Transferring Spanish property to UK company

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This topic contains 40 replies, has 16 voices, and was last updated by Profile photo of Anonymous Anonymous 4 years, 8 months ago.

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  • #54793
    Profile photo of Anonymous
    Anonymous
    Participant

    I own a proerty in the Costa Blanca which is worth about 250,000 euros. I have two children who are the sole beneficiaries in my Spanish will. Would there be a benefit by forming a UK limited company and transferring the property to it. I understand that there could be inheritance tax savings. If this is so, is it an easy process and is it expensive.
    Jane Archer

  • #90537
    Profile photo of Anonymous
    Anonymous
    Participant

    This is an incredibly complex area and you also need to consider UK as well as Spanish tax issues.

    Anyone advising on complex products or off-shore structures would benefit greatly in set up and on-going administration fees and you would have to pay taxes on set and re-structuring.

    There are ways of negating the value of assets for IHT but then look at the recent Landsbanki scandal and then you will have solved your problem because you will have nothing to leave anyway.

    Be very wary of the financial wizards residing up and down the coast selling their half baked advice and commission rich products.

  • #90607
    Profile photo of Anonymous
    Anonymous
    Participant

    Since the UK chancellor ceased ‘Benefits In Kind’ taxation on the directors of companies who used residential properties held within their companies this has become a viable exercise. This is how the seriously wealthy buy their second homes (and in some cases all of their residences), ordinary folk usually put two and two together, come up with 47 and don’t look into it further.

    A UK Ltd Company can hold any legal entity that it wishes within it’s ‘wrapper’. Spanish VAT is not payable, neither is Spanish Capital Gains Tax on sales and no Worldwide Wealth Declaration is required. The company has to produce audited accounts but unless you are running a letting business within it the cost would be circa £500.00 p/a.

    The UK Ltd company rules have to be respected by all EU states, as we have to respect theirs. It is far easier and more tax efficient to pass on your property to your heirs as you would be simply passing on nominal value share certificates. No UK taxation would occur until a property is sold and the profit taxed under the prevailing rules.

    A good friend has purchased in this way, it cost him 5000 euros including legal fees, I intend to do the same. If other forum members wish to see their properties wither away due to draconion Spanish taxation then that is their business.

  • #90610
    Profile photo of katy
    katy
    Spectator

    Transfering a property to a company would still incur the normal 7% sales tax.

  • #90620
    Profile photo of Anonymous
    Anonymous
    Participant

    @katy wrote:

    Transfering a property to a company would still incur the normal 7% sales tax.

    My friend has just completed the transfer of his villa valued at 535,000 euros, so the ‘sales tax’ would be what? The full value or the value less the purchase price, either way the former would cost 37,450 euros and the latter would cost 19,950 euros. I wonder why his total cost was only 5,000 euros, perhaps you are wrong.

  • #90625
    Profile photo of Anonymous
    Anonymous
    Participant

    Crookesey

    This sounds like the beer talking.

    You are saying your mate transferred a property he bought for EUR250k to a UK limited company and valued the asset on transfer at EUR535k and he did all this for only EUR5k including legal fees, notary fees, capital gains tax in Spain and UK, transfer tax, registry fees etc

    This is intriguing.

  • #90626
    Profile photo of katy
    katy
    Spectator

    perhaps I am wrong 😕 I would have thought that any property transfer in Spain has to pay 7% sales tax. If it’s so easy why haven’t more people done it?

  • #90633
    Profile photo of Anonymous
    Anonymous
    Participant

    @katy wrote:

    perhaps I am wrong 😕 I would have thought that any property transfer in Spain has to pay 7% sales tax. If it’s so easy why haven’t more people done it?

    I understand that quite a few are doing it now that the Benefit In Kind tax on company property usage has been abolished. The OP has obviously heard of it, my mate has done it, I have known about it for about 12 months and I know of another guy who has done it.

    Honestly, you guys bend over backwards to abide by Spanish taxation rules that are, IMHO draconion, they tax you from every direction possible so why not look at a legally tested alternative? I’m not selling anything, just passing on my answer to the OP who has obviously worked out how little of the value of his property will go to his kids by doing things your way.

