You accept that moving to a new country means getting to understand a different tax regime and I think the biggest problem for me and I am sure for many other expats in Spain is understanding succession taxes (death taxes to you and me).
Even more of a concern was to find out that even though I had left the UK that I could still be liable for UK inheritance tax as well as the aforementioned succession taxes. How can this be I wondered? Having investigated the matter further I got to understand that I had acquired UK domicile through birth and that even though I was now formally living in Spain as a Spanish tax resident this had nothing to do with my domicile which apparently can take years to shake off. Of course anyone who is UK domiciled is also subject to UK inheritance tax on their world wide assets. Clearly I need a plan!
My next assumption was also incorrect as well, thinking that because there is a double taxation agreement between Spain and the UK that Spanish succession tax would not apply. However, and this is the key issue that we expats need to understand, in Spain succession tax is payable by the beneficiary whereas in the UK it is the estate of the deceased that pays any tax due. Furthermore in Spain there is no spousal exemption where assets can pass freely between husband and wife without any tax consequences. So there could be a situation where someone who retains UK domicile will pay both UK IHT and Spanish succession tax.
The final quirk I established was that in Spain succession tax varies from region to region, those lucky Madrilenos get away almost scot free with minimal succession tax (no wonder wealthy Spaniards like to live there!) whilst down in Andalucia where a large proportion of expats live there is succession tax to pay if you inherit more than €175,000, that’s right inherit €175,001 and that extra cent means that you pay tax on the whole lot. Just one other thing as well, succession tax is also a gift tax and therefore if you benefit from a legacy from your rich aunt in the Bahamas you are required to declare it and pay tax on that too.
We are passionate about helping expats get the very best financial advice, so how can the experts at Fiduciary Wealth help you mitigate your death tax liabilities both in the UK and in Spain?
We would like to start by offering you a FREE private consultation (worth £500) to assess your succession tax and IHT liabilities and explain how our tax reduction strategies can help. If you already understand what your liabilities are take advantage of a FREE tax planning assessment instead (worth £1,000). Just think you will be getting FREE advice on tax planning, succession tax and IHT planning and savings and wealth tax.
We all want to live the dream but none of us want that nagging issue of what happens when we die to spoil things for our loved ones. Let us help you put your mind at rest, call now on +34 951319727 or email firstname.lastname@example.org.