Spanish Succession TaxPosted by Anne Sun, May 13, 2018 22:24:54
The major changes
introduced in Andalusia at the beginning of 2018 for the calculation of Spanish
Succession Tax (SST) liability are of note generally, when dealing with estate
planning and inheritance cases which include Spanish assets.
is only one of 17 Autonomous Regions within Spain
Whilst in Spain, the individual Autonomous
Regions set their own exemptions/ allowances, a very
significant proportion of Spanish properties owned by British nationals are actually
situated within Andalusia. Hence, an awareness of the SST rules in Andalusia is
particularly important for estate planning professionals who deal with cases
including Spanish assets.
towards reduced SST Impact
The recently introduced fiscal changes in
Andalusia followed a concerted social and political campaign in Spain against
the previous rules- which in many cases, led to inconsistent and onerous
treatment of beneficiaries. Several other Autonomous
Regions had previously capitulated to this type of pressure; and had taken
steps to reduce SST Impact.
Now that Andalusia has similarly
acted, it is anticipated that Autonomous Regions which (for now),
continue with harsher SST rules, could over time, also introduce less stringent
rules. In general terms, the policy trend in Spain certainly appears to be
towards reducing SST impact.
Also, many commentators continue with the view that the
imposition by Autonomous Regions of different SST rules also
creates discrimination between EU citizens- depending on where in Spain their
property is situated. The view being that it is inevitable eventually, that
Spain will be forced to centralise/ standardise the SST policy across all the
Autonomous Regions, to bring an end to this anomalous
New SST Rules
The effect of the new rules is that spouses and parents/
children/ grandchildren who individually inherit assets within Andalusia which
do not exceed 1 Million Euros in value, pay no SST- by way of an exemption. But
as always, there are various important 'small print' points:
The new rules only take effect in
relation to inheritance which arises from deaths occurring after 1 January
2018. There is no retrospective effect.
The new rules do not benefit
beneficiaries who fall outside the strict marital and ascendency/ descendency
relationship groups indicated.
Any beneficiary who has wealth above
1 million Euros in value before the inheritance in question does not
have the benefit of the new exemption.
For cases where the actual amount
inherited exceeds 1 million Euros in value, then it is only the amount above 1
million Euros which is taxed. (Previously this was not the case. To exceed the
exempt amount even by one Euro meant that tax was then paid on everything-
subject only to very small allowances).
British owners of Spanish Properties
As was previously the
case, EU individuals inheriting properties in Spain continue to have the
benefit of the individual Autonomous Regions' SST exemptions
and allowances, irrespective of their country of actual residency. This extends
to the new rules of Andalusia, including the 1 Million Euro exemption.
However, once Brexit occurs, (as
British owners of Spanish properties will then no longer be EU individuals), it
is anticipated that they will only have the benefit of the
individual Autonomous Regions' SST exemptions and allowances provided
that they are fiscally resident in Spain.
So post-Brexit, family owners of
Spanish properties who continue to live mainly in the UK (and, for example,
just have a holiday home in Andalusia), will instead of having an SST exempt
amount per beneficiary of 1 Million Euros, have an SST exempt amount per
beneficiary of just under 16,000 Euros!
In estate planning terms therefore,
it is essential to bear in mind where potential beneficiaries are fiscally
resident. In many cases of English individuals who have retired to Spain, for
example, if their children remain living in the UK, then the family Spanish
assets remain very much exposed to SST.
For this reason, although the
headline-grabbing increase in the SST exempt amount has come as a relief to
many families, there are a very significant number of British families with
properties in Spain where (and even more so, anticipating the post-Brexit
situation), there is very little in the way of SST protection. So, intelligent estate
planning; and having in place tax efficient Spanish Wills, remains as important
as ever, for English families with properties in Spain.
The Legal 4 Spain team is always
available to provide preliminary advice on a no-obligation basis in relation to
Estate Planning and Inheritance cases where there are Spanish assets.
Spanish Wills &Estate PlanningPosted by Anne Sun, October 15, 2017 13:01:49
owners of Spanish properties, the importance of making a Spanish Will is
general terms, a correctly executed Spanish Will ensures certainty, speed and
economy in the event of Spanish probate; and also provides the facility for tax
the consequences for the beneficiaries of a non-Spanish national who dies
leaving Spanish assets, but no Spanish Will, can be unexpectedly onerous. In
our Spanish probate practice, to date, there is not a single case where we have
not found a solution to complete Spanish probate- however unusual the
a few exceptional cases, whilst it has been possible to ‘unlock’ the Spanish
property by completing the Spanish probate case, the combination of the failure
of the deceased to make a Spanish Will and the consequential forced application
of Spanish legal and fiscal principles, has inevitably created situations of
significant complexity for those left behind. A couple of examples will
illustrate the point.
deceased English lady, estranged from her three adult children from her first
marriage, since her second marriage 25 years ago. She died totally intestate.
