por Gabriella Trussler | Abr 4, 2018 | Inheritance, Tax
As you will already be aware if you read our post on “Inheritance Tax reform in Andalucia”, a much needed revamp of Inheritance Tax legislation took place in Andalucia in 2017.
As you may also have heard, thanks to a political agreement between PSOE and Ciudadanos, further improvement on this legislation came into effect on the 1st January 2018 and April 2019, by which a tax allowance of 1,000,000 € was introduced for some direct family members, as well as a fied 1% tax rate in all cases.
Who does this apply to?
This news, as often happens, has given way to some confusion that this in fact refers to a general tax allowance, which is not the case. The 1,000,000 € exemption per beneficiary (in Spain each beneficiary is taxed rather than the estate – for more information check out our post “Inheritance Tax reform in Andalucia”) will only apply to family members that come under Group I and II in accordance with Andalucia’s Inheritance Tax legislation. The groups under this legislation are as follows, and are based on the beneficiary’s relation to the deceased:
| Group I |
Blood or adoptive descendants under 21. |
| Group II |
Blood or adoptive descendants 21+, spouses and blood or adoptive ascendants. |
| Group III |
Collateral relations of 2nd and 3rd degree (siblings, nephews, nieces, etc.), and other ascendants and descendants (stepparents, stepchildren, etc.). |
| Group IV |
Other collateral relations (cousins) and strangers. |
This means that the 1,000,000 € tax exemption does not apply to siblings, nephews, nieces, cousins, strangers, etc. These have their own, much lower allowances.
Finally, a further condition to being entitled to this exemption is that the beneficiary’s existing assets are no more than 1,000,000 €.
In addition, a reduced tax rate of 1% applies to these types of beneficiaries, as far as any amount that surpasses this allowance.
Changes to Gift Tax
The 1,000,000 € tax allowance will also apply to the direct family members described above, only in the event that a living gift is made for the purpose of the beneficiary purchasing his/her first home, or for a business startup or expansion. Obviously certain conditions are put on this exemption that will ensure the gift is being made for that purpose.
Once again, the 1% tax rate applies in the case of a living gift to these beneficiaries from Group I and II
In conclusion, despite having some limitations, this is a welcome change that effectively does away with Inheritance Tax in Andalucia for direct family members, except in the case of the “super rich”. It is important when dealing with an inheritance in Spain that you seek the appropriate legal counsel, who is aware of these and other benefits, and who knows how to apply them in both the resident and non-resident field.
Gabriella Mary Trussler Rowland
Lawyer
4408 Ilustre Colegio de Abogados de Almería
por Gabriella Trussler | Ene 4, 2017 | Property
As every foreigner living in Spain is more than aware, Spain has been receiving a lot of media attention for its large amount of illegally constructed properties extended all over the country, and the attempts being made by local and regional governments to facilitate the legalisation of said constructions.
This post applies to properties built on both urban and rustic land in the region of Andalucía, as the details can vary from one autonomous region to another.
Background
Historically building regulations in Spain have been largely ignored, especially in the countryside. As a result Spain has been left littered with all manner of illegal buildings, such as:
- Properties constructed without any building permission being obtained at all.
- Properties constructed with little regard to the plans submitted and the building permit issued (i.e. construction in excess of the square metres permitted by the permit).
- Older properties extended during renovations without obtaining building permission, or registering or declaring any extensions built.
Rustic Land and Protected Rustic Land
Land classification is extremely important in determining if there is a solution. Generally it is possible to legalise buildings on rustic land, but to legalise buildings on protected rustic land is almost unfeasible.
General conditions for legalisation
The regional government of Andalucia (Junta de Andalucía) has attempted to clarify the legal status of such illegal buildings and provide a mechanism to legalise or regularise where possible, as long as certain requirements are met:
- That more than 6 years have passed since the completion of the construction (previously 4 years under old legislation).
- The property is not part of an urban planning disciplinary procedure or a judicial process.
