::     Frequently Asked Questions     ::    
1. Why would I have to pay Spanish Inheritance Tax?

If you own a Spanish property when you die your beneficiaries will need to go through probate and pay the relevant taxes before they officially own their portion of the property.

In Spain it is the recipient that is taxed and not the Estate which means each beneficiary has to probate individually. To complicate matters further there are different rules for recipients domiciled in Spain who are liable to pay taxes to the local Government. Non-Spanish domiciled recipients pay any taxes due to the National Government. It is to be noted that a Residencia does not necessarily mean that you are deemed to be domiciled in Spain.

Why should I bother?
This is a question that we are often asked! Many people have a mental blockage when it comes to planning what will happen to their assets when they die. This is understandable as we all think, ‘It won’t happen for ages’ or ‘Why bother as I will be dead anyway’, at times. But the fact of the matter is that we WILL all die one day and if we have not made provision then our beneficiaries can be left with one unholy mess to sort out at a time when they really could do without the added burden of debts relating to inherited assets, especially when the tax relates to the assets owned by ones spouse.

In reality it is very necessary that we do sit down and ensure we have things boxed off so that when we do die our Estate is easier to deal with and that is why Wincham Investments Limited have devised methods to assist Spanish Property owners to structure their assets in such a way that their beneficiaries will inherit their Spanish assets with the minimum of delay, no cost in taxes in Spain and with no necessity to deal with Spanish Wills, Lawyers or Notaries.
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2. But I already have a Will in both Spain and the UK?

This is definitely a start but neither will protect your property against Spanish Inheritance Tax. The Wincham product allows your beneficiaries to inherit your Spanish property without the need to probate a Will in Spain so if your only asset in Spain is your property then you will not need to have a Spanish Will.

Spanish law does not allow for your partner in marriage to automatically inherit your half of a jointly owned property and in all cases the beneficiary will need to probate the Estate and pay Inheritance Tax on the asset before the asset can legally pass into the new owner’s name(s). To make matters worse any bank account held in the deceased’s name, or jointly, is automatically frozen until the Estate has been probated and all necessary taxes have been paid. The taxes cannot be paid from the deceased’s assets in Spain and it can take between 6 months and 2 years to complete the probate process and the transfer of the deceased’s assets to the beneficiary.

Inheritance tax is calculated using different formulas dependant on the relationship of the person to inherit with the deceased. For instance if you and your partner are not married then the tax will be significantly higher than if you are. Children of the deceased also pay different amounts of tax dependant on their status; unmarried partner’s children from a previous marriage, that have not been legally adopted, pay more tax than children who are the direct descendant of the deceased. As you can see the whole situation is fairly complicated and is made even more problematical as it is not the Estate that is probated but each persons part of the Estate that they are due to inherit. This means each person is individually required to go through probate in order to obtain their share of the property at a cost in the region of 5,000€ for lawyers fees plus the Inheritance Tax that is due to be paid. The end result can be a very costly affair and the property cannot be sold until all beneficiaries have completed the process.
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3. Who can I appoint to be Executor of my Spanish will?

Question: I have been told that an Executor cannot be a beneficiary. Is that true?

The role of an Executor is an English legal concept and one that is not recognised by Spanish law. In England, the role of an Executor is a very important one and carries much responsibility. An Executor is appointed by the person drawing up a Will to act on their behalf in dealing with the administration of their estate and distributing what is left of the estate (the residual estate) in accordance with the wishes of the deceased. To do this the Executor has to speak to the deceased’s bank/other financial organisations to establish if a Grant of Probate is needed. In England an Executor appointed in a Will can also be a beneficiary. A beneficiary, who has not been appointed Executor, need not play an active part in the probate process and can simply wait until the process has been completed before receiving their inheritance.

Some Spanish Wills appoint an `albacea’ and this term is often translated into English as meaning `executor’. This does not mean however that the albacea has the same power as an Executor to deal with the administration of the estate and then distribute the residual estate to the beneficiaries. As stated above, a beneficiary of assets in the UK under an English Will need not play an active role in the process and can simply wait until everything has been finalised. The Executors take charge and deal with all administration. This is not the case in Spain. There have been examples where there is no Spanish Will, and the Executor named in an English Will has assumed the same responsibilities as in England. Wrong! Every beneficiary of Spanish assets must play an active role in the process and cannot simply wait for their share of the inheritance to appear in their bank account. Each beneficiary must, at the very least, produce an original NIE certificate and accept the inheritance in person or appoint someone to act on their behalf by power of attorney. The starting point is of course to determine if a Spanish Will exists. If it does, the beneficiaries need to be identified and contacted. There are occasions where a beneficiary is unaware that he or she has been named in the Spanish Will, and the absence of an ‘Executor’ can mean that the beneficiary is never contacted. It is therefore advisable to ensure that someone knows of the existence of the Spanish Will and undertakes to contact all beneficiaries.