She had taken Spanish residency along with her second husband, in her final
years. She had verbally expressed her intention that her surviving husband (and
co-owner of the Spanish property) should receive her 50% interest in the
Spanish property in the event of her death.
the deceased was habitually resident in Spain at the time of her death, in the
absence of any legally binding direction for English succession law to apply
(by her not having made a Spanish Will), Spanish succession law had to be
succession law generally operates to protect the interests of descendants-
therefore in this case, necessitating the long- estranged deceased’s children’s
involvement in the Spanish probate process.
deceased’s children (after no contact in 25 years), had to be traced through
genealogy professionals. Rejecting the proposal simply to renounce their
entitlement, as had been hoped, the deceased’s husband is left with a
restricted interest in the Spanish property- now being a co-owner, along with
his deceased spouse’s children- whom he had never even previously met.
the deceased signed a simple Spanish Will containing an expression of her wish
for her husband to inherit- pursuant to English succession law, her husband
would have enjoyed a comfortable retirement; and he would have been able to
sell the Spanish property as he had planned with his late wife; enabling him to
return to live in England. He would have received the Spanish property sale
proceeds following his wife’s death.
he remains in Spain with all his wealth tied up in a Spanish property, which is
now co-owned along with individuals who are not known to him; and whose
willingness to co-operate is directly linked to ill-feeling over the demise of
their parents’ marriage 25 years ago.
fact, had it not been possible to find the solution we did, the situation would
have been significantly worse for all concerned, with the property totally
‘locked’ in legal terms; and selling or dealing with (mortgaging/ letting) the
property would have been totally impossible. Our solution of the case at least
provides a framework for the family to come together and settle terms between
them for the disposal of the property- which could then be effected without any
further legal complications.
English resident couple in a civil partnership with a property in Spain
had English Wills leaving their respective worldwide Estates to a common
partner then intended as part of their overall Estate planning, to sign a
Spanish Will leaving a life interest in their respective shares in the Spanish
property to the surviving civil partner, with the underlying legal title in the
Spanish property passing down to the common friend.
intended Estate planning strategy would have resulted in a zero Spanish
Succession Tax bill for the surviving partner; and his having a secure lifetime
interest, guaranteed for his remaining years- living unencumbered in the
the failure (by the partner who then died before signing his Spanish Will), to
act promptly in signing the Spanish Will as planned, meant that the surviving
partner was unable to claim the intended lifetime interest in the Spanish
furthermore, because of a quirk in the regional rules for calculation of
Spanish Succession Tax, this also led to a total Spanish Succession Tax bill of
more than 3 times the amount it would otherwise have been (from 20,000 Euros up
to more than 60,000 Euros).
again, the best possible solution in the circumstances was found for the case
to ‘unlock’ the Spanish property. But the failure of the deceased to have put
in place a Spanish Will with tax efficient Estate planning, unavoidably
frustrated his testamentary wishes; and also left an unnecessarily high level
of tax exposure.
Legal 4 Spain team is always available to provide preliminary advice on a
no-obligation basis in relation to Inheritance and Estate Planning cases where
there are Spanish assets.
Spanish Succession TaxPosted by Anne Fri, June 02, 2017 20:52:25
It is well over 2
years now, since the European Court of Justice's Ruling, that the Spanish Tax
Authority’s succession tax system conflicted with the European Union principles
of freedom of movement of EU individuals and circulation of money within the
That case was
specifically in relation to the distinction the Spanish Tax Authority
previously made between those who were resident in Spain; and those who were
The Ruling was that
Non-Spanish Residents (who were also Europeans) should be treated in the same
way as Spanish residents, for the purposes of Spanish Succession Tax.
Following the Ruling,
Spain revised its practice, as required; and now (for example), British owners
of Spanish properties are treated in the same way for Spanish Succession Tax
purposes, irrespective of whether or not they are resident in Spain.
But although the
Spanish Tax Authority is now compliant in terms of the Spanish residency/ non-
Spanish residency distinction, there remains a separate glaring inconsistency
in approach, which also amounts to discriminatory treatment of EU individuals.
That is the different
levels of Spanish Succession Tax impact, according to which Autonomous
Community within Spain is the charging Tax Authority in the case in question.
In many countries,
the calculation and charging of succession taxation is simplicity itself.