  • #90634
    Profile photo of Anonymous
    Anonymous
    Participant

    @JJB-Mijas wrote:

    Crookesey

    This sounds like the beer talking.

    You are saying your mate transferred a property he bought for EUR250k to a UK limited company and valued the asset on transfer at EUR535k and he did all this for only EUR5k including legal fees, notary fees, capital gains tax in Spain and UK, transfer tax, registry fees etc

    This is intriguing.

    Anything you say my friend, you obviously know best. Oh, and thanks for reminding me about the beer, I run out last night and can now pick up a supply on my way home from work. 😀

  • #90636
    Profile photo of Anonymous
    Anonymous
    Participant

    It’s interesting and clearly there are diferences if you acquire from the outset through a company structure that try to re-structure later but inheritance tax planning is an incredibly complex area and the share certificates can still be valuable assets etc

    But I have also seen a lot of bad advice given by Spanish lawyers and Spanish tax advisers who have ignored the fact that many remain UK/Irish domiciled and/or resident and may still be liable to UK/Irish inheritance or capital acquisitions tax or capital gains tax.

  • #90641
    Profile photo of Inez
    Inez
    Participant

    My understanding (to the OP) is that as you already own the property, you want to transfer the same to a UK ltd company, which providing you dont have a spanish mortgage on it, you can do.

    However, as Katy points out, you will certainly pay notary fees and the transfer tax on the value of the property, no less than the amount you declared when you bought it.

    If you go down this route, the shares can be held by whoever you want, you complete your UK tax return yearly and on your passing, the shares (if in your name) transfer in accordance to your will, or if your kids already hold the shares either direct or in trust, then nothing happens.

    Only tax payable is any cg if they decide to sell up.

  • #90656
    Profile photo of Anonymous
    Anonymous
    Participant

    @JJB-Mijas wrote:

    It’s interesting and clearly there are diferences if you acquire from the outset through a company structure that try to re-structure later but inheritance tax planning is an incredibly complex area and the share certificates can still be valuable assets etc

    But I have also seen a lot of bad advice given by Spanish lawyers and Spanish tax advisers who have ignored the fact that many remain UK/Irish domiciled and/or resident and may still be liable to UK/Irish inheritance or capital acquisitions tax or capital gains tax.

    Share certificates of a Private Ltd Company are worth what they are priced at, just a few pounds in most cases. When the owner of said shares dies they pass in accordance with the wording of the deceased’s will. No tax is payable until something is sold and the proceeds passed to a beneficiary/ beneficiaries.

    I have never seen any bad advice given by either Spanish or any other lawyers and tax advisers as I have never been invited to ‘sit in’when said advice was being given, I suspect that neither have you, other than in respect of your own dealings.

    I have studied the Spanish IHT rules and I don’t like them, or to be truthful I can’t make head nor tail of them. Spanish folk must have a system where they split the ownership of their assets between all of their beneficiaries in order to mitigate their estate’s IHT iliability.

    If you consider IHT planning to be a complex issue I suggest that you start reading up as I suspect that like us all, you are not imortal. It’s very simple really, either you have a liability or you don’t. If the former is the case which tax regime would you choose it to fall into? The UK system is simple and understandable whilst the Spanish system IMHO is a veritable nightmare.

  • #90659
    Profile photo of katy
    katy
    Spectator

    There are lots of “financial Advisors” advertising this scheme. Maybe it’s ok. for new buyers 😕 but I still say if you transfer a property you own then 7% spanish sales tax is payable.

    If the owner is over 65 and resident here no inheritance tax is payable.

  • #90660
    Profile photo of Anonymous
    Anonymous
    Participant

    It is a much more complex issue, because for each individual case, it is needed to take into account more details. The IHT rate depends on each Region in Spain and, if the person was resident or not.

    Nevertheless, anyone (resident or not) can create a Spanish Company and the Company can buy a house, paying 7% or vat 7% and AJD 1% if it is a new property (as usual).

