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I read today in Moneyweek page 25 that New EU regulations that come into effect on 17th August 2015 will allow a citizen of one country who is resident in another to decide which set of national laws govern their whole estate,with the default being those of the country in which they are resident. I think this is very helpful to UK property owners who wish to keep their UK homes yet live in retirement in Spain in particular those who wish brothers or sisters to inherit wheras they are currently discriminated against by Spanish law. Monewyweek do not give further information about this that I can report
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I am now reading that if you are fiscally resident in Spain but a ‘citizen’ (what qualifies as that ?) of the UK and you die in Spain and have a Spanish Will stating you wish to be treated according to the tax rules of UK you are not entitled to the £325000 exempt band so it is not as beneficial as would first seem ? However if you are fiscally resident in the UK and No residente in Spain it makes it vitally important to make a new Spanish Will stating that you want your Spanish assets to be dealt with under UK rules. this is a great improvement for non residents particularly if the beneficiaries are brothers air sisters with homes of their own who would be double taxed under the Spanish Law ?
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My further observation is this : If you are fiscally resident you are required to pay Spanish Taxes annually on your worldwide income . Spanish taxes tend to be higher with smaller personal allowances if you are living on pensions and not in employment. Being No Residente restricts you to 182 days in Spain but you pay a nominal small income Tax. The second disincentive to becoming resident in excess of 182 days is the requirement to declare any property of value that you own outside Spain such as a UK home worth over 40K euro or face stiff fines. The new EU Directive to my thinking removes one of these disincentives. You can become fiscally resident in both countries pay your extra income tax but now have the bonus of being able to spend longer in Spain because you no longer have to worry about Spanish Inheritance Tax rules provided provided you make a new Spanish Will electing to be assessed on a UK basisIn my thinking that you spend at least 90 days in UK to qualify as UK resident thus qualifying for the £325000 exempt tax band. It would not however I think relieve CGT on the sale of a property please note.Very useful if like me having left England at end of October you find springs unpleasantly cold to come back to.. In fact you only need to be in UK mid June to mid September. Would appreciate comments on the accuracy of these 3 posts as think the issues raised of considerable relevance to people considering relocating to Spanish territory or who currently restrict themselves to 182 days.
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My further readings cause me to post further. the new EU directive applies only in this way : It APPLIES TO THE APPLICATION OF SUCCESSION LAW ONLY. It does not entitle you to have your Spanish property bundled with any UK property and exempted under the UK £325000 Inheritance Tax exempt band if you die Spanish resident but are also a citizen of another EU country such as UK or indeed dual tax resident for reason of being in UK 90 days per year and filing a UK tax return each year. Again comment on accuracy of this appreciated.
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My understanding of this issue is as follows:
The new regulations are, in no way, a form of tax treaty, and concern only the issue of laws applicable to successions.
Some european countries, and France in particular, have laws regarding forced heirship, under which, there is an obligatory split of a deceased person’s assets, which can not be modified by the terms of a will.
Under the new regulations, and in certain circumstances, it is possible to avoid the application of forced heirship rules. However, where forced heirship applies to fixed property, in conflicts between the laws of different countries, French courts for example, could argue that the issue is a matter of public policy, and apply French not English law.
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