- The construction does not occupy land under special protection or cattle trails.
AFO Certificate (Cerificado de asimilado a fuera de ordenación)
An illegally constructed property, which is able to be legalised, may be legalised by applying for a Certificado de fuero de ordenación or Certificado de asimilado a fuera de ordenación. The process involves synchronising and presenting a series of documentation to the planning department of the local Town Hall.
Each Town Hall charges a local tax in relation to the value of the square meters being legalised. The rate of tax varies from one local government to another and will depend, therefore, on the municipal area the construction is located in.
In addition to this, the property’s Land Registry records will have to be rectified to avoid any future difficulties.
Conclusion
This is an incredibly complex process and no two properties are the same. The mere fact that a property pays rates (IBI) and is connected to utilities (i.e. electricity, water, etc.) does not mean that the property is legally sound. It is because of the complexity of this process that we recommend seeking legal advice from professionals familiar with these procedures, so as to avoid unnecessary expense and complications.
Gabriella Mary Trussler Rowland
Lawyer
4408 Ilustre Colegio de Abogados de Almería
por Gabriella Trussler | Nov 5, 2016 | Inheritance, Tax
Finally, a much needed change to Inheritance Tax in Andalucia has arrived and will be coming into effect on the 1st January 2017. With Andalucia being one of the poorest regions of Spain it was becoming increasingly difficult to justify it being the region with the highest level of Inheritance Tax, forcing many inheritors to renounce their inheritance because of the unaffordable tax bill that came with it. Consequently, a restructuring of the tax had long been a matter of debate and negotiation, on a regional as well as a national scale.
Higher threshold
The main change brought about by the new Inheritance Tax reform is the increase of the general threshold from 175,000 € to 250,000 € for each individual beneficiary. This means that as long as the value of the part of the entire estate being inherited is under this amount, no Inheritance Tax will be owed by said heir.
In addition, to inheritances of between 250,000 € and 350,000 € a 200,000 € reduction is applied (e.g. if an inheritor’s share is valued in 270,000 € tax will only be due on 70,000 €). The effect of this change is to correct the leap that currently exists where, the moment the inheritance is even a euro over the threshold, Inheritance Tax is owed on the entire amount. This circumstance quite clearly placed inheritors at a comparative disadvantage, and was one of the main criticisms made of Inheritance Tax regulation in Andalucia.
Main residence
Another important change is the introduction of increased
allowances for the inheritance of the deceased’s main residence by spouses, ascendants or descendants, or collateral relations over 65 years-old. Specifically, a 100 % allowance is applied when the value of the property is under 123,000 €, which reduces 1 % each time as the property value band increases, with the minimum allowance being 95 % when the property is valued at anywhere over 242,000 €.
Furthermore, as of the 1st January the beneficiary will now only be required to maintain ownership of the property for 3 years, as opposed to 10 years as it stands at the moment.
How is the tax rate calculated?
The above allowance, together with any other allowance the heir may be entitled to, is applied to the amount above the general threshold to determine the taxable amount.
Once we have the taxable amount the Inheritance Tax scale is applied, as well as a coefficient that depends on the relation to the deceased and the inheritor’s existing assets, to determine the tax rate that applies. All of these aspects remain unaltered by the tax reform.
Will this apply to UK residents post Brexit?
The regional allowances for Andalucia in the event that both the deceased and the beneficiary are EU residents. When this is not the case, only state allowances may be applied, which are far fewer.
Therefore, depending on the result of the negotiations between the UK and the EU, these regional allowances will continue to be applied to UK residents post Brexit, or not.
It is important that all of these circumstances and potential costs are taken into account when preparing your will, so as to organise your will and manage your wealth in a way that will be most beneficial to yourself and your inheritors. All of which makes seeking professional assistance in these matters essential, to avoid any unexpected and costly surprises when it’s too late.
Gabriella Mary Trussler Rowland
Lawyer
4408 Ilustre Colegio de Abogados de Almería
Comentarios recientes