    Of course, you have a launching costs (around 600 € and 1% of the shares), and certain maintenance costs. But, if you decide to sell the shares (for example two years later) to a member of your family or even a strange, they will receive the property of the company (who owns the house) with no tax.

    In certain cases, it can be a useful solution, being well advised and with much more less complications than using other type of companies involved in legal issues (tax paradises, high maintenance costs, inheritance problems, etc.)

  • #90661
    Profile photo of Anonymous
    Anonymous
    Participant

    @katy wrote:

    There are lots of “financial Advisors” advertising this scheme. Maybe it’s ok. for new buyers 😕 but I still say if you transfer a property you own then 7% spanish sales tax is payable.

    If the owner is over 65 and resident here no inheritance tax is payable.

    Have a look at this Katy, http://www.rimontgo.es

    It’s the part in 1.1 that starts However, the law admits remission ………

    Sorry forgot to say you need to log into ‘Real Estate Services’ and then link to ‘On the purchase’.

  • #90668
    Profile photo of Anonymous
    Anonymous
    Participant

    I could be wrong but I was under the impression a few years ago that the Spanish government had brought out an annual tax on companies that owned property which amounts t either 1 or 3% of the declared value. The idea was to stop that very practise (companies owning properties) to get round transfer tax when the house is sold or passed on.

    With a company owning the asset the transfer tax is 1% when sold of the share value which as has been mentioned is usually a token amount (100GBP in the UK and 3006 Euros in Spain)

    As I say it is possible I am mistaken – it has been a while since I have been involved but that is certainly my understanding. I would take some good advice by someone who knows before going down that route

  • #90670
    Profile photo of Anonymous
    Anonymous
    Participant

    If one is nearing the age of 65 & a resident in Spain, which I am sure a lot of long term retirees would be. Why would they go through a setting up a UK company & than get caught by some zealous tax inspector either in UK or in Spain.

    With the taxing ethos of the current incumbent at no 10 Downing street who has been known to tax everything that moves, set out schemes & withdrawing them. The Spanish draconian tax system and negative bias towards non Spanish resident. One cannot go down the route of complex tax planning.

  • #90681
    Profile photo of Anonymous
    Anonymous
    Participant

    just transferring my house and a commercial building from personal name to a spanish co – cost is 1% of value plus setting up costs of company; not 7% -consult a well established spanish tax accoutant co – not your local conveyancing law firm!!

    annual fees are around €1,000

    i guess your UK co could hold your Spanish SL

  • #90684
    Profile photo of katy
    katy
    Spectator

    Does this mean that if I sold my house I could set up a company (or the buyer could) and they would not have to pay the 7%…I don’t think that Spain would allow that!

    The cost may not be worth it for cheaper properties.

  • #90686
    Profile photo of Anonymous
    Anonymous
    Participant

    well Katy, if the buyer bought your SL then he/she would pay 1% not 7%- ie they acquire the shares –

    it is quite complicated as you then enter the world of possible underdeclaring of price or increasing share capital – not many buyers would take this on unless part of a sophisticated tax planning structure that suits them.

    these days SL companies in Spain are mainly used by business people who want to protect assets in the event of bankruptcy, law suits etc


  • #91163
    Profile photo of Anonymous
    Anonymous
    Participant

    Hello Fellow Members,

    I have just purchased in Spain and was advised by my Spanish Tax Consultant as how to combat Spanish Inheritance Tax. They informed me that if I buy the property in a UK Limited Company and not my own name, I could leave the shares of the Company which I own instead of the property to my Heirs & Beneficiaries, so NO IHT in Spain would be payable.

    I followed their advice and have now produced a UK Will, which instructs to leave my shares of the Company to members of my family. This means that when I pass away no Spanish Inheritance tax will have to be paid by them, as they will inherit a UK Limited Company that owns the property, and not the property its self. Therefore Spanish Inheritance Tax is irrelevant and completely removed.

    If I wish to sell the property, I will not have to pay any 3% Withholding Tax which none Spanish Domiciled People have to pay when they sell the property, Secondly anyone who wishes to purchase the property from me do not have to pay the 7% Transfer Tax. This is because when I sell, I will not be selling a property, but will sell the UK Limited Company which owns the property, so no Taxes are payable in Spain.

