I Have Saved Spanish Inheritance Tax & Saved Purchase and Selling Taxes

Yes you might save taxes up front but this arrangement generates higher annual taxes as the Spanish government is aware of this option and is closing the loophole. You will also generate UK taxes and the need to maintain a UK registered company.

Hello Rob,

This method is not there to only save taxes in advance, but means no Spanish Inheritance Tax has to be paid by my Heirs or Beneficiaries when I pass away. There is also no Spanish Transfer Taxes to pay if I sell the property to to the Buyers or me, as I will sell the Company and not the property. If the Buyer does not wish to buy the Company then I can simply sell the property to the Buyer out of the Company in the normal way.

Can you please let me know what annual taxes the Spanish Government charge a UK Limited Company for owning a property in Spain, I am not aware that they do charge any at all.

My UK Accountant has informed me that as this is a none trading UK Limited Company and has only been formed to own the property, I will not have to pay any taxes as there will be no trading or profits in the Company.

My Accountant will also only charge me ?150 to deal as my Company Secretary and Registered office in the UK per 12 months. And will only charge me ?300 each 12 months to file my accounts at Companies House. This hugely out ways any IHT or selling Taxes in the future.

My Property Consultant who helped me with this process has been purchasing and selling in Spain for 25 years, and as of yet has received no problems from either the UK or Spanish Governments. A loophole is something that is stamped on quite quickly but this tells me that there should not be a problem.

Maybe this process is worth you thinking about for your Buyers & Sellers as it today can legally save 10% in the deal, which should be fantastic in this difficult time, and also safeguards any none Spanish Domiciled people to the huge problem of Spanish Inheritance Tax.

I am glad that you have found an arrangement which suits your circumstances.

It appears the 3% annual tax only applies to tax havens - which the UK is not! For UK residents this arrangement might generate a UK tax - Benefits in Kind.

To be honest I think the IHT problem is much over rated because the rules are so complicated and differ region to region which seems to result in people thinking they will have a huge liability.

However there is a trend (and without wishing to enter any kind of political debate) that regions governed by the Socialist party have the most generous allowances often resulting in no IHT payable - obviously terms and conditions apply (age, status, wealth etc)

As we always say here - it pays to research and take professional advice.

Dear Rob,

I have checked with my UK Accountant about the benefit in kind from owning Spanish property in a UK Limited Company. I was delighted to find that in the new budget this year there is no benefit in kind to pay to either the UK Company or the UK Government, this is because the Government has removed the requirement to confirm time spent at the property if it is owned by a UK Limited Company, therefore no benefit in kind is charged.

As far as Spanish IHT being over rated I have to disagree, it may not be a problem if you are Spanish or Domiciled in Spain (Which is not taking Residence) but for all other Owners, Heirs & Beneficiaries it is a nightmare. You are correct to confirm it depends on the region, age, status & wealth but if you are British, Spanish IHT will have to be paid.

Before I purchased in Spain, my Property Consultant prepared a Proposal that calculated the amount of Spanish IHT that would have to be paid in future, should I buy in my own name with my family. The figures they used were taken from the Spanish tax office and included the payable IHT taxes, and the IHT Tax allowance for my family and I on the property.

I unfortunately cannot supply my personnel information of my Spanish IHT proposal, but I am happy to display the Allowances that British people will have should they inherit a property, or part of a property in Spain.



Group 1 ? 15,956.98 / Descendants and adoptive children under 21.
Group 2 ? 15,956.98 / Descendants and adoptive children over 21, Spouse, Parents and adoptive parents.
Group 3 ? 7,993.46 / Brothers, sisters, nephews, nieces, uncles and aunts.
Group 4 ? 0.00 / Relatives in fourth degree and friends (partners)

These calculations are based on all Beneficiaries NOT being domiciled in Spain.


Any British Domiciled inheritors of Spanish property will only have the above allowance deducted from their estate, and all Spanish Taxes will have to be paid before they can gain their Inheritance, which is the reverse from the UK.

Any Owners, Buyers or potential Inheritors can apply for a proposal to calculate their potential Spanish IHT at a website called www.winchamiht.com , I came along this website whilst I was doing my homework with my family on Spanish IHT.

Finally Rob I have to agree again you are correct to say it pays to research and take independent advice other then a normal Estate Agent.

I am delighted that the UK government has given something away!