The issue of NIE numbers for beneficiaries is one that is asked regularly. A person can be named as a beneficiary in a Spanish Will without having an NIE number at the time. However, in order to claim the inheritance, the beneficiary must produce an original NIE certificate.

In closing, I would like to ask a question myself. Why would an English national want to prepare a Spanish Will in the first place and put their beneficiaries through the associated pain of having to probate in Spain? Quite apart from the difficulty in dealing with Spanish lawyers and the associated high costs, a Spanish Will simply locks the beneficiaries into Spanish taxation. By choosing a UK Will instead, all moveable and immoveable assets in Spain can be bequeathed to your UK Limited Company, and probating is carried out in the UK. There are no Spanish Taxes to pay. This is a much more straightforward solution for all concerned. A Spanish Will is not needed and a new UK Will can be drafted to cover all UK and Spanish assets.

Wincham Executor & Trustee Company Ltd is a company offering professional Will writing and Executor services. We are in the unique position of knowing our clients and having knowledge of their Spanish assets. This should make us your preferred and obvious choice as one of your Executors
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4. My wife and I are both residents in Spain so surely this does not affect us?

But what about the beneficiaries when you have both died? If your contingent beneficiaries do not live in Spain then they will all need to go through the process of probating their part of your Estate. You may be resident in Spain but domiciled in the UK and in either case your beneficiaries will need to probate in Spain. As previously stated Residencia does not necessarily mean that you are domiciled in Spain.

OK so what can I do to simplify things?
The simple answer is that you can invest your property in a UK Limited Company.

Why not a Spanish Company or an Offshore Company?
Neither of the above options will provide the same benefits. Investing the property in a Spanish company will still mean that on your death your beneficiaries will have to go through the probate process and pay the relevant Spanish Taxes. Investing the property in an Offshore company does not give you any benefit either as the Wealth tax for offshore companies is prohibitive.
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5. I have been advised that I should put part of the property in my Son and Daughter’s name – is this a sensible option?

Not really. Whilst this can legally be done, there are inherent risks. Once you have placed the property in their names it cannot be reversed and, if the recipient is involved in matrimonial issues or Insolvency issues, it could put their part of the property at risk. It may also create issues in the UK in respect of gifting to family members. If the Transfer is done after purchase then there will also be the 7% Transfer Tax in Spain on the value of the asset moved.

This method will still leave the new Beneficiaries of the property with the same requirement to probate should any of the owners die in the future, this in turn would leave them liable to pay Spanish Taxes at the time of probate, together with all the other issues previously mentioned.
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6. If there is a mortgage on the property can it still be transferred to a UK Company?

In Spain a mortgage and a loan are 2 separate items as the mortgage is the charge / guarantee for the loan lent against the property. A Mortgage (Hipoteca) is recorded against the property on a public deed and a 1% land registration fee is payable which is charged on the mortgage value, usually 1.5 times the loan value, to remove the mortgage a further public deed is required and a 1% land registration fee is payable based on the mortgage value. It does not matter if the property is in the individual names of the owners or the Company as the bank will simply reposes the property should the loan repayments not be made. Once the property is in the ownership of your Company then the loan repayments can be made from the Company bank account. The bank account will be funded by the owners of the Company or from income that is collected from the property. The interest and other expenses can then be offset against any income to the company which cannot be done if the property is in your own name.
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7. I was also advised to take out a 100% mortgage on the property should I consider this?

Some advisors do recommend that you take out a 100% interest only mortgage and this is mainly that they are motivated by the commission to be earned. Whilst it is true that Spanish IHT is only paid on the un-mortgaged portion of the property you will have to carry the burden of interest payments for the duration of the loan and ultimately leave it to your beneficiaries.

It is usually recommended by the Broker that you place the Equity Release money on deposit to counteract the interest payments. There is little point in following this route in Spain as your deposit monies would be frozen on your death and also the interest to be gained will always be less than the interest paid.

In some instances the Equity Release could be used to discharge a mortgage in the UK which, today, bears a higher interest rate than that in Spain. This option could be worth considering as, under those circumstances, it would be saving interest paid in the UK.
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8. So what does the UK Company option do for me?

Once the property is invested into a UK Limited Company it will be owned by the Company which will in turn be owned by the Shareholders of the company which will of course be the original owners of the property.

How does that help when I die?
Once you have invested the property in the company you can leave your share to your intended beneficiaries. All you will need to do is to change your UK Will to state who you want to leave your shares to. When you die it is a simple process to move the share and issue a new share certificate to the beneficiary or beneficiaries after your Will in the UK has been probated. As it is the company that owns the property and the company does not die there is no need for probating in Spain as, in so far as the Spanish authorities are concerned, the ownership of the property remains exactly the same. The end result is no probate in Spain, no taxes in Spain and a smooth and seamless transfer of the ownership of the property.