    My Tax Consultant who is located in Spain & the UK are also a Corporate Property Ownership Consultant and can assist anyone who wishes to purchase or own in a UK Limited Company, appose to his or her own names. If you have a buyer of your property then my Consultant can help save the 10% Spanish Taxes in a totally Legal way as well. Should anyone already own a property and want to find out how to Transfer to a UK Limited Company without paying the Spanish National 7% Transfer Tax then they can also advise on this, and because UK Limited Companies are not Offshore and part of the EU there is no annual 3% Spanish Tax payable to the Spanish Authorities.

    If anyone else has suggestions of how to save IHT & Taxes in Spain then I would love to hear them but my research so far shows this is the only true way around it. I also found out that the only people who benefit from Spanish Companies (SL) when it comes to IHT are the Spanish and not anyone else so be careful of this advice.

  • #91165
    Profile photo of Inez
    Inez
    Participant

    Assuming that the person buying your company has full cash then in theory this works, However, most people, and certainly its good advice with regards to IHT, will either want or need to take finance, and in this case the property has to come out of the company you have set up. This then opens the door to the 3% ertention and of course capital gains

    Many people were advised to do this and then on having to sell (varying circumstances) found they ended up paying a lot as the initial purchase saw them paying a lot for shaers where the property had a very low declared value.

    Also please respect the rules of this forum with regards to advertising.

  • #91166
    Profile photo of Anonymous
    Anonymous
    Participant

    Dear Inez,

    When I purchased I required a mortgage and the Bank in Spain simply allowed me to take the finance in my own name with a Guarantee on the UK Limited Company, which of course owns the property in Spain so no problem here.

    If I wish to sell the property from my UK Company and make a profit then I have to pay Capital gains Tax of 18% in Spain or the UK, the same as if I was selling from my own name. If I find someone who will buy the Company from me then they do not have to pay the 7% Transfer Tax in Spain and the Capital Gains Tax on the sale of the shares of the UK Limited Company is at only 10%. So many savings here.

    I have read the Forum rules and at the moment cannot see how I have broke them, but if I have and the Administrator can drop me a message, then I apologise in advance and will follow their request to the letter.

  • #91170
    Profile photo of katy
    katy
    Spectator

    I think it’s advertising too.

    I would advise anyone thinking of doing this to take independant advice from an expert in Spanish law not these outfits offering to do it for you.

  • #91171
    Profile photo of Anonymous
    Anonymous
    Participant

    @W.C.D. wrote:

    I have read the Forum rules and at the moment cannot see how I have broke them, but if I have and the Administrator can drop me a message, then I apologise in advance and will follow their request to the letter.

    Instead of apologising, just delete your messages as it is clear they are advertisement posts. Do you think everybody is ignorant?

  • #91173
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi Jane,

    you have to take into account two different perspectives: on the one hand, the UK tax office’s (I think you call it Inland Revenue), and on the other hand, the Spanish tax office’s.

    Unfortunely I am not skilled in UK tax law, therefore I cannot tell you how things would stand there with the Inland Revenue. However, I can tell you how things would work here in Spain.

    Firstly, you have to count the costs involved in purchasing or setting up the UK company. For this information, you should get in touch with a Solicitor in the UK. I have got my own contacts, but I am sure you can get estimates yourself.

    As to the costs involved in getting the UK company operating in Spain, you have to count the Company identification number for tax purposes; in order to get a Company Identification number for tax purposes, the UK company’s documents (articles of association, memorandum of association and also a certification from the company registrar office) should be notarised by a UK Notary; afterwards, such documents have to bear the Apostille of Hague and also be translated to Spanish by an Spanish official translator. How much all of this costs is difficult to say at first sight, as I do not have the documents and I do not know how much the UK people would charge for that.

    An approximate estimation would be 1000-1200 €.

    Secondly, it is necessary to count with someone to deal with the Spanish tax office in Spain in order for the company to get the Company Identification Number. You should also appoint a legal representative for tax purposes.