I agree with your IHT table - but it still does not give the full picture - each inheritor has the allowance and the properties value is divided by the total inheritors who then pay tax at a starting rate of 7.65%

eg

Property value 100,000

Say 4 Group 1 inheritors = 25k each- Minus allowance in round figures = 16k net amount for tax = 9k

8 k @ 7.65% = 612 + 1k @ higher rate of 8.5% = 85 Around 697 euros total tax each.


Of course another way round it is to register the property into the childrens names at completion so they already own it upon the parents demise. And of course as you say should the inheritors be tax residents of Spain (an increasing occurrence as families relocate en masse) they are in a more beneficial situation.

This may negate your UK company ownership benefits but deals with the IHT (which might have been abolished in the meantime anyway)

We have been discussing your UK company idea with a client who is an accountant - he is in the process of reclaiming his Spanish IVA repayments via a UK VAT refund - we await the outcome with interest.

To answer your posts -
1. On the 6th April 2008 the Chancellor abolished Benefit in Kind Tax for Directors of Property Owning Companies.

2. With regard to the costs of running a UK company there are 2 things you will need to do
a. Provide a Registered Office for the company in the UK. File the Annual Return for the company and pay a ?15 filing fee. This service can be provided by Company Formation Agents at an inclusive price of ?200
b. You are required to file an annual set of Accounts for the company with Companies House and HRMC. This can be dealt with for a cost of ?100 for a non-trading company and ?300 for a trading company. The benefit of a trading company is that you can claim Tax Relief on the attributable expenses for the business. This can include Community Fees, Water, Electricity, Suma, repairs and possible flights and car hire for the Directors. There is a saving to be made to offset these costs as no Wealth Tax is payable by the Company and as the owner of the company has no assets in Spain there is no necessity for the owner to file Tax Returns in Spain. The company will file Tax Returns in Spain with zero liability. The filing of this return on Spain would be approximately 60?.

3. With regard to Inheritance Tax, if you personally own property in Spain, all inheritors would be required to probate the Estate individually and pay the IHT based on their individual Inheritance Tax. This must be paid prior to any transfer of the asset. All assets are frozen; include personal and joint bank accounts, until probate has been completed. The assets cannot be mortgaged to pay these taxes. If the property were to be invested in a UK Limited company there would be no taxes or Probate in Spain. It is much easier to deal within a UK will with the shares of the company which are exempt from UK inheritance tax if the company is classed as a trading company. There are simple rules laid down by HMRC with which you would be required to comply. It should be noted that if the property is personally owned that there may be further IHT tax to pay in the UK depending on the size of the overall Estate. With ownership in a Corporate structure the shares can be transferred exempt of tax and the Directors Loan Accounts in the company could be gifted to the beneficiaries prior to death. This is quite simple to do and only required a letter to be produced stating that the Loan Accounts in the company should be gifted to the nominated beneficiaries and this can be lodged with the owners Will. The recipients do not even need to know that this has been done. The result is that as long as the owner lives 7 years then the Loan Account will be outside of the Estate for tax purposes.

4. If you wish to sell the property, Corporate ownership gives you 2 options. Option one is that you sell the property from the company in the normal way, 3% Withholding Tax will be deducted from the sale proceeds. The balance of the proceeds will now be held in the company and you are able to withdraw your Directors Loan Account, this will include all the loans that you have made to the company to finance the costs of running the property. Option 2 allows for you to sell the company, this is the most cost effective and simple process for all parties. It is achieved by the preparation of a Warranted Sale & Purchase Agreement. This can be prepared by a UK Lawyer, Accountant or Corporate Property Consultant. A small cost of 600? would be payable to a Spanish Lawyer to check the Title and for any encumbrances on the property. The vendor would be required to provide a professionally prepared and warranted Balance Sheet for the company. The payment by the purchase for the shares and the Loan Account can be made either in the UK or Spain and the transfer of ownership is quick and simple with nothing to do in Spain. From a Tax point of view the purchaser will not be required to pay the 7% Transfer Tax or the 1% Land Registry Fee and the legal costs will be limited to those stated previously. The vendor would not be required to pay the 3% Withholding Tax or the 18% CGT in Spain but would only be required to pay the 9% CGT levied by the UK HMRC on the sale of shares of a UK trading private Limited company up to ?1,000,000 gain.