Are there any other benefits?
Yes there most certainly are and I will explain the most important ones below.

Wealth tax
As a non resident living in Spain you will be required to pay Wealth Tax annually based on the value of the property. Once the property is invested in the company this no longer applies. By law UK Limited companies are not liable to pay Wealth Tax in Spain.
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9. Who may own a UK Limited Company?

The services we offer are available to both Residents & non Residents of Spain as any Nationality may own a UK Company. Whether you currently own a property in Spain, are about to purchase in Spain, or own the property in an Offshore or SL Company, we have a solution and method to help to transfer your property into a UK Limited Company.
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10. Capital Gains Explained

In Spain the standard rate of Capital Gains Tax (CGT) was increased from 18% to 19% in January 2010. This is to cover the increase in the value of the property over the original declared purchase price of the property and this is payable on a declaration basis. As many Non-Spanish residents sell up and leave Spain without paying this tax the Government has provided for a With Holding tax to be retained by the purchaser based on 3% of the sale value. This tax has then to be submitted to the tax office by the purchaser. It is then incumbent on the seller to submit the required documentation to recover this tax if it is not due or they pay the difference.

It is a fact that, in the past, many people under declared the value of their property, at the time of purchase, to reduce the liability of purchase tax (normally 7%) and Land Registry fees. This became known as a Black Money deal where large sums of unrecorded cash would pass between the purchaser and the vendor. Obviously this is illegal under the new International Money Laundering Regulations (MLR) and leaves the purchaser open to investigation as to the origin of the funds. Whilst this method would save 7% of the Black Money in tax it leaves the purchaser with the prospect of paying CGT in both Spain and the UK when the property is sold. In this event if the purchaser did not wish to deal in Black Money the full value of the property would be declared and this would result in CGT being payable by the vendor on the difference between the original declared purchase price and the sale price. UK citizens may have to account for CGT in Spain and the UK and the transaction, in any event, should be submitted on an Annual Tax Return.

The Capital Gain Tax (CGT) that should be paid will be different between a Tax Resident and a Non Tax Resident of Spain as per the following:

  • If you are Non Tax Resident in Spain, you must know that the Law for Non Residents has been modified by means of the Law of the 23rd of December, therefore for the year 2010 the CGT has been increased from 18% to 19%.
  • If you are Tax Resident in Spain, please remember that the Law on the 18th of December has changed so the CGT for Residents is now 19% (up to 6.000€ Gain) and 21% (from 6.000,01€ onwards).This applies for the whole country of Spain except some communities like Basque Country, etc.

But as a Tax Resident in Spain please bear in mind that there are also some important exception of this tax.

RE-INVESTMENT IN ANOTHER HABITUAL/MAIN RESIDENCE: if you reinvest the proceeds of the sale of your habitual residence in the acquisition of a new habitual residence, you will not pay CGT in Spain. In this point is important to remember that the funds must be reinvested within 2 years from the sale and considered as habitual/main home.

WHEN THE VENDING/SELLING PARTY IS ABOVE 65 YEARS OLD: when a person over the age of 65 sells their habitual residence then no CGT will be paid. (No need to reinvest the funds in the purchase of a new habitual residence)
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11. What is the Capital Gains & Transfer Tax implications when Investing my property into a UK Limited Company?

There is no CGT implication in Spain when you invest a property in Spain into a UK Limited Company, as the Hacienda has a method of calculating an investment value based on the original purchase price as shown in the Public deed, plus the 7% paid at purchase, plus the Notary fees, plus indexation for the years the property has been owned. This value is the new investment value into the Company with no CGT in Spain. There is a further benefit to clients who purchased their property before 1997 as before this date there was no CGT in Spain and this allowance will be calculated into the new investment value. The downside is that in 2007 the rules changed, for each day that the property is owned after 1st January 2007 one day is taken off the Tax free allowance, therefore shortening the Tax free time available for CGT. It is therefore beneficial to utilise this Tax free time now as in the future it will be eroded to zero.

CGT will not be applicable in Spain if the owner is a Resident of Spain for Fiscal reasons and over 65 and the property is their main residence. This means that the property can be invested at a significantly higher value with no CGT in Spain. This will also save future CGT when the property is ultimately sold.

When investing a Spanish property into a UK Company there is no 7% Transfer Tax on the transaction either.
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12. What if I want to sell the property – will the fact that it is in a company be a problem?

Not at all – in fact it is actually beneficial to both the vendor and the purchaser if the property has been invested in a UK Limited company.