    Third stage would be putting the property onto the company’s name. The costs are a 1% tax and a Notary Deed for transferring the property onto the company. Provided that the value of the property according to the already existing deeds is 250.000,00 €, the tax amounts in principle to 2.500,00 € (in some cases there are some tax deductions depending on the Comunity). On top add the Spanish notary invoice – it is an estimation, but it could be round 1.000,00 €.

    Fourth, you have to count the maintenance costs of the system; in the UK I suppose you have to submit annual accounts, etc. Have you enquired how much it does cost?

    From the Spanish point of view, every year there is a 3% tax fee charged by the for owning property through a non resident company…the basis of the tax is the cadastral value, therefore count with that tax – 3% of the cadastral value – every year.

    At this point you should add all the expenses of the process and the maintenance, from the Spanish point of view and the UK perspective.

    Now you should compare if it is really worthy all this mess by contrasting the tax fee for inheritance tax in Spain. I assume in my calculations that your children are not residents for tax purposes in Spain and also that they are over 21 years and are getting 50% each. If you have got two children it means that each gets 125.000 € at present values…The individual tax fee for each of them – with the present legislation – would be 13.948 €. Total, 27.896,00 €.

    As alternatives, I propose the following:

    how much would it cost to contract a life insurance, either here or in the UK, to cover that fee of 30.000,00 €? (I have made the figure 30.000 as there is also a tax on life insurance if you contract it in Spain)

    Yours,

    @janearcher wrote:

    I own a proerty in the Costa Blanca which is worth about 250,000 euros. I have two children who are the sole beneficiaries in my Spanish will. Would there be a benefit by forming a UK limited company and transferring the property to it. I understand that there could be inheritance tax savings. If this is so, is it an easy process and is it expensive.
    Jane Archer

  • #91175
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    Anonymous
    Participant

    good answer “Echevarria”………….. just as well, if you hadn’t posted the correct details there might have been a wave of innocents who would have signed up. I wonder why they didn’t mention the 3% annual tax – hope they told W.C.D ha ha …… .

    By the way, I’ve just transferred my house to a spanish SL (not for inheritance tax purposes) If the administrator is not me then I guess this asset could escape IHT if its not declared as mine ??

    Glad to see lawyers on the forum providing accurate and transparent advise !! ……….

  • #91183
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi Ubeda,

    thanks for the compliment.

    As to your question: I would need to have details of the shareholder structure of the company Sl, and what relationship there is between the company director-administrator and the shareholder structure. furthermore, I would ask you to clarify what you mean by IHT.

    if you do not feel comfortable with doing that “here” please use echavarrialegal@gmail.com

    @UBEDA wrote:

    good answer “Echevarria”………….. just as well, if you hadn’t posted the correct details there might have been a wave of innocents who would have signed up. I wonder why they didn’t mention the 3% annual tax – hope they told W.C.D ha ha …… .

    By the way, I’ve just transferred my house to a spanish SL (not for inheritance tax purposes) If the administrator is not me then I guess this asset could escape IHT if its not declared as mine ??

    Glad to see lawyers on the forum providing accurate and transparent advise !! ……….

  • #91242
    Profile photo of Anonymous
    Anonymous
    Participant

    I posted on here a while ago a thread called War In Lanzarote which I subsequently updated with War In Lanzarote Part 2. Unfortunately, the links in the previous postings have now been disabled by the website forum they were directed to.
    However, anyone looking at this aspect should take notice of the following forum discussion on the Lanzarote Gazette which has been raging for some time.

    http://www.gazettelive.com/forum/index.php?topic=833.0

    I have been looking at many aspects of this for at least 3 years and I am still no closer to knowing for sure what is legal or not.

    Caveat Emptor more than ever in this arena.

  • #91645
    Profile photo of Anonymous
    Anonymous
    Participant

    Hello All,

    I have read this post with interest and I feel it would be of use if I cleared up some inaccuracies and maybe miss understandings from members.

