Brexit is causing great uncertainty and anxiety especially for UK citizens who have property and other interests in the EU.

One thing that is certain is that if you are a UK tax payer and have property in Spain you will pay far more inheritance tax (IHT) after Brexit unless you act now.

The reason is simple. After Brexit the British will not be treated as EU citizens for tax purposes. They will be treated as any other non Eu citizen and will not be able to take advantage of the allowances and lower rates if IHT and gift tax available to EU citizens.

Before Brexit the amount of IHT and gift tax you pay will depend largely upon where the property is located and to a lesser degree upon its value and the number of beneficiaries. In most areas of Spain EU citizens who benefit from a gift or inheritance pay very little tax as a result.

A simple example illustrates the point.

 Mr and Mrs Smith make a lifetime gift of their villa in Alicante worth €100,000.00 to their three children pre Brexit. The IHT that will be payable is NIL.

 Mr and Mrs Smith make the same gift of the same villa after Brexit the gift tax payable (at current rates) €12,487.54.

Even better, after a gift of property to, say, your children it can be registered at the Land Registry that the gift was subject to a life tenancy in your favour so that while your children will be listed as the legal owners for tax purposes you will have a legal right to use the property and it could not be sold without your consent.

You should also benefit under English IHT law. If you make a lifetime gift of an asset, even if it is located abroad, and survive for more than 7 years the property gifted will not form part of your estate when calculating IHT. However to receive this benefit you will not be able to retain a legal interest in the property as you cannot benefit from your own gift

It should be remembered that if you do gift your property in Spain the beneficiaries will have to pay plusvalia tax on any increase in value between when the property was acquired by you and when it was gifted. This is fixed by the local council and is likely to be much lower than the IHT that would otherwise be charged.


CONTACT Susana Diez now on 01727 858807 or 07772619457.

Susana is a Spanish abogado working in England with Labrums solicitors with many years experience dealing with property in Spain for UK citizens. You get the benefit of a fully qualified Spanish lawyer with the backing and support of an English solicitors firm.

Post a comment

Related Posts