How does that work?
Normally when you sell a Spanish property the purchaser has to pay approximately 10% of the value of the property in taxes and lawyers fees and there is a 3% retention and Plus Valia Tax which is held by the buyer and is paid to the Spanish tax office to offset against the potential Capital Gains Tax liability of the vendor.

On a property valued at 200,000€ this would mean the vendor would loose 6,000€ of the sale proceeds and the purchaser would have to pay an additional 20,000€ in taxes and lawyers fees. By purchasing the company that owns the property none of this would be necessary. All that is needed is a simple Sale and Purchase Agreement which states that the purchasers agree to purchase the company at the agreed price of the property and at the time of the purchase the purchase proceeds will discharge any existing mortgage on the property and repay the Shareholders loan account.

As mentioned previously this loan account will equate to the original investment value as specified at the time the property was invested into the company plus any subsequent Shareholders Loans to meet the running costs etc. At the time of the sale the new owners of the company will be appointed as Directors and Shareholders and the existing Directors will resign. This provides for a quick and seamless transaction which does not even require that the vendor or the purchaser visit Spain to complete the transaction if they do not wish to do so.

Once the new Directors and Shareholders have been appointed they will continue to benefit from owning the property in a UK Limited Company in exactly the same manner and will be able to instruct their lawyers as to whom they wish to leave their shares in the company to in their UK Will.

It would be necessary to undertake property searches in Spain to identify that the asset is unencumbered and has all legal licences. It is also necessary to undertake due diligence in respect of the UK company to ensure that the company is in good order.

What if I want to sell the property – will the fact that it is in a company be a problem?
In the unlikely event that this happens it is still possible for the property to be purchased from the company in the normal manner.
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13. If I am looking to purchase a property in Spain can I make any savings?

Yes. It is possible if you have the cooperation of the vendor to invest the property in a UK Limited company prior to the purchase so that the purchaser can buy the company with the property already in it.

This can be done using a simple UK contract provided by Wincham Investments and our legal team can deal with the Company Formation and all legal matters relating to the investment of the property into the UK Company and the sale and purchase contract for the company between both parties.

The savings to the purchaser would be the 7% Purchase Tax.

The savings to the vendor is the 3% Withholding Tax. The costs of investing the property into the UK Limited company would be borne by the purchaser.
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14. Is it true that shares in a UK Private Limited Trading Company are free from Inheritance Tax on the death of the Share Holder?

In terms of inheritance tax in this scenario, then the recipient is technically liable to IHT but subject to business property relief .There are a number of rules surrounding the circumstances , however, the key one being that the company to which the shares relate must have been or be a trading company (as opposed to an investment company for example).

Assuming the business property relief is applicable which would seem likely in this scenario then there would be no IHT applicable.
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15. Does Wincham have the infrastructure in place to deal with this transaction?

Wincham has offices located in the UK and Spain and within our organisation we have qualified professionals in both jurisdictions, these include Gestores, Economistas, Tax Consultants, Chartered Accountants, Lawyers and Members of the Institute of Credit Management. Our subsidiary company, Companies 4 U Limited, which is a professional Companies House Formation Agent provides Company formation services and the future Corporate Management of our clients companies. Additionally we are members of the Association of International Property Professionals and operate to their Code of Conduct. Our Cases are covered by our Membership of the Ombudsmen Scheme and our company holds Professional Indemnity Insurance which covers our activities in the UK and Spanish operations.
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16. What Professionals do I require in Spain after completion?

There is no requirement for Wills in Spain, probate in Spain, Lawyers in Spain or any personal annual Tax Declarations on the property in Spain. You only require someone in Spain to act as the Companies Fiscal representative to submit a ZERO Tax declaration each year, this service we provide to our clients.
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17. Can you supply any onward benefits?

Wincham has invested over £125,000 developing a bespoke online Case Management System for the benefit of all registered clients. This ensures all clients can track the progress of a case by logging into their personal, secure section of our website and viewing copies of all personal, company, bank and Legal documentation. Clients can also keep track of any Taxes or Fees due and view copies of receipted documentation once paid. Additionally we are now able to offer a Cash Book facility which records all expenses in respect of the ownership of the property. By ensuring that this simple facility is kept up to date clients can ensure that the cost of the preparation of the annual accounts for the company is kept to a minimum. An additional benefit of our system is that, should the company be inherited or sold in the future, there is a full record of all transactions, company and property which are available to the new owners.
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18. Do you have to submit annual Tax Returns in Spain for the Ownership of a Spanish Property?