5. It is not understood by most Brits that apart from paying taxes in Spain that they must also declare to HMRC any profits that may be made on their World Wide assets and even though taxes may have been paid in Spain that further taxes may still need to be paid in the UK. As many Brits have suffered appalling advice from Spanish Estate Agents who have recommended that they pay for a property using what is called ?Black Money? this method is not only illegal but can also create a significant CGT liability back in the UK when the property is sold as there can be an inflated profit generated which will be taxable. Using a corporate method for acquisition, operation and sale effectively eliminates all Spanish Taxes and can provide the lowest taxation liabilities in the UK.

NO NO NO,

Sorry to say but all these contructions with UK companies are void and invalid due to the new anti avoidence measeres taken by the goverment in 2007.

Companies holding only real estate in Spain are now considered anti avoidence vehikels and hence treated as non existent.

Full tax will be charged!

OK - can you give the source of this information?

Thanks.

Bily
I dont know who has been telling you this information but I know you are wrong ,we have over 3 million euros of property of our own in Spain in UK Companies and over 300 Clients with properties registered in UK Companies ,A Company is as legal as any Person.

Hi Guys,

I will post the various sources later and yes its legal to buy property thru a UK company or any EU or offshore, but if the only asset is real estate in Spain then it falls under the new anti avoidence measures because the company is set up solely to avoid spanish taxes!

Using a Company to Buy Property in Spain

This article will explain the various methods of owning a property through a company. Choosing a strategy where you buy as an individual or through a Company will depend mainly on the value of the property and your personal circumstances.


We suggest that you make an appointment to speak with a fiscal advisor who will provide you with a study based on your personal requirements.

How companies were used in the past to avoid Spanish tax
Until recently buying property using a company used to be an effective way of avoiding tax. In the recent past it was acceptable practice to buy a property using a local Spanish company that was owned by a foreign company. The Spanish property and the foreign holding company could then be bought and sold while avoiding many of the taxes or costs of transfer, as the sale of the shares in the foreign company frequently fell outside the scope of Spanish tax.

Another common method was to own the property using a Spanish company and to sell the shares, which avoided capital gains and transfer taxes as there is no taxation on the transfer of shares under Spanish law. This was a complicated procedure and required careful structuring in order to achieve a successful outcome.

These are risky strategies nowadays, as tax authorities throughout the European Union have cracked down on tax avoidance. Spain has toughened up its legislation in line with EU regulation by introducing a special annual tax now on real estate owned by non resident companies (not used for business purposes) set at 3% of the valor catastral. Furthermore, indirect sales using the transfer of shares in a foreign holding company that directly control a Spanish company owning a Spanish property(s) are liable for tax and in the event of non payment the property bears the charge.

Off shore or non-residents companies are also currently taxed in the same manner as non resident individuals and face a capital gains tax rate of 35% on the profit of the sale of the property principally paid with the 5% with holding tax of the registered sales price. What types of company can own property in Spain? You can buy property using the following Spanish company structures: a Sociedad An?nima (S.A.), a Sociedad de Responsabilidad Limitada (S.L.), a real estate investment fund (Fondo de Inversi?n Inmobiliaria - F.I.I.), or an investment company (Sociedad de Inversi?n Inmobiliaria - S.I.I.). Or as a foreign investor you can buy property in Spain using an off-shore company, or a company that is registered in a country outside of Spain (however no longer a viable option for most investors due to the extra running costs from the new tax mentioned above).

Why use a Spanish Company to own Spanish property
Provided that you structure the company in the correct manner (see below), and that you can show that buying and owning property is part of the company statutes (the title deed for the company that declares what types of business the company has been set up to do), there are still some opportunities to avoid or minimize the taxes associated with buying and owning Spanish property. Here are some of the benefits:

Tax avoidance
Income and Wealth taxes
Income & Wealth taxes associated with owning property can be reduced if the value of the property(s) is high. The tax rates for these taxes increase progressively related to the value of the assets. It may be worth using a Spanish company if the values of the property(s) are over ? 1.000.000.


Property guide Spain

Your article is correct and it would not be prudent to use any offshore or Spanish Company, but your article does not refer to a UK limited Company. This is treated totally differently than any that are quoted in the article. A UK company is not taxed in Spain at all if it has opted to be taxed in the UK, under EU rules a UK company has the same rights as a Spanish one but is taxed in its own durasdiction. You will not find many downsides for this method as nothing can be more complicated or costly than owning a property in Spain in your own names.

