Spanish
Inheritance Tax
Expatriates resident in Spain for tax purposes
are liable for Spanish Inheritance Tax (IHT) regardless
of the country in which the inheritance is situated.
Those not resident in Spain are liable to IHT
in Spain on assets they inherit which are physically
located in Spain.
UK
Inheritance Tax
The worldwide assets of a UK expatriate are
also liable to IHT in the UK. Where the deceased
is not domiciled in the UK, IHT is assessed on
UK sited assets.
The
bottom line
Many will say that Spain is now their permanent
home and that they will remain here for the rest
of their lives, however most will admit that they
would probably return to the UK should either
partner become ill or one of them died. The fact
is that most UK expatriates in Spain retain their
UK domicile so are therefore liable for IHT in
the UK and in Spain.
The
tax - UK
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 UK domiciled. A non-UK domiciled spouse has
an allowance of £55,000.
The
tax - Spain
Tax is assessed on each individual. The tax
payable depends on the relationship to the deceased,
pre-exisitng wealth and if under 21 years of age
and the amount inherited. Here in Spain there
is no exemption for the spouse. Tax is payable
on all transfers and the allowance is just £10,000.
The
home in Spain
Spanish IHT legislation states that, subject
to certain conditions, the value of the family
home can be reduced by 95% subject to a maximum
of £75,500 (20,000,000ptas). However, any
tax saved can be clawed back, with interest if
the home is sold within 10 years, except on the
death of the recipient. Since many surviving spouses
return to the UK following the death of their
partners, this 95% reduction has little meaning
in practice.
There
are however, several ways to reduce any liability
to IHT and you should seek professional advice.
The information given here is only a rough guide
and bear in mind that legislations and allowances
do change.
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