Spain operates a system of self assessment for the collection of Taxes. Both Residents and Non-Residents with property in Spain are under an obligation to file annual Tax Returns (Tax Declarations) there even if you are collecting NO income from the property. If the property is owned by more than one person then there will be a charge for each extra person except a Husband and Wife who are joint owners and can submit combined Tax Returns. Should the property be owned by a UK Limited Company then any personal Tax Returns may not be required in Spain, and only one Tax Return will be required for the UK Company which could be filled at Zero. If the Tax Returns are not submitted in Spain and the annual Taxes are ignored then the property may receive fines which would be payable should it be sold, Inherited or transferred to a new owner.
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19. What is the process of moving the property into a UK Company and what do you do for the fees which we are charged?

  • We register a UK Limited Company at Companies House and appoint the requested Shareholders & Directors.
  • All the Company documents are translated into Spanish and Notarised & Apostilled in the UK.
  • A CIF number is then applied for in Spain which is a Company equivalent of an NIE number which allows a Company to operate in Spain, we also provide the Fiscal Representative in Spain for the first 12 months.
  • After all the property details are supplied the appointment with the Notary in Spain is made and the property is invested into the Company. There is no 7% Transfer or Capital Gains Tax on this type of transaction in Spain.
  • Once the Transfer is completed by the Notary the Title deed is registered at the local Land Registry in Spain.
  • The Company will then have a Spanish Corporate bank account setup in Spain and we will help move all the Council, Electric, Water & Utility bills into the Company name and set up direct debits for the payments.
  • We will then inform the Spanish Tax office that the UK Company is going to elect to pay its Taxes solely back in the UK
  • The owners should make sure they have a UK Will dealing with the Shares and loan accounts in the Company, NO Spanish Will is required
  • Spanish Inheritance & Taxation is then completely removed as a UK limited Company does not pay taxes in Spain
  • A Spanish Property can be invested into a UK Limited Company within 2 - 4 weeks if required
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20. I was told to place my property in Spain into a Spanish (SL) or Off Shore Company.

Most Owners of the shares in a Spanish SL or Offshore Company are still going to leave their Beneficiaries Taxes to pay in Spain when they pass away as well as Taxes on their worldwide assets in the UK.

The reason for placing the ownership of a property located in Spain into a UK Limited Company is to remove Spanish Inheritance Tax.

Transferring the ownership of the property from their Spanish SL or Offshore Company to a UK Limited Company will also completely remove Spanish Inheritance Tax.

The owners of the UK Limited company will only require a UK Will and will not need a Will in Spain.

To transfer the ownership of the property from a Spanish SL or an Off Shore Company to a UK Limited Company the Shares of the property owning company would be transferred to the new UK Company, the property owning company would be liquidated and the property Registered in the new UK Company. This transaction would incur a 1% Transfer Tax and Plus Valia Tax in Spain but NO 7% Tax. The cost for this transaction is exactly the same as our normal UK Company transaction cost to exclude Land Registry Fees and Power of Attorney and Translations costs.

Most people are advised that an Offshore Company has to pay 3% annual Tax on the asset value in Spain each year, this is true for Companies registered in Gibraltar, The Isle of Man, Jersey, Guernsey, etc, but this is not true for UK Companies. The UK is part of the EU and a UK Company does not pay any Taxes in Spain unlike Offshore Companies.
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21. I believe you do not pay Tax in Spain after 4 years.

It is true that in Spain the statute of limitation period is 4.5 years and if you are lucky enough the Spanish Government may not chase the Taxes from the Inheritor.

Should the Beneficiary or Co-owner of the property in Spain decide to keep quiet until this period is over then you should be aware of the potential problems.

  • The property deeds will be in the name of the person who has passed away so you cannot sell the property.
  • There is no way of raising finance on the property.
  • If there is more than one owner of the property and they pass away before the property is correctly registered in their name, then this will leave double the Inheritance Tax problem and costs to the remaining Beneficiaries.
  • Most Banks in Spain treat the money in the deceased’s name as part of the Estate so may place a hold on any bank account in the name of the Deceased until Probate has been achieved in Spain and any Taxes due have been discharged. This may apply to bank accounts in Spain that are either in single or joint names. If you do not declare to the Spanish Tax Authorities during the 4.5 year period then you have to be prepared not to have access to the money as the account will be frozen and withdrawals cannot be made on the bank account.
  • Should the Spanish Tax Authorities find out that the owner is deceased then the property may be Embargoed by the Spanish Authorities.
  • Whilst the Statue of Limitations on Taxation in Spain exists this would not be relevant if the Spanish Government could subsequently prove a fraudulent non disclosure had taken place. There is no such Statute of Limitations for fraud, and therefore, there is a very real risk the Spanish Authorities would claim that there was deliberate criminal withholding of information and thereby enforce the Tax retrospectively. Misuse the Statute of Limitations in this manner is a criminal act and highly dangerous method of Tax evasion – not to be advised!
Should you be lucky enough to pass the 4.5 years period then there is a method of transferring the property from the deceased’s name to the rightful owner/owners.
  • You will need the Death Certificate and Grant of Probate from the UK confirming the rightful Beneficiaries and this will need to be translated into Spanish, notarised and Apostilled.
  • The Beneficiaries will need to attend a Notary in Spain with the legalised and translated Death Certificate and Grant of Probate. The Notary may stipulate a time period within which any other potential Beneficiaries can make claim against the Estate.