Sorry for the misunderstanding.

Allthough, is it correct to say that in the UK the tax charge is 75% less then in Spain on these companies?
If so the new measures include UK companies!

If not so how much tax is paid on holding a spanish property of 1000000 Euro in a UK company?

Regards

CFC rules are regulated by 121 of CITA, whereby Spanish individuals and entities are subject to corporate income tax on certain positive passive income earned by non-resident entities, in which they own, individually or together with related persons, more than 50 percent of share capital, equity, profits or voting rights. Furthermore, the corporate income tax paid by the non-resident entity, must be less than 75 percent of the Spanish corporate income tax payable and is considered as passive income according to CITA. There are, therefore, three requirements in order to apply Spanish CFC rules: (i) control of the foreign company by one or more Spanish resident individuals or entities; (ii) the foreign company must be subject to a pref-erentiai tax regime; and (iii) the foreign company must obtain passive income.

In this link the rules are explained:


http://spaviv.costamedinvest.com/planificacionfiscal/20061219173003401.pdf

One must make a difference bewteen heirs resident in Spain and heirs resident elsewhere!

The 35% CGT and 5% withholding tax are both out of date.......................

I've just seen this thread and although somewhat out of date I thought I'd throw a bit more fat into the fire.
The use of a UK Company to buy property in Spain does indeed currently work but won't for much longer. There are changes in legislation going through in Spain at the moment to plug this loophole and HMRC are on to it anyway.
If you are a shareholder in a UK company and indeed you would be if you used a UK Company to buy the Spanish property then you are up a gum tree taxationwise in the UK because you cannot use a company to buy just one property here as this is seen as tax avoidance in the UK whether the property is here or Katmandu and regardless of the local tax rules applying.
Anyway, it is a fair chance that you are UK tax domiciled anyway (not resident this is different to domicile) which means that regardless of anything clever you might have done or think you have done you are an owner of shares which contribute to your worldwide estate which when added to all your other assets, wherever they might be, is subject to taxation in the UK - and this measn IHT when you die. So if your Spanish property shareholding is in excess of the nil rate bands applying to your death situation then you will be liable to inheriatnce tax in the UK regardless. This will of course generally be less than you might have paid in Spain of course.

The bottom line therefore is if your Spanish property is all you own and it's an itty bitty little place then yes your estate does end up with no IHT against it because its value or rather the value of the shareholding in your estate is less than the UK Nil Rate Band(s).

However as I say this is all academic because the loophole will soon be closed and everyone who thought they were being ever so clever avoiding tax will find themselves taxable again and then they'll need my contact details.

:)

The status of a UK company in Spain or anywhere in the EU is governed by EU rules and there is no proposed legislation to penalise any member country. A UK company in Spain must be treated the same as a Spanish Company. EU rules state that a EU Company can select in which jurisdiction it is to be taxed , This means that if you select the UK you are subject to UK Taxation.
This is far preferable than Spain. If the property is owned by a UK Company then no taxes are payable in Spain. No IHT,No Wealth tax No 25% rentals. This is not a loophole as you suggest but a commercial facility. With the UK Company operated as a trading company subject to HMRC rules, tax reliff can be obtained on all attributable expenses including Bank Mortgage interest, Council taxes, insurance and the like.
With regards to IHT no probate or ISD in Spain. As far as the UK is concerned Shares in a UK private trading limited company are exempt from IHT and if you sell the shares then there is only 10% capital gains as opposed to 18% in Spain and the UK on property.

Remember if you are UK Domiciled you would have to probate the estate in the UK adding the Spanish property to other UK assets and then pay IHT under the UK rules. You would then have to probate each recipient individually and they would pay the taxes in Spain, as they are 2 different taxes 1 on the estate and 1 on the recipient no treaty or offset exists so double taxation applies, a UK Company overcomes this problem.

I would be interested to know how you would deal with say a 300000? property owned by UK Domiciled people. I await your reply!

