If you own a holiday home on the Costas, are you confident you have done allyou can to minimise inheritance tax when you leave it to your loved ones?
Many second home-owners are unaware of how severe inheritance tax in Spainis and dont realise that a beneficiary could end up paying tax in both the UK andSpain, and that includes a spouse of the deceased.
Typically,a British person inheriting a Spanish home could pay 40 per cent ofthe estates value and legal fees on top to probate in Spain. Simply making a Spanishwill does not reduce the tax obligations of inheritors as it just leads to savings intranslation and legal fees incurred when a British probate includes a Spanish asset.One solution that could mean the beneficiaries of your Spanish property pay notax inSpain, is to transfer ownership of your property to a UK limited company,which you own outright. This would allow you to transfer the companys shares in effect ownership of the property to beneficiaries through your British will,avoiding the cost and bureaucracy of probate in Spain.
Spanish tax consultancy Wincham Consultants, which has offices in the UK andSpain, has pioneered a scheme that allows you to do just this. For a single fee thecompany will form and set up a UK limited company for you and transfer ownershipof your Spanish property to it, and oversee all the necessary paperwork in Spain andthe UK. Any further properties transferred to the company at the same time cost300 (plusVAT) each if the transaction is dealt with all together.
"Another benefit is that transferring a Spanish property to a UK company doesnot incur a seven per cent transfer tax in Spain, unlike if you were transferringthe property to another individual, who could also incur capital gains tax," saidMark Roach,director at Spanish tax consultancy Wincham Consultants. "Also, thecompany structure means that attributable expenses such as mortgage interest,council tax bills, water, electricity, repairs and maintenance can all be tax deductibleby the company, and this may include car hire and flights for the directors." Thiscannot be done in Spain if the property is owned in individual names.
Prices correct at 22nd July 2009