However in Spain, it is a highly complex system, which creates a great deal of
uncertainty, inconsistency and controversy.
Tax is not always administered centrally; nor is it charged in a uniform way
nationally; nor is it charged at a single rate; nor is it subject to universal
national allowances and reductions.
At the heart of the
complexity is the fact that for Spanish nationals/ Spanish residents, the
responsibility for Succession Tax administration lies with the 17 individual
autonomous communities within Spain. Each autonomous community has discretion
as to charging basis; practice; and allowances/ exemptions.
This fiscal quagmire creates
bewildering inconsistencies across Spain. On the attached image, the Spanish
Succession Tax impact is indicated, based on the same Estate details, but
varying according to which is the applicable Autonomous Community.
And, as a very
noteworthy side issue, it is not only foreign owners of Spanish properties who
are exposed to the unfairness of this perplexing system; but it has been
acknowledged that many Spanish families living in Spain themselves suffer this
arbitrary discrimination under the current system, according to where (in
Spain) their family members live.
It remains to be seen
whether this very worrying anomaly will be regularised by centralizing/
standardising administration of Spanish Succession Tax; or (if that is deemed
too radical), at least a harmonisation of practice across Spain.
For non- Spanish
owners of Spanish properties, they are fortunate, in that there are
opportunities in Spanish Wills and estate planning, to mitigate this exposure
to Spanish taxation; and expert advice is recommended to ensure that the fiscal
impact is minimised; in planning for future inheritance.
commentary is not intended to be exhaustive; and case-specific legal advice
should always be sought.
The Legal 4 Spain
team provides a full Wills, Estate Planning and Probate service for properties
and other assets anywhere in Spain. We are always happy to provide a
competitive cost estimate in the first instance, on a no-obligation basis.
Spanish Succession TaxPosted by Anne Tue, May 09, 2017 22:26:45
It is well over 2 years now, since the European Court
of Justice's Ruling that the Spanish Tax Authority’s succession tax system conflicted
with the European Union principles of freedom of movement of EU individuals and
circulation of money within the EU.
That case was specifically in relation to the
distinction the Spanish Tax Authority previously made between Spanish Residents
and Non-Spanish Residents.
The Ruling was that (European) Non-Spanish Residents
should be treated in the same way as Spanish residents, for the purposes of
Spanish Succession Tax.
Following the Ruling, Spain (as required) revised its
practice; and now, British owners (for example), of Spanish properties, are
treated in the same way for Spanish Succession Tax purposes, irrespective of
whether they are resident in Spain or not.
It is considered probable by most commentators, that
the Spanish Succession Tax treatment of British owners of Spanish properties is
likely to change again in the light of the Brexit Referendum decision.
In principle, (as regards British owners of Spanish
properties who are not actually resident in Spain), the Spanish Tax Authority
will no longer be obliged to comply with the EU principles which require equal
treatment of EU citizens.
It remains to be seen exactly how the negotiation
between the UK and Spain will be concluded as regards fiscal issues. But, it is
considered probable that once the UK is outside the EU, (non-Spanish Resident)
British owners of Spanish properties will lose this special EU benefit, and
will again be subject to the much more onerous 'national' Spanish Succession
Tax rules, as applied by the Central Spanish Tax Office.
This would strip from British (but non-Spanish
Resident) owners of Spanish properties, the more ‘generous’ succession tax allowances/
exemptions which the autonomous communities within Spain otherwise currently offer.
So, a meagre succession tax-free inheritance amount of just below 16,000 Euros
per spouse/ descendent beneficiary is then allowed. Any inheritance received
above that value is taxable.
Well advised British owners of Spanish properties
(but who are not actually resident in Spain) should therefore review their
Spanish Wills and Estate Planning arrangements, to be prepared for this anticipated
consequence of Brexit.
The tax mitigation steps which are recommended to
prepare for this anticipated consequence of Brexit, are in fact, intelligent
estate planning steps to take, even if the outcome of Brexit in this context is
less onerous than expected.
So, in other words, a Spanish Wills and Spanish Estate
Planning review is recommended as a wise process to go through in the run-up to
Brexit- whatever the outcome of negotiations between the UK/ the EU. It is quite possible that the Spanish tax
exposure can be reduced- whatever the end result of Brexit.
This general commentary is not intended to be
exhaustive; and case-specific legal advice should always be sought.
The Legal 4 Spain team provides a full Wills, Estate
Planning and Probate service for properties and other assets anywhere in Spain.
We are always happy to provide a competitive cost estimate in the first
instance, on a no-obligation basis.