What you say is correct insofar as it goes other than your assertion that the loophole is not a loophole and is not about to be plugged - but I'll let that pass. The rest of my hasty posting was about my concern for the fact that the UK liabiloties were not covered and rather than bore you with my own diatribe I though it would be useful to throw the thing at our tax lawyers; so their response to your posting as follows and puts the icing on the cake of my first post:

As you are aware Rex the shares in the UK company will be subject to UK IHT @ 40% because it is an investment company thus no Business Property Relief

Also if the property is sold this is liable to Corporation tax on Capital gains at the lower or higher rate depending on the amount but both of them are higher than the CGT rate for an individual......

The Company having paid tax (and any Spanish taxes and duties payable by a vendor on disposal) will then be sitting on cash

There are three means of extraction
1 Dividend
2 Bonus under PAYE
3 Liquidation
4 Trust based extraction

Only 3 pays CGT at 18%, 1 and 2 are taxable in the usual way and using 4 results in no tax at all and no tax ever again in the future, capital or income, personal or business.

I do hope you will inform all your clients of these facts and pass them our contact details so we can button things up for them.

As for your ?300,000 property clients I would be pleased to send you the briefing document for the solution if you'd let me have your email address.

Over to you

Regards

Sounds Final!!,

However can i pose the question a different way,

How do you legally reduce liability to a minimum on a ?300,000 property in Spain , either on Sale, Death, Inheritance, ( I suppose there are two conditions, Resident and non resident), I dont mean to Hijack the thread, I will repost or ask admin to move if not relevant.

Mike
You can eliminate all taxes in Spain by gifting your property to a UK private limited Company .

The previous contributor states that 40% IHT would be payable in the UK if the property is an Investment Company this is correct .

If the company is a UK private trading limited company then the company is exempt from IHT ,the key word is TRADING this is defined by HMRC and as long as the HMRC criteria is met then no IHT will be payable .

We provide the full service to our clients this includes the Company formation the gifting of the property to the Company and the preparation and filing of qualifying accounts in the UK, as we cannot advertise on this site unofficially you can contact me through the private section for more details

Hello All Members,

I have been using this Forum for about a year to research whether there is any other solution in removing Spanish Inheritance Tax for my Heirs and my Beneficiaries, other than purchasing and owning the property I bought via a UK Limited Company. The research I have done and the comments made to this Forum still lead me to believe this is the only true legal way to safeguard against IHT in Spain. It will be great if anyone can confirm any other way of removing Spanish Inheritance Tax in Spain on my property other than the UK Company ownership route.

Hi all

My first post on here, I currently own an apartment with 3 other people

Wife, Mother in law & Father in law

Father in law is quite ill and we need o look at the practical side of things like IHT. i was thinking of putting the apartment into a UK based company as I have heard a lot about it, can anyone confirm that this is the best route and approx cost against cost of paying IHT ?

Property is worth approx 130,000 euros, I have beeen told that IHT will not be much but probate will be a large expense.

Any help much appreciated

Thanks

Brin
You can save all ISD(IHT) in Spain and the probate costs if you put the property into a UK Company then the shares of the deceased will be dealt with in the UK probably free of IHT. You can obtain a free illustration of your probable IHT costs in Spain by logging in to winchamiht.com and requesting a free illustration.The cost of investing the property into a UK Company is ?5000 all in including Notary fees a small price to pay to save many thousands of costs in Spain. Does your Father in law have a Spanish Will if he does this may prove costly as the taxes will be payable if you are lucky then he may only have a UK Will and then you could vary this to leave his share of the property to a UK Company. A UK Company does not pay IHT in Spain.

Dear Brin,

As mentioned earlier in this post I own a property in Spain and bought in a UK Limited Company so I can tell you from first hand experience.

a: I do not own my Company on my own so multiple people can own the Company who in turn own the property in Spain.

b: We only require a Will in the UK to leave the shares of the Company to our Beneficiaries, No Will in Spain is required as the property will not be directly Taxed by the Spanish Government when we die, nor do we have to pay annual Ownership Taxes as our Company Tax returns which we put into Spain each year are at zero as the Company has elected to pay its Taxes solely back in the UK.

c: When we bought in our UK Company the purchases was taken care of for less than ?10,000 by my Consultant.

Please let me know if you require my Consultants details as they have offices both in the UK & Spain.

Hi all

My father in law has made a spanish will, how will this affect what i am trying to do ?

