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Spanish assets and Inheritance Tax

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About Seila

By Seila Sanchez Lucas

We are often asked about the situation of expatriates who have purchased a property in Spain with a view to retiring to Spain, or are already living in Spain but still own assets in the UK.

The EU Succession Regulation (650/2012) came into force on 17 August 2015, under which Spanish successions are governed by the law of the last residence of the deceased, unless they made a Will opting for the law of their nationality (i.e. England and Wales) and this is important because it avoids the “forced heirship rules” which form part of the Spanish succession laws.

A British citizen could make an English or Spanish Will to cover their worldwide assets, or separate Wills for each jurisdiction.

A Spanish Will will be valid, and admitted to Probate, in England and Wales if it was prepared in accordance with the requirements of the Spanish law at the time of its execution, as English Law regards this as being valid here.

One argument for having two separate Wills is that the administration can proceed separately in each country, rather than one having to wait for the Will to be proved in the other before it can begin.

When a British citizen makes a Spanish Will but already has an English Will in place, it is of the utmost importance to ensure that the Spanish Will does not inadvertently revoke the English Will; this can be avoided by showing a copy of the English Will to the lawyer preparing the Spanish Will.

The choice of a particular Succession Law does not affect the charge to Inheritance Tax, which remains different in each country.

In England and Wales, the deceased’s domicile would determine whether Inheritance Tax is to be paid only on the deceased’s UK assets or on their worldwide assets.

Spanish Inheritance Tax is charged on the basis of “Tax Residency” of the beneficiary (not the deceased), which depends on having a permanent residency in Spain and spending more than 183 days per calendar year in Spain. If the beneficiary is a tax resident in Spain at the time of the deceased’s death, they would have to pay Spanish Inheritance Tax in connection with all of the assets they inherit worldwide; if they are not a tax resident in Spain at that time, then they only have to pay this in relation to the inherited assets which are based in Spain.

Before taking any steps mentioned in this article, you should take professional legal advice. Please also note that this article is based on current regulations which may be subject to change.

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