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Hi all, new to the forum and looking to try and gather some information from more experienced people than me.
My father is planning to give his spanish property to my brother and I as he can longer visit to to health issues. We are aware of the running costs and familiar with the property and the area (Mar Menor) having both visited and stayed there in the past. Our basic idea is to take on the property and use for holidays, no plan to rent out. Our concern at the moment is the transfer tax we expect we will have to pay. A couple of questions if anybody can help,
1. How is the property value determined for the basis of the transfer tax, our estimation, estate agent 😯 , notary or some regional council official?
2. Are there any significant other costs involved in the transfer, such as notary fees or other taxes?Thanks in advance for any help 🙂
Pete
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The tax rules for a transfer like this is very complex if you want avoid to pay to much tax. It may be the case that for the best results you father may have to be a resident and also the children he transfers it to. Can’t remember though and you should consult at tax specialist. It may be better to put it into his will than doing a simple transfer etc.
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Thanks Ardun for your input 🙂
I have been researching as much as I can on the web and this is where “I think” we stand.
My father is not a resident of Spain, niether are my brother or myself. As such there are no allowances available to us. So it would seem we have to pay ISD (gift/inheritance), at a rate determined by the value of the property as it is a sliding scale. The difficulty I have is understanding how the property would be valued, the only thing I can find so far is this,
The value of the asset.
The basis required for Gift Tax (ISD) is known as its ‘real value’. This means that the starting point is a full and proper, open-market valuation.It still seems very vague, after all I’m sure an estate agent will value the property much higher than the reality in the current climate. However, looking from the other perspective, of course I would value it very low in order to get the lowest tax rate possible.
I can’t help but feel there will or should be some independent or tax office official who has a responsibility if not to value the property then at least to review and accept (or not), a valuation provided.
It may be better to leave the property in my fathers name, but ultimately this is just delaying the inevitable as at some point there would be ISD to pay as inheritance tax. Alternatively, we could wait and try and second guess when the market will hit rock bottom then go for the transfer. In theory this would give us the lowest tax bill.
I’ve also read about making the property an asset of a company in order to minimise tax but cannot yet find if we need to be residents of Spain in order to do this.
Any help on how to get an agreed valuation of the proprty would be gratefully appreciated.
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@Igurisu wrote:
Thanks Ardun for your input 🙂
I have been researching as much as I can on the web and this is where “I think” we stand.
My father is not a resident of Spain, niether are my brother or myself. As such there are no allowances available to us. So it would seem we have to pay ISD (gift/inheritance), at a rate determined by the value of the property as it is a sliding scale. The difficulty I have is understanding how the property would be valued, the only thing I can find so far is this,
The value of the asset.
The basis required for Gift Tax (ISD) is known as its ‘real value’. This means that the starting point is a full and proper, open-market valuation.It still seems very vague, after all I’m sure an estate agent will value the property much higher than the reality in the current climate. However, looking from the other perspective, of course I would value it very low in order to get the lowest tax rate possible.
I can’t help but feel there will or should be some independent or tax office official who has a responsibility if not to value the property then at least to review and accept (or not), a valuation provided.
It may be better to leave the property in my fathers name, but ultimately this is just delaying the inevitable as at some point there would be ISD to pay as inheritance tax. Alternatively, we could wait and try and second guess when the market will hit rock bottom then go for the transfer. In theory this would give us the lowest tax bill.
I’ve also read about making the property an asset of a company in order to minimise tax but cannot yet find if we need to be residents of Spain in order to do this.
Any help on how to get an agreed valuation of the proprty would be gratefully appreciated.
This will probably dissapoint you. You will be in a very grey area of the spanish tax system since they don’t even allow the real market value in many cases as a basis to calculate the transfer tax. I have been involved in many totally legit transfers that in the end runs into patrol from the tax office that just refuse to accept it as a real value. Even deals done with repossed properties from banks. We have even sent in other copies of transfers from the same street with the exact kind of property to try and get them to change their stance to no avail.
If you have read “The process” by Kafka you will probably understand how absurd the situation is.
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Thanks Fuengi, I take it the valor fiscal is the same as the valor catastral? I don’t know what that is yet but will see it during my next visit in October.
Spent more time digging around last night and my summary so far with regard to taxation to pay is as follows.
1. ISD for gift tax which is on a sliding scale depending on the property value (one off charge).
2. IBI tax (annual tax).
3. IRNR tax (annual tax)
4. ISP (wealth or Patrimonio tax) as a non resident it seems there is no allowance against this.To add to this we have the aprtemnt running costs, annual service charges, utilities etc.
The amusing thing is that both my father and my brother and I thought this would be a good thing. It seems that my brother and I will have an initial layout of close to €10k, then ongoing annual costs of around €1.5k (these numbers are each). Considering that I’m still working and could only visit 3 or 4 times per year it makes this quite an expensive holiday home. Normally this would be offset by the fact we do own an appreciating asset, however it seems clear that currently property in spain is anything but appreciating.
It seems the best way forward would be to leave the property in our fathers name and we cover the running costs for him. Does anybody see anything I’ve missed or miscalculated somewhere?
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Ingurisu: It is a can of worms you have opened. You well not be able to get a definative answer from any one. What is definitive in the end is the tax that you will pay. That is the nature of the beast.
In such matters Spain is its biggest enemy. While most Countries allow tax breaks to encourage inward flow of capital. Spain bites the hand that feed it.
I am aware that there are things happening on the inhertance tax front, at the EU level let us see when and if things settle.
When you are next in Spain. Please visit an Gestor. While I understand that you wish to do your research at least to ask the right questions.
Good luck & keep us posted as two certianities in life tax & death will come to all of us.
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Hi Shakeel, I do plan to visit the Gestor when I go in October. I will start with the same guy who was involved when my father bought the apartment, at least he has some knowledge of the history, this may or may not be helpful.
As you say, I am just trying to do as much homework as possible before I visit. My understanding on the inheritance tax was that Spain were forced to change it as they were charging different rates for residents and on residents. From what I could find the previous rate of 35% for non residents has now been changed to 21% that applies to everybody in spain.
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