Thanks

Hello brin,

Most Lawyers in Spain recommend you have a Will in Spain but the Wills are registered in Madrid and therefore are set in stone, when there is a death the Taxes have to be paid by the Beneficiaries within 6 months otherwise fines may be issued by the Spanish Government. Also the Lawyers in Spain are on a good earner as they charge each Beneficiary Legal fees to probate in Spain which could be anything from 5,000 to 10,000 euros each, and they also tend to charge on a percentage basis in Spain so it might even be more.

Once you have your property in Spain owned via a UK Limited Company it removes the asset from Taxation in Spain so you simply need to cancel the Will in Spain with a Lawyer, and then make or amend your UK Will to leave the shares of the Company to the Beneficiaries which leaves the estate to be Taxed in the UK only.

Hi all

Thanks for your help with this, this is becoming a complete nightmare and is causing me sleepness nights...I simply cannot afford this sort of money!!

How much does changing/revoking your spanish will cost, Father in law is still with us but for ease can this be done by power of attourney in UK ?

Also, if the Spanish do impose fines what happens if you can't pay them, does your property get taken (there is no mortgage on it) ? and if so would this affect your credit rating in the UK ?

Thanks again for everyones help

Hi all,

Just want to say that I have spoken to Malcroach today and he has been more than helpful, hoping to meet with him next week so will keep this forum updated.

Thanks Malcom

For some people there may be alternatives to buying expensive UK companies. Please call Catalunya Insurance Services on 0034 977493607.

Hello,

I would be very wary of looking at insurance to pay IHT in Spain as our whole discussion is to remove the Tax in Spain which of course a UK Company ownership does. Taking insurance like life insurance does not remove IHT in Spain as it only means the beneficiaries can use the money to pay the Taxes when the owners die. Also to form a UK Company only costs ?50 in the UK from any good Companies House Formation Agent but there are additional costs in setting up that Company to be able to operate and own properties in Spain, nerver the less these initial costs of setting up and investing the property in Spain into the UK Company are far less than the future probate / legal fees in Spain and Spanish Inheritance Taxes on death.

Often the purchase of UK companies is carried out through an agent and the costs can be very high. There is nothing wrong with that as it will solve the problem and probably be a lot cheaper than the tax liability. But that is in the future and not everybody will wish to go that route. For some people who do not wish to go this route they can insure each other for the amount of the tax liability. If they are young and healthy this can be a very cheap option and may be worth considering. It will not get rid of the IHT liability but it will provide a cheap alternative and solution to the problem. It is worth mentioning that the policies must be set up correctly or they may make the situation worse.

Both the UK and Spanish govts are now clamping down on these scams.

UK customs and excise now view it as evasion and are about to stop this from continuing.

Its been covered on here before.

Pay these idiots around ?8,000 to administer this is crazy and in a few years time, useless.

Which explains why there is a mad rush on PR at the moment, there grabbing as much business into 2009 as possible, as 2010 they`ll be sellin other products.

Hello,

It is not correct to say that when you buy in a UK Company there are increased costs because if you purchase a resale property in Spain in your own name then you have to pay 7% Transfer Tax to the Spanish Government, also most Lawyers in Spain ask you to do a black money deal and under declare the value which does defraud the Tax Authorities in Spain and costs you 18% Capital Gains Tax on the undeclared value if you sell in future.

If a purchaser wishes to acquire a property from a seller into a UK limited company the purchaser can form a UK limited company using this scheme. With the seller appointed as the shareholder of the company, the seller can attend the Notary in Spain and instead of selling the property to the company, he can gift the property to the company. In this instance there would be NO 7% Transfer Tax to the purchaser and NO 3% Retention / Withholding Tax to the seller. There is a simple sale of shares to complete the deal. This is a simple solution costing less than most probate and legal fees in Spain when there is a death of an owner of the property. All nationalities in the world, including both Residents and non-Residents of Spain can own a UK Limited Company that owns a property in Spain.

This solution to the IHT problem in Spain is also for owners who already own Spanish properties as the owner/s can gift the property to a UK Limited Company. There would not be a 7% Transfer Tax in Spain on this transaction unlike other property transfer transactions. This method may eradicate all Taxes in Spain in the future, in respect of the property, as under EU Directive a UK company is only taxed in one jurisdiction, the UK, and No Taxes are payable onwardly in Spain. A UK company is not an 'offshore company' like Gibraltar or the Isle of Man - they are charged an annual 3% Tax by Spain for not being part of the EU Community. Shares in the UK company are dealt with in only a UK Will, and depending on the structure of the company the shares may be exempt from Inheritance Tax in the UK too.

