Having decided to move to Spain the first thing us expats want to do is find our dream home. Not for us a two up two down in a terraced street in Wolverhampton (my home town where there are plenty of those), no we have avidly followed Jasmine’s journeys around Spain on a ‘Place in the Sun’ and want some big bang for our bucks or Euros at least. Of course ideally we want to be mortgage free, and many may not be in a position to secure a residential loan but it may be worth just taking a step back and think for a minute whether there is any advantage in securing a debt against your property. There may just be an advantage when it comes to planning for that notoriously tricky Spanish succession tax.
Let me help by explaining further. As you may have already gathered Spain has very different rules when it comes to inheritance tax - for a start they call it succession tax (Impuesto sobre Sucesiones y Donaciones) and the level of taxes vary from region to region. Any tax is payable by the beneficiary and there is no exemption between spouses. Owning a modest property in Andalucia can still mean a significant tax liability for a beneficiary because if you inherit more than 175,000 Euros you are obliged to pay succession tax on the whole of your inheritance, the rates of tax are quite steep and the larger your inheritance the steeper the tax band becomes.
A mortgage therefore might be a sensible solution to reduce the net value of property. The idea of creating debt might not suit everybody, I for one would have been glad to see the back of my mortgage but having done a few calculations it actually made sense to consider a loan to reduce the value of any inheritance. If this is an option you think worth exploring you need to do it before you purchase, you cannot put a mortgage on your property at some time in the future and use that to offset your potential tax liability.
Of course getting a mortgage is only one solution to what is a concern for most of us when we decide to make the move. Other options which I thought about were to consider life assurance or to include my children on the property deeds but in the end I opted for the loan as this suited me best.
You do need to be careful when considering how best to mitigate your succession tax liabilities. Personally I always thing it is better to stick with tried and tested methods that work rather than consider some innovative scheme that has never really been put to the test.
Of course it’s too late when you are gone and your beneficiaries have to sort out a mess so best to get it right now. That’s why we passionately believe in having everything in place so that you can enjoy your future in Spain without any “What if’s or Maybe’s”.
If you would like some advice and a review of your succession tax plans as well as any UK IHT issues you might have we can start by offering you a FREE private consultation (worth £500) to assess your current financial position and explain how our Spanish tax reduction strategies can help. If you already have a clear understanding of your current situation we can offer a FREE tax planning assessment instead (worth £1,000). Just think you will be getting FREE advice on tax planning for Spanish residents as well as retirement, savings and wealth tax mitigation strategies.
We have all come to Spain for a better life let us help you make sure the tax man doesn’t spoil that. Call now on +34 951319727 or email email@example.com.