An estimate of costs per Inheritor would be in the region of £5,000 and this would include all Legal, Translation and Notary costs in Spain and any Power of Attorney costs. It would not include Probate in the UK or obtaining the Death Certificate and Grant of Probate in the UK. This will exclude Land Registry Fees and 1% Transfer Tax.
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22. When to pay Plusvalia Tax and who’s responsible for paying?

When is it paid?

Payment of the Plusvalia Tax needs to be addressed in every single Spanish house purchase transaction and is commonly overlooked or misunderstood. The amount payable can vary significantly and can run into thousands of euros, particularly if the tax has not been paid, or if a property has not changed hands, for a number of years. The local Town Hall of each municipality calculates the tax payable using a formula which takes into account different variables such as the catastral value (rateable value) of the property and the number of years since the last conveyance or transfer of the property. The Plusvalia Tax should not be confused with Capital Gains Tax.

In order to calculate the Plusvalia Tax payable in advance of completion, you need to make enquiries at the local Town Hall where the property is located. They will usually request the following:

  • Escritura showing the date of the previous purchase.
  • The most recent IBI receipt for that property.
  • The proposed completion date upon which the new Escritura will be signed.

The Town Hall will then be able to tell you the Tax accrued if the property is to be sold on that date.

Who pays?

The Plusvalia Tax is usually paid by the vendor. This makes sense since the sum payable will be higher in situations where the vendor has owned the property for a long time. Under normal circumstances, the purchaser should not be penalised for this. However there are occasions where a purchaser signs a private contract, in advance of signing the Escritura, which states that the purchaser will pay the Plusvalia Tax. Unfortunately, there have been examples where an unscrupulous vendor has taken advantage of a purchaser by returning to their home Country without paying the Tax.

If, at the completion, provision has not been made to pay the Plusvalia Tax, then it will become the responsibility of the purchaser to pay this, to prevent the unpaid tax from becoming a debt registered against the property.
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23. Please explain a Usufruct.

A usufruct is a formal agreement and gives permission by the owner of a property to other person(s) to live in that property for a specified period of time. It is often used by families in Spain to reduce the effects of gift or inheritance tax between generations.


The beneficiaries of a usufruct have the right to live in the property without becoming the owner of the property, but cannot sell, rent out, damage or undermine the value of a property other than through fair wear and tear. They are expected to carry out normal repairs and maintenance and look after the property as if it were their own. They are also responsible for the payment of annual taxes and other fees, and property insurance (as a joint responsibility with the property owners).

Property Owners

The property owners cannot use the property while a usufruct is active, but are responsible for all more extensive repairs and maintenance. In addition, the owners are responsible for paying any mortgage on the property and have a joint responsibility with the owners of the usufruct to pay property insurance. It’s worth noting that if the property is repossessed, or becomes subject to an embargo, the property owners are obliged to compensate the owners of the usufruct.


Be prepared for disagreements regarding rights and responsibilities between the property owner and the owner of the usufruct. In extreme circumstance this could lead to serious family disputes. These rights and responsibilities can, however, be regulated by a written agreement between the property and usufruct owners. If the usufruct is still active when the property owner dies (ie the period granted has not yet expired), the beneficiaries of that Will must honour the remaining period of the usufruct. In this circumstance the new owners of the property are prevented from living in the property by the ongoing usufruct.

Ending a Usufruct

A usufruct ends when the last beneficiary dies, or the period granted expires, or the property is destroyed or damaged beyond repair.

Is This A Solution?

No. Whoever is the rightful owner of the property will still leave inheritance tax to be paid by their beneficiaries when he or she dies. In addition the beneficiaries may be prevented from living in the property they have inherited by the fact that the usufruct is still active. This could lead to further disputes particularly if the new property owners and existing usufruct owner do not see eye to eye.
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24. The Question of Domicile.

In essence, your Domicile is the country which you consider is your permanent home.

This does not mean that it is the country of your birth or the country in which you may be living at present. Neither does it mean citizenship or residence even if you become naturalised in the country you live in and it does not mean that you would automatically become domiciled in that country.

There are four types of domicile. Domicile of Origin, Domicile of Dependency, Domicile of Choice, Deemed Domicile.

Domicile of Origin

To solve the question of their domicile, each person will first need to start with their birth.