The EU treaty allows a Company from an EU county to operate in another EU county and decide in which jurisdiction it wishes to pay it Taxes. This is to encourage international trade and makes it far more manageable for those companies to keep track of their individual Tax liabilities. A UK Company can own a property in Spain and with the CIF number that the Company has in Spain it can elect to pay its Taxes back in the UK, just the same as a Spanish (SL) company can own a property in the UK and elect to pay its Taxes back in Spain. In 2008 the British Government removed the benefit in kind Tax for Directors of UK Companies who own property abroad so this is an incentive and not a deterrent. Any Chartered Accountant in the UK will be able to confirm this.

It would be great if anyone who believes this method is illegal or incorrect can demonstrate and show an alternative as my research shows me this is the only true, legal, tried and tested method to remove IHT & Taxes in Spain.

I have pesonally dealt with a number of companies that offer this service to open a UK company. The opening costs start at 8000 pounds sterling and go to over 10,000 pounds sterling. So you need to be pretty sure that there will not be any changes coming up which will make it a waste of money.

>

It would be great if anyone who believes this method is illegal or incorrect can demonstrate and show an alternative as my research shows me this is the only true, legal, tried and tested method to remove ecked_word">IHT & Taxes in Spain.


It would be useful to show any recent cases of IHT being avoided using this method since 2003 when Spain upgraded its Tax laws.

People need to read these

http://ec.eu.eu/taxation_customs/taxation/company_tax/gen_overview/index_en.htm

http://www.gomezacebo-pombo.com/AdministradorNoticiasfotos1104.PDF

Then try to search companies house concerning Holding Company rules.

For legit Companies the rules are clear, but simply registering a company by individuals wishing to avoid IHT is no longer deemed legal and is now classed as tax avoidance.

Its a very complicated area, almost all info on IHT on the net/forums is provided by the companies charging huge disproportionate costs.

Its best to gain advice by independent tax lawyers who don`t sell products.

The same happened with property laws, people were advised by "experts", much to there regret.

IHT will be the next legal mess in Spain.

You have been warned.

Hello Blackbird,

I am glad I am not the only person who has used these services before and you are correct as I paid ?5000 for the formation of the UK Company, all the Company documents translated into Spanish, and all Legal & Notary fees in Spain & the UK including the registration of the property to the Company in Spain. I was very happy with my Consultant who helped me purchase this way as I received a very detailed written quotation from them, which included the full costs and onward fees including any Taxes which may have to be paid at purchase. I did find it impossible to receive anything from Lawyers in Spain who documented my costs and Taxes in Spain if I purchased in my own name, this made me very wary of what I could be walking into. There was the initial cost when I purchased in the Company but paying the initial fee instead of instructing a Lawyer directly in Spain has saved my Family just under 50,000 euros in probate, legal and IHT Taxes in Spain in the future, which to be honest I do not know where we would have got the money from when we needed to pay it.

>

IHT will be the next legal mess in Spain.

You have been warned.


I 100% agree with the statement made above by Santi that IHT in Spain is, and will be a huge mess, but if you own a property in Spain using a UK Limited Company then that removes Taxation in Spain all together, so surely this is a positive step in removing property owners from that mess.

Probably the most important issue here is to make people aware that there is a problem. 99% of the people that I talk to do not realise what the IHT situation may mean to them when the time comes. This forum is doing a good job in getting the discussion going but the word needs to be spread. I am a licensed IFA in Spain and I understand broadly what the issues are and can point people in the right direction for expert assistance to sort these problems out, but be aware there are a lot of unregulated people offering advice on this subject who are out to make a fast buck without any thought for the clients well being and of course if they are unregulated and give the wrong advice there is probably no recourse.

If anybody wishes to pointed in the right direction for advice please call Catalunya Insurance Services on 977493607. Ask for Chris. If I do not know the answer I no a man that does. The information is free.

Isn`t Westholme linked to Wincham Consultants.

Who just happen to be the people all over the net sellin this as quick as possible before it becomes general public knowledge.

You see it doesn`t look good stating this,

"I have purchased on Finca Parc near Murcia and was advised by my Agent 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".

When you are a company registered at the same address as the company who advised you.

