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NON-RESIDENTS
HOW TO PLAN A TAX EFFICIENT SUCCESSION IN ANDALUCÍA
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ortunately, however, recent developments from the Court of Justice of the European Union (CJUE), the Spanish Tax Authorities and the Parliament of Andalucía have led to a more comprehensive and affordable system for non-residents leaving a permanent residence or a business in Andalucía.
THE BRAND-NEW TAX RELIEF FOR REAL ESTATE PROPERTY LOCATED IN ANDALUCÍA The Parliament of Andalucía has recently enacted a new Inheritance Tax relief of at least 95 per cent for relatives of homeowners, applicable to deaths after August 2016. For benefiting from the tax relief, the property shall be located in Andalucía and must have been the deceased’s main residence at that time. Most importantly – and this is truly good news – there is no limit on the value of the property to qualify for the relief. By relatives we refer to descendants, spouses, ascendants and even collaterals if certain requirements are met. The small print, of course, is that the inherited property must not be sold or transferred during the three subsequent years.
LEAVING TO YOUR CHILDREN Descendants can also benefit from the tax relief provided that they
WORDS FRANCISCO DE ASÍS GAMBOA
There can be various direct tax consequences of dealing with assets and properties when a member of the family passes away. Unlike in the UK, successors inheriting assets in Spain are personally liable themselves for payment of Inheritance Tax. Furthermore, non-resident heirs have been historically barred from benefiting from tax relief in equal measure as Spanish nationals.
are tax residents in Spain, in any other EU country, or even in Iceland, Liechtenstein or Norway. This is, of course, only possible following the issuance by the CJEU of its famous ruling on September 3, 2014. For instance, Mr Hughes leaves a villa of €500.000 located in Marbella. He has two grown-up children residing in Wales and his wife predeceased him. Upon his death, each one of his children will receive the real estate asset benefiting from a 95 per cent tax relief in Inheritance Tax, insofar as they remain owners of the villa for the next three years. Thereafter, they will be free to sell it at their discretion.
ANOTHER GOOD REASON TO REVISIT YOUR STRUCTURE
LEAVING TO YOUR SPOUSE
While not new, very few people know about the applicable tax exemption when shares in a Spanish company are left to direct descendants. Indeed, there is a 95 per cent tax exemption regarding gifts or inheritance of family businesses if: the company is engaged in a business activity; the shareholder owns at least five per cent of the share capital, individually, or 20 per cent together with the spouse, ascendants, descendants or collateral up to the second grade; and a family member, being a Spanish tax resident, carries out management activities in the company and is paid for such services
There always exists the option to leave the main residence to the surviving spouse, who will then leave it on his/her death to the children or grandchildren. This works insofar as the successors – spouse and children – comply with the referred requirements and keep ownership of the residence for three years. Had the spouse passed away during the three years period, this would have no impact on the validity of the tax relief.
During the past years, many people have chosen to have their real estate property owned by a trust structure or a company. However, due to the aggressive measures adopted by most of the national tax authorities of the EU countries it is strongly advised to revisit and appropriately tackle such structures. The introduction in Andalucía of this tax relief on the main residence along with its applicability to non-residents is a good reason to encourage people to review their plans for succession.
LEAVING SHARES IN YOUR FAMILY COMPANY
more than 50 per cent of his total annual income. Should the company be located in Andalucía, the tax exemption would upgrade to 99 per cent.
AVOIDANCE OF DOUBLE TAXATION Most probably, at this point, you are concerned about any prospective double taxation. Careful attention should be paid to each specific case. However, the Spanish legislation includes mechanisms to eliminate double taxation regarding Inheritance Tax, and so does, among others, English law. The above is a brief example of how complex situations can be efficiently planned by taking proper advice. Of course, each case is unique and requires its own specific approach. At Fitzwilliam Solicitors we are proud to offer our clients tailored solutions to the specific matters they may face, whether they imply applying Spanish or English legislation. g FRANCISCO DE ASÍS GAMBOA Solicitor of the Senior Courts of England and Wales Fitzwilliam Solicitors Legal and Finance Marbella www.fitzwilliamsolicitors.com
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