    You always want to take independent advice when reading Forums but this particular topic requires your accountant or lawyer to have a wide knowledge of the Spanish, UK and EU Laws; unfortunately I have found most only understand the jurisdiction they operate from, eg, Spain or the UK but not both. It is also not of interest for them to inform you of a solution which takes you as a Client out of their Tax laws as they cannot charge you for their services anymore. By owning a property in Spain via a UK Limited Company you have no requirement for Lawyers in Spain anymore as it is all dealt with back in the UK. This is because under EU law a Company from an EU country can own a property in another EU country and decide which jurisdiction it wishes to be taxed, this can be the jurisdiction of the property or where the Company is registered. The Company only needs a CIF number in Spain appose the individual owners having an NIE number themselves. The Companies from EU countries like the UK are not charged the annual Tax of 3% as mentioned a few times in the post unlike offshore companies, like Gibraltar, Isle of Man, etc. It is extremely important to understand the difference between offshore and not offshore, only offshore Companies who are NOT part of the EU are charged this annual tax.

    The main reason to own via a UK Limited Company is to protect again Spanish Inheritance Tax. In Spain it is the Beneficiaries who pay the taxes whereas in the UK it is the Estate which is taxed. You also need to be aware you cannot offset one Tax against the other as they are not identical Taxes so both may have to be paid. There are some benefits for being over 65 if you are Resident in Spain but not IHT in Spain, as it is the Beneficiaries who pay the Taxes. You could be 165 and they still have to pay the Taxes when you die.

    There is no 7% transfer tax in Spain when you move the property to a UK Limited Company unlike to an individual; this is because you gift the property to the Company so no 7% has to be paid. 5000 euros to deal with this transaction excluding land registry fees is about correct but I know the 1000 euros per year for the maintaining of the UK Company can be done for about £250 per year. The whole point of owning in a UK Limited Company is to remove Taxation in Spain so the last thing anyone would do is own in a Spanish Company (SL). The only people who benefit hear are the Spanish born and bread, the Spanish Tax Authorities and the Lawyers in Spain. (Remember my comments above for keeping you in the Spanish Tax system)

    Once the property is owned in the UK Company it can simply be the sale of the shares that take place in the UK appose to the property its self in Spain, so no 7% sales Tax for the buyer and no 3% withholding Tax to the Seller. Only a UK sale & purchase agreement is required which costs about £1500 and any UK Lawyer can produce this. Any Nationality in the world can own and buy a UK Limited Company, even the Spanish.

  • #91648
    Profile photo of Anonymous
    Anonymous
    Participant

    hmmmmmmmmmmmm

  • #91654
    Profile photo of katy
    katy
    Spectator

    Hmmmmm….isn’t this the same company as the other spammer above ❓ Has a sort of air of desperation about it don’t you think 🙄

  • #91675
    Profile photo of Anonymous
    Anonymous
    Participant

    Hello UBEDA and Katy.

    I have never registered before within this forum and before i did i checked with the forum administrator that it was OK for me to register and make my comments and observations. I received an email reply from them before registering and confirmed what I could show and what I could not. I have followed their recommendations to the letter and have not done anything wrong. Also as their is a time gap from when you initially register to when you are approved I presume I have been reviewed before acceptance to the forum by the administrator.

    I use many forums to research information and air my views and I find it very frustrating with members like yourself who do not reply with comments about the post and who seem to try and cause trouble, especially when it is 2 members who are working together as they do not wish for the information to be displayed. Why do you not reply with some constructive comments about the post so that fellow members have something interesting to read rather then trying to get the information removed. This particular topic of Spanish inheritance tax is a very important topic and can be extremely expensive to the owners beneficiaries when they inherit, so i am sure other members will find it invaluable reading. If you do wish to spend time making replies then why not make suggestions of how the tax can be saved or protected against in Spain.

  • #91692
    Profile photo of Anonymous
    Anonymous
    Participant

    Consultants & Agents
    There is now an opportunity to earn extra money from your family, friends, contacts and clients who own property in Spain. Simply introduce them to our unique service and we will pay commission to you should they proceed with our service. Wincham will also be holding a number of training courses to develop a network of approved IHT Consultants, these Consultants will deal directly with Clients and build their own network of Agents or introducers to increase their earning potentia

    l.

    hhhhmmmmmmmmmm – sounds familiar !!

