CGT & IHT – European Court????

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This topic contains 10 replies, has 5 voices, and was last updated by Profile photo of Anonymous Anonymous 2 years, 7 months ago.

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  • #57965
    Profile photo of Anonymous
    Anonymous
    Participant

    Can anyone shed light on the progress taken by the European Court against Spain, pushing for an ‘equal flow of capital’ with its Inheritance Tax and Capital Gains Tax? I understand early last year both IHT and CGT were said to unfairly hit non-resident property investors and both would need to be adjusted.

    Once the changes are announced (or there’s confidence that the government would repay unfairly levied tax) Spain will finally become a fully attractive investment proposition. These – especially the shocking inheritance setup for non-residents – are a huge disincentive to touching Spain with a barge-pole. Given the potential for inward investment, foreign buyers are still miniscule in number. Just look at the scale of transactions in London – or Liverpool for that matter – over a single year.

    Any info is welcome, as I have to weight these in my decision to go in… or go elsewhere.

  • #119374
    Profile photo of Anonymous
    Anonymous
    Participant

    You are quite right about the discriminatory IHT position for non residents -its absolutely punitive because your beneficiary can be stitched up a large amount of the value of the property unless they are paupers so you have to write out at present a Testament giving 7500 euros to as many people you can think of to cover the sale proceeds tax free after you have paid for all the lawyers work identifying them and finding out if they have assets so they can be charged double.Why should you have to sell it when you want to pass it on. The only way out of this at present is to pay to have your property put into a UK Limited company and this can cost quite a bit. There are specialist companies like Winchams that will do this. Does anyone know a cheaper option than them -firms of UK lawyers that can do this without it costing an arm and a leg ?( Note this route via Winchams said by belegal .com print of recent decision in Spain that its illegal. However I am not sure whether there is any distinction between a buyer who buys through a company at the outset and those that buy in their own names and then re-register into a company -there might be because the behaviour is different and in this judgement I do not no what was of the essence .)

  • #119375
    Profile photo of Anonymous
    Anonymous
    Participant

    PS I was not aware the EU are looking into this. If they can it would do Spain a great favour -they don’t deserve because they could clean up their act themselves but have always to be dragged kicking ! Would appreciate any news too !The Spanish CGT would not seemingly be so much of a problem as the IHT for a non resident owner because apparently you can just pay 3% and leave . Now you are still supposed to file a return within a year but apparently they do not persue you abroad -that is my current understanding. Even if you sell for less than you paid 3% is not astronomical. However 21% which is what you should pay is something different particularly if you had a difficult purchase if it were enforced. Then there may be a CGT liability with HMRC .Of course being resident does give IHT other options -if your beneficiary(ies) keep it for 10 years there isthen none to pay but being resident brings other difficulties if you also own a property in your name in UK. I saw an article today in the Telegraph (page10) that IHT in UK was the second highest in Europe after Ireland. This cannot be correct: In the UK no IHT is paid on estates of £328000 or less by the donor and none at all is paid by beneficiaries. In Spain it is the beneficiary(ies) that pay the tax not the donor and this tax starts on as little as anything over 7500 Euros that each beneficiary is allowed free of tax -you need a maybe 6 beneficiaries at 7500 to cover a small flat near the bottom of the market .Now admittedly all the beneficiaries would have to agree to sell it and if one refused till he died because he wanted to use it and pay the running cost -then maybe Hacienda have to say well there are 6 beneficiaries and X 7500 Euros that covers the current marketl value so there IS NO TAX to pay and they can inherit and continue in beneficial ownership – Is my analysis correct please -somebody might know to the benefit of others too ? ????

  • #119389
    Profile photo of Anonymous
    Anonymous
    Participant

    These are very important issues for potential buyers -in particular what happens to the property if you die with it -nobody wants their beneficiaries to spend in costs and pay in taxes amounts that they might not have -nor would it be worth them to do so. Some properties lie abandoned in Spain and dilapidate because the taxes have not been paid and its not worth the beneficial owners to pay them.

  • #119436
    Profile photo of Anonymous
    Anonymous
    Participant

    http://www.belegal.com Useful article here in the matter of putting property into a UK Company. It appears that this practice has been ruled illegal tax avoidance. It seems that Inheritance tax has been made less of a burden to categories 1 and 2. but 3 -leaving to a brother or sister no help or to the less important category 4 friends and distant relatives .but in Canarias 99% exemption of resident owners replaced by a sliding scale. Makes it very complicated !

  • #119443
    Profile photo of Anonymous
    Anonymous
    Participant

    I saw an advert about this – it was a company explaining the issue and selling the service of placing property into a company. The advert was sent to me by a friend who knows I am in the process of buying there.

    As soon as I saw it, I could see that this was a workaround, a loophole, if you like. And there’s one sure thing about loopholes – they get closed.

    If GCT and IHT is a concern, then step away.

    In the meantime, the company whose advert I saw, and others like it, will make money moving from one tax-dodge to the next. Always to be avoided, in my view.

  • #119454
    Profile photo of Arthur Stuttard
    Arthur Stuttard
    Participant

    The case – C-127/12 (initiated by me) had a preliminary hearing on Jan 5th this year and is awaiting a full hearing. You can follow its progress at http://www.curia.europa.eu

  • #119455
    Profile photo of Anonymous
    Anonymous
    Participant

    Attempted access Arthur but received result of No data found . The input asked for names of the parties but not sure this would have impaired the request. ie put in date and case number.

  • #119458
    Profile photo of Arthur Stuttard
    Arthur Stuttard
    Participant

    Works for me. Make sure you have entered the Case Number exactly as above. You shouldn’t need it , but the parties are European Commission v Kingdom of Spain. Try leaving out the date.

  • #119513
    Profile photo of Anonymous
    Anonymous
    Participant

    Interesting postings…I wonder if indeed the ECJ will dictamin against Spain and in my view it is an extremely discriminatory law where the Spanish Gov. forces a non-resident even if you are a Spanish citizen living overseas like my case to given astronomical amounts of money compared with the residents on the same estate inherited. Myself was a victim of this barbarity since I currently work and live in the US, so Im treated as a non-resident. I was participant along with a sibling (spanish resident) in an inheritance from my parents a few years ago. I was forced to pay in IHT an approx. 30% rate whereas my sibling paid barely 1%. I hope the ECJ will dictamin against this discriminatory law and I am in the works of filing a “reclamacion” with a lawyer in Madrid who was recommended by a close friend of mine. I do not recommend investing in Spain, their Government is out to get whatever they can from anybody that has something resident or non-resident, right now this new “conservative” Government also wants to know if you are a resident what assets you have out of Spain. Best recommendation is not to have a penny in Spain, go on vacation or stay for 5 to 6 months a get out to return next year. I believe they are a very heavy/expensive Welfare State packed with Gov. Programs and generous benefits for Government employees and at the end of the day this is not free, it has a price tag and one way or another the people who works hardest pay for it. There you go…..:(

  • #119519
    Profile photo of Anonymous
    Anonymous
    Participant

    I wondered if anyone can say please -when a beneficiary pays the IHT and sells it at a later date whether the Hacienda rebase the purchase price to market value at the time you paid the tax rather than the original price whereupon the donor paid Impuestos de Compravente for any subsequent CGT? .Indeed if there were no tax to pay maybe because a property was left to more than one person to share !

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