Ops ;)

> Isn`t Westholme linked to Wincham Consultants.

Who just happen to be the people all over the net sellin this as quick as possible before it becomes general public knowledge.

You see it doesn`t look good stating this,

"I have purchased on Finca Parc near Murcia and was advised by my Agent 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".

When you are a company registered at the same address as the company who advised you.

Ops ;)


I joined this forum on the strength of this thread, wanting to learn how to minimise my family's IHT/ISD liabilities after my days (a serious heart attack being something of a 'spur'). I contacted Wincham via Royal Mail - but heard nothing in response. I contacted W.C.D. not knowing that their Consultant was indeed Wincham - and W.C.D. responded immediately with Wincham's contact details (but that RM letter was already in the post). I also contacted our fellow member 'Brin' who was meeting Malcroach/Wincham back in June. I've heard nothing from Brin so maybe he also drew a blank. I also contacted member 'W.. P..' - but apart from an initial response, I have heard no more.

Although I originally had ample Life Insurance to cover the ISD, the cover 'ran out' and obviously the new terms were prohibitive, however, research has now led me to offer one of my properties for sale, and pay the 18% CGT, and split the other between myself (35%), my wife (35%) and my son (30%) whilst retaining the usufruct. This latter has the effect of giving me total control over the apartment and also reduces it's value for the transfer tax etc etc, by approximately (in my case) 27%. The net result will be my heirs facing a tax bill of 20% of 35% of one apartment instead of my wife facing a ?90,000 bill for 150% of two apartments. Result!

I am still researching the Family Trust/Corporation angle but so far the property split seems the most likely route for me - unless you know better??????

You did well on that.

Hopefully others will follow that path.

As with all govts and tax rules, you cannot hide forever and anybody who sells you a product that claims to save you money, yet charges almost ?10,000 is a scam, pure and simple.

I fear others will find out much to there cost once they need to dispose of the asset.

It may well have cost them extra for nothing, I`m sure the authorities will impose a suitable fine to anybody found guilty of Tax avoidance.

I`m sure the sellers have indemnified themselves from any responsibility.

Independent advice should always be taken before handing huge sums of money away on such schemes.

> You did well on that............
Independent advice should always be taken before handing huge sums of money away on such schemes.


Thank you - and it's the independent advice I'm busily seeking right now before departing for Spain. Maybe I should give the Blackbird a little call and seek his advice and opinion.

Maybe worth a PM to ROBI who contributed at the begining of this, he may no a man to help.

Also have a look around at articles on this site.

You may also find a really old method of research in the form of a book, Amazon do some really useful guides, although not fashionable in these modern times, they tend to be more reliable than the internet.

Excellent thread, Thanks to everyone for trying to clear the murky water.

Pity the advice has gone cold :roll:

I have been discussing this with a local lawyer friend( British ,living in Spain) He thinks the system using the Uk Company if fraught with danger and advised seeking information from the Spanish Tax authorities.

Others here also have their doubts on the future implications and with the big brother thing in full swing worldwide,, caution must be used.

I must say reading Winchams site the plan looks worth considering, but like you all we will have to research more before making any decisions.

Our personal situation is: that we have been out of Europe for over 25 years, all our income has been offshore and at this time we are not resident..anywhere? but considering buying in Spain for retirement.

The last post on this topic was well over a year ago and I was wondering if there have been any changes, updates or clarifications to the situation regarding Spanish IHT and the possible remedy of gifting a Spanish property to a UK limited company?

Update: Since posting this, have decided to start a new more appropriate thread on the subject.

Hello Justin,

I have owned my property in Spain using my UK Company for sometime now and all is running fine with no Taxes being paid in Spain for the ownership, except my utility bills and council Taxes which I do pay via the Company bank account in Spain which builds up my Directors loan to offset against any Capital Gains Tax when I sell my Company in the future. My Spanish Tax and Legal consultant who helped me setup the UK Company ownership structure for my property submits my Companies Tax Declaration in Spain every January but as the UK Company is a non resident Company of Spain then it is always at zero. My UK accountant has been my Company Secretary and Registered office in the UK and has been filing my UK accounts each year and no Tax has had to be paid either in the UK. It may be worth looking at my Consultants website as they have been nominated for an award in relation to their services and this type of structuring and it is a very interesting read.

Thank you WCD for your reply. Please look out for my new thread on this topic.