  • #91694
    Profile photo of Anonymous
    Anonymous
    Participant

    “Mark Roach – Spanish Tax Consultant”

    Are you really still trying to sell this with all the problems it has caused to date and the pending court cases etc?
    As I have previously said on this forum, I do not have an opinion as to whether what you are purporting to be able to do is legal or not, and there are lawyers who say it is and others who say it isn’t along with Asesorias, Gestors…whatever you want to call them. But I do know that there is a trail of destruction in Lanzarote left by a company who did this in the past and that there is a court case pending.
    Surely you must be aware of this?

  • #91695
    Profile photo of Anonymous
    Anonymous
    Participant

    Dear Stewlanz,

    I am aware of many Owners who have bought property in Spain and who have moved the ownership into uk Limited Companies and have never had any problems at all. Maybe the Companies you talk about in Lanzarote are offshore companies so are not part of the EU and therefore have different rules and have to pay the 3% annual Tax to the Spanish government. There was also a company called the Quill Group that offered what they called LLP Companies, these are not uk Limited companies so do not have the same protection and opened the owners up to lots of risk with their assets.

    The reason to do this is to make sure Spanish Inheritance Tax is completely removed because if you know what a problem it is and have seen some of the Tax bills I have seen that beneficiaries have had to pay to the Spanish government, then you would see what a great solution it is. Whether you are inheriting a property of €100,000 or 1 million euros the IHT allowance is exactly the same of only €15,956.98. This allowance is also if you are a direct descendant like Husband and Wife and it gets reduced the further relationship you are away from the Deceased. If anyone would like access to a calculator that works out your Spanish Inheritance Tax liability then I have one to hand. The figures used are taken directly from the Spanish Tax office so are 100% accurate and true. One example is if a husband or wife inherit an estate of €125,000 then the Tax liability is about €13,947 plus probate/legal fees of around €5,000. This is then doubled up to a total estate of €250,000 which is then left to the children who pay IHT as well, and so on down the family line. The IHT Taxes have to be paid within 6 months of the death other wise the estate receives additional fines, and remember the property cannot be sold until you have paid the Taxes so it may become distressed if the beneficiaries have no cash to pay.

    The above solution is the only way I believe IHT in Spain can be removed and is done in a completely legal way using the EU laws that Spain is now part of. You can take advice from your Lawyer in Spain but if they do not understand EU law then how can they give correct advice. It will be great if anyone else has experience of IHT solutions in Spain or past experience with the process as I believe we can all learn a great deal from one another if we talk.

  • #91699
    Profile photo of Anonymous
    Anonymous
    Participant

    Fair enough Mark,

    If I can ask 1 question that has been asked over here a hundred times and never satisfactorily answered:
    Does your setup apply to a UK passport holder who has been living in Spain for X number of years and calls it his main residence with no property in the UK. Or is it only relevant if you still have property in the UK?
    Furthermore, when can one consider oneself to not be DOMICILED in the UK for IHT purposes?

    Seems this never gets a straight answer….

    By the way, you are recommended on a widely read Lanzarote forum (because I submitted a link to this thread) and should now be getting lots of enquiries. We can work out an introducers’ commission in due course!

  • #91736
    Profile photo of Anonymous
    Anonymous
    Participant

    Dear Stewlanz,

    Any nationality in the world can own a uk limited company and benefit from the removal of taxation in Spain. If you are Spanish then this would not be of interest as you would have a Spanish (SL) Company instead, if you and your Beneficiaries are Domiciled in Spain then this may not be of interest either but the big problem is identifying if you are domiciled or not in Spain as you have mentioned.

    In essence, your Domicile is the country which you consider is your permanent home. This does not mean that it is the country of your birth or the country in which you may be living at present. Neither does it mean citizenship or residence even if you become naturalised in the country you live in and it does not mean that you would automatically become domiciled in that country.

