WITH rates of taxation rising across Europe and with populations continuing to age, Inheritance tax (IHT) is likely to become an increasingly important tax for governments seeking to fill their empty coffers.
For UK citizens, The Fry Group’s (free) guide to UK IHT provides detailed information about this tax and a range of tax saving options. It does not consider the interaction with Spanish succession tax, which is vital for Spanish residents, although personal advice is available on request.
Importantly, a growing number of UK retirees in Spain now have sufficient ties to Spain (long term residency etc.) to assert a domicile of choice here and this could remove any liability to the UK tax (other than on UK property, UK shares and deposits).
The ability to assert a domicile of choice in Spain needs to be assessed based on personal circumstances/ intentions and The Fry Group offer a specialist domicile assessment service.
The avoidance of Spanish succession tax (in the communidads where it is levied) for non-Spanish nationals is relatively straightforward because unlike the UK, where the worldwide estate of a deceased person is assessed, the recipient of bequests is assessed in Spain.
This means that where assets are held outside of Spain and pass to a non-Spanish resident there is no tax to pay. We have also seen a favourable judgement by the European court in September 2014, which ruled the Spanish system to be discriminatory against non-resident beneficiaries.
Holding one’s assets outside of Spain for succession tax planning is a simple means to potentially reducing liabilities in Spain and long term residents should undertake a domicile assessment to see if UK liabilities exist. Full planning then can be undertaken.
The location of physical property in Spain or the UK limits planning options, although property can be sold. UK share portfolios can be removed from UK assessment by holding them in a collective investment.
Estate planning is unique to each individual and therefore personal professional advice is required.
For further information or a domicile assessment contact Mark Davies at mark.davies@ thefrygroup.co.uk.
A free copy of the Fry Group’s guide to UK IHT will be sent by e-mail to readers on request.