When you are born a person acquires the domicile of the person that they are legally dependent on. That person would normally be their father. It is their mother if their father is dead or their parents are living apart and they have a home but not with their father.

Domicile of Dependency

Throughout your early years you continue to have the same domicile as the person that you are legally dependent on. If that person changes their domicile status then you change your domicile this is called Domicile of Dependency. You only become capable of having your own independent domicile when you reach the age of 16 in England or 14 in Scotland, other countries have similar ages.

If it ever becomes uncertain in which country you regard as your permanent home your domicile will revert to your Domicile of Origin. Under UK law your domicile always reverts to your Domicile of origin not your Domicile of dependency.

Domicile of Choice

In most cases a person’s Domicile of Origin remains their domicile for the rest of their life.

This domicile can only be changed, to Domicile of Choice through permanent emigration and that means permanent.

Acquiring new Domicile of Choice for tax purposes can be very difficult to prove. This relies on the person proving to the revenue that they will never return to the country.

To establish a Domicile of Choice you will be required in the UK to complete a form P85 you must ensure that you declare your intention to adopt your destination country as your new permanent home.

Take whatever steps are necessary in the destination country to establish citizenship.

Buy a grave plot in your new country; this is given great importance by the tax authorities when looking at domiciled.

Write a Will in the new country

A person who ceases to be domiciled in the UK will continue to have been deemed UK domiciled for Inheritance tax purposes for 3 years after ceasing to de domiciled in the UK.

Deemed Domicile

A person is deemed to be domiciled in Spain if the person has lived there for at least 17 out of the last 20 years; Deemed Domiciled only applies to inheritance tax and not income tax and capital gains tax.

Resident for Fiscal reasons

Most British people living in Spain will be Domiciled UK and resident in Spain for Fiscal reasons.

If you spend more than 183 days in Spain per year you will need to register as a resident for tax purposes and pay your taxes on your worldwide income subject to double taxation treaties.

If you wish to establish Non-Residence in the UK

  • You will need to declare your intentions to HMRC on form P85
  • Buy a Home in Spain
  • Take your family including your pets
  • Take up Employment or start a business in Spain
  • Get on the Electoral roll of the country
  • Visit the UK as little as possible
  • Make sure your former home in the UK is sold or not available for your use
  • Ensure that residential accommodation is not available to you in the UK always stop in hotels
  • Resign memberships of any clubs or associations in the UK
  • Close your UK bank accounts and cancel all Child Credits and Child Benefits.
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25. What is the Padron?

The Padron or, to give it its full name, the Padron Municipal de Habitantes, is the municipal (or electoral) register. This is a list of all the people who live in a particular town, and is held in the local town hall. Empadronarse is the act of registering yourself on this list, and empadronamiento is the process of registering. The list is confidential and subject to data protection laws and enables the town hall to know precisely how many people live in their area and thereby provide public services that are adequate for that number of people. Officially, all residents in Spain are required by law to register on the Padron, and, once registered; you can begin to enjoy all of the advantages of the community in which you are living (see below), particularly if you intend to live in Spain for an extended period of time. In practice, being registered on the Padron is the key to becoming a member of your Spanish community.


You can register as an individual or as a family and unlike many other official procedures in Spain, the empadronamiento is painless. To apply in person take some official identification documents (see below) to your local town hall and complete the form provided with registration normally completed on the same day, but you may have to return to collect your certificate. Depending on where you live, you may have the option of applying for registration by phone or on line.

Accepted identification

For expediency, you should take originals and a copy of the following with you:

  • Passport or NIE or residence certificate/card (including those of your children if you are applying as a family).
  • Recent utility bill in your name.
  • Deeds to your house or copy of your rental contract.
  • If you are renting a room in a house or apartment then you will need your landlord or roommate (who is already empadronado) to vouch for you.

Advantages of Registration

Once registered and in possession of your Padron certificate (or certificado de empadronamiento), you will benefit as an official resident of your community in many ways. The benefits may vary from one municipality to another, but as an illustration, the following are examples of what you might expect from most districts:

Better Public Services

The Spanish Central Government allocates money according to the number of people registered on each Padron, and the city or town uses this money to provide services on your behalf. Therefore, if you are not registered, your town hall is losing money for the provision of (for example) health centres, policing, fire fighting and schooling.

Access to Benefits and Social Care

You must be registered on the Padron for a specific period of time to take advantage of some income-related benefits, and other aspects of social care that are available through local social services.

Reduction in Taxes

Depending on the town hall, registration on the Padron could mean up to 50% off Property Tax and reductions in certain community charges.


All people registered on the Padron can enjoy discounted courses, leisure and cultural activities run by the town hall.


You must be registered on the Padron to qualify for voting in local European elections.