    There are 4 types of domicile. Domicile of Origin, Domicile of Dependency, Domicile of Choice, Deemed Domicile.

    Domicile of Origin
    To solve the question of their domicile, each person will first need to start with their birth. When you are born a person acquires the domicile of the person that they are legally dependent on. That person would normally be their father. It is their mother if their father is dead or their parents are living apart and they have a home but not with their father.

    Domicile of Dependency
    Throughout your early years you continue to have the same domicile as the person that you are legally dependent on. If that person changes their domicile status then you change your domicile this is called Domicile of Dependency. You only become capable of having your own independent domicile when you reach the age of 16 in England or 14 in Scotland, other countries have similar ages. If it ever becomes uncertain in which country you regard as your permanent home your domicile will revert to your Domicile of Origin. Under UK law your domicile always reverts to your Domicile of origin not your Domicile of dependency.

    Domicile of Choice
    In most cases a person’s Domicile of Origin remains their domicile for the rest of their life. This domicile can only be changed, to Domicile of Choice through permanent emigration and that means permanent. Acquiring new Domicile of Choice for tax purposes can be very difficult to prove. This relies on the person proving to the revenue that they will never return to the country. To establish a Domicile of Choice you will be required in the UK to complete a form P85 you must ensure that you declare your intention to adopt your destination country as your new permanent home.

    Take whatever steps are necessary in the destination country to establish citizenship.

    Buy a grave plot in your new country; this is given great importance by the tax authorities when looking at domiciled. Write a Will in the new country. A person who ceases to be domiciled in the UK will continue to have been deemed UK domiciled for Inheritance tax purposes for 3 years after ceasing to de domiciled in the UK.

    Deemed Domicile
    A person is deemed to be domiciled in Spain if the person has lived there for at least 17 out of the last 20 years; Deemed Domiciled only applies to inheritance tax and not income tax and capital gains tax.

    Resident for Fiscal reasons
    Most British people living in Spain will be Domiciled UK and resident in Spain for Fiscal reasons. If you spend more than 183 days in Spain per year you will need to register as a resident for tax purposes and pay your taxes on your worldwide income subject to double taxation treaties.

    If you wish to establish Non-Residence in the UK
    1) You will need to declare your intentions to HMRC on form P85
    2) Buy a Home in Spain
    3) Take your family including your pets
    4) Take up Employment or start a business in Spain
    5) Get on the Electoral roll of the country
    6) Visit the UK as little as possible
    7) Make sure your former home in the UK is sold or not available for your use
    8) Ensure that residential accommodation is not available to you in the UK always stop in hotels
    9) Resign memberships of any clubs or associations in the UK
    10) Close your UK bank accounts and cancel all Child Credits and Child Benefits.

  • #95831
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    Anonymous
    Participant

    Hi Katy can you be a bot more precise as to where I can find this information. I am lost. Thanks

  • #108402
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    Anonymous
    Participant

    I am aware of Winchams and received a quotation from them. Another contributor to this forum suggests to me that Winchams are expensive. My belief is that they have considerable experience but there may be other providers of a transfer service that might be good enough. So I would be very interested to hear of any. Particularly I have a low value property that is questionably worth the amount that is required except that I am a batchelor and wish to leave it to brothers who do not get as much tax relief before IHT as would a spouse under the Spanish rules.

  • #108409
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    Anonymous
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    @Ptr wrote:

    I am aware of Winchams and received a quotation from them. Another contributor to this forum suggests to me that Winchams are expensive. My belief is that they have considerable experience but there may be other providers of a transfer service that might be good enough. So I would be very interested to hear of any. Particularly I have a low value property that is questionably worth the amount that is required except that I am a batchelor and wish to leave it to brothers who do not get as much tax relief before IHT as would a spouse under the Spanish rules.

    You also always run the risk of all these sort of setups change through time. In general you have to own quite expensive property for it to be worth these sorts of setups. Inheritance tax in Spain is a bitch though.

    I certain countries certain forms of tax planning is not allowed how stupid it even may sound. Which can cause you even bigger problems in that home country.

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