Generally Making Life Easier

You must be registered on the Padron to carry out tasks such as registering for healthcare, registering your car with the Spanish number plates authority, getting married or enrolling your children in school.

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26. A to Z of terminology and translations.


Abogado – Lawyer
Acta de notoriedad – Legal act or document
Acta notarial – Notary’s certificate (debts)
Actos juridicos documentados – Title registry
Agrupacion de Fincas – Group of country properties
Alta Castral - Land Registry inscription
API ( Agente de la Propiedad Immobilaria – Official Estate Agent
Arrendamiento de obra – Building contract
Asiento de presentació- Provisional property inscription at the land registry


Boletin de engache – Supply report containing information on how much power and water a property is allowed


Cancelació -Cancellation
C?dula de habitabilidad – Habitation certificate
Certificación – Certification
Certificado bancario de devisas – Foreign currency bank certificate
Certificado final de obra – Building completion certificate
Código civil – Civil rights
Cómision de urbanismo – Building commission
Comunidad de propietarios – Community of owners
Condición resolutoria – Condition to cancel a contract
Condición suspensiva – Condition to postpone a contract
Contrato de arrendamiento – Rental contract
Contrato de opció- Optional contract, with the right to buy a property, usually with a 10% deposit
Contrao privado de compraventa – Private purchase contract
Copropietarios – Co-owner, when several people own a property together
Cuerpo cierto – Non variable condition. A condition that cannot be changed
Cuota – Instalment charges


Declaration de obra nueva – New build certificate
Demarcacióde Costas – Coastal
Derecho de retención – Deposit paid to the Onternal Revenue office if you are a Non Resident in Spain
Derecho de superficie – Land management rights
Derecho de tanteo/retracto – Purchasing rights enabling you to reserve an object which you may wish to purchase at a later date


Edificabilidad maxima – Construction limits
Embargo – Repossession
Escritura – Deeds
Escritura publico de compraventa – Public sale deeds


Fianza – Deposit
Finca – Country property
Finca registrada – Registered country property


Hacienda publica – Internal Revenue
Hipoteca – Mortgage


IBI ( Impuestosobre bienes immuebles) – Real Estate Tax
Impuesto de actos juridicos documentados – Documented legl acts tax, that is paid to lawyers
Impuesto de transmisiones patrimoniales – Property transfer tax, 6-7% of the indicated sum on the escritura
Impuesto sobre construcciones, instalaciones y obras – Construction and istallation tax
Impuesto sobre el patrimonio – Wealth tax
Impuesto sombre sucesiones y donaciones – Succession and gift tax
Impuestos municipals – Local tax
Información urbanistica c?dula – Urban planning department
Institución de heredero – Appoint an inheritor
IRPF – Income tax


Ley de arrendamientos urbanos – Local rental laws
Ley de la propiedad horizontal – Horizontal property tax
Ley del suelo – Floor area regulations
Licencia de obras – Building permission
Licencia de primera ocupación – First occupation licence


NIE ( número personal de identificación de extranjeros) – Non Spanish personal identification number
NIF (número de identificación fiscal) – Fiscal identity number (company)
Nota simple informitava – Land register certificate – local search
Notario – Official authorised to certify contracts


Obligación personal – Obligation to pay tax as a resident
Ocupación maxima – Maximum occupancy


Parcela – Plot
Perito – Expert
Permiso de obra menor – Minor building permission
Plan parcial – Urbanisation plan
Planta – Floor or level
Plusvalia – Value added tax
Poder – Authorisation
Posesión – Possession
Precio de venta – Sales price
Procurador – Barrister
Promotor – Promoter
Propiedad – Property
Propietario – Owner
Proyecto de ejecución de obras – Building execution


Recepción definitiva – Construction completion
Registro de la propriedad – Land Register
Representante fiscal – Fiscal representative (financial representative)


S.A.(Sociedad Anónima) – Association
S.L.( Sociedad Limitada) – Limited Company
Saneamiento – Reconstruction
Segregación de fincas – Country property positioning
Separación a linderos – Distance between plots
Servidumbre de tránsito – Accessibility
Solar – Building plot
Suelo no urbanizable – Non building plot
Suelo rústico – Non permanent floor
Suelo urbanizable – Building land or plot
Suelo urbano – Urban area


Tarjeta de residencia – Residence card
Tasa – Fee
Toma de posesión – Take possession
Traspaso – Transfer


Urbanización privada – Private urbanisation
Uso de oficinas – Office use
Usucapción – When you obtain a plot for the period of time allocated by the courts
Usufructo – Rights of use
UTM – Plot number at the land register


Valor catastral – Land register value
Valor comprobado por la administración – Amount checked by Internal Revenue
Valor real – Real estate value


Zona de servidumbre de protección – Accessibility protected area.
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