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The information given below is to be used only as a guide as legislation relating Property laws and to Spanish Tax is subject to change.

Inheritance Tax
There are ways to reduce any liability to Tax matters and professional advice should always be sought.

All Residents in Spain for Tax purposes are liable to Spanish Inheritance Tax (IHT) regardless of the country in which the inheritance is located. Any person not resident in Spain is liable to Tax on assets inherited which are physically located in Spain.

In the case of a foreign resident in Spain, or having property or assets in Spain, it is strongly advised to make a Will in Spain to dispose of assets in the event of death. Assets in another country will require a separate Will that should be made in the country in which the asset is located.

Spanish Inheritance Tax is charged on its value after the first 15,000 and at present there is no exemption as may be found in some other countries. However, being a resident of Spain give the possibilities to claim a 95% reduction in the value of the asset for Inheritance Tax purposes. When no Will exists in Spain for the disposure of assets, a Will in another country will apply under the Law of the country in which the Will has been lodged.

Under Spanish law the property of nationals upon death, degrees that two-thirds of the estate is inherited by the offspring. However, a foreigner is able to nominate who will be the inheritors of the estate but this does not exclude the estate from being subject to normal Inheritance Tax.

A Spanish Will is made in two parts. The first part is in the Spanish language and the other in a language of choice. It is checked by the Public Notary to be correct and in his presence it is signed by all concerned with three witnesses. This type of Will is named a Testamento Abierto. The Notary will keep the original in his files and upon request supply certified copies.

The Inheritance Tax payable depends on the relationship to the deceased and the amount inherited. Within Spain there is no exemption for a spouse. Tax is payable on all inheritance and there is a Tax threshold allowance. The Tax law states that under certain criteria the value of a family home can be reduced by 95% subject to total figure involved.

Financial companies and Banks in many countries as well as in Spain are prepared to lend money to purchase a selected property. A loan is either secured by a property in the purchaser's home country or on the intended Spanish property. Spanish Banks are prepared to lend funds to non-residents to purchase properties. The normal practice is to lend up to 60% of the purchase price value.

Advantages and disadvantages in obtaining a mortgage in Spain instead of the UK should be considered in depth and financial advice should be sought.

In Spain there may be high set-up costs and these could be in the region of 1,000 - 2,000. Also, the buyer may have to pay extra taxes and fees to the country where the property is located. The buyer will pay the local interest rates which may be lower than those applied in the UK.

If repayment for your Spanish mortgage is from a UK source take into consideration the exchange rate. It is advisable to commence enquiries about a mortgage prior to choosing the actual property. When deciding the name or names of ownership it is also good to take legal advice due to the many influencing factors.

Prior to making a property purchase it is advisable to consider the various types of ownership. It can be purchased in an individual's name, with a partner, or, in a company name. These different methods should be considered with reference to the future, when reselling, and the question of possible Inheritance Tax.

Spanish laws relating to the rental of properties are extensive and we specially recommend that when considering long-term rentals legal advice should be sought. Below are some points to be considered.

When the Landlord request a Rentor to leave the property which is has a two year contract known as a Vivienda Contract, an extension to the Rentor may be obtained through the Courts for a further five years period.

If the Landlord decides to sell the property during the period of the Contract, the Rentor has an option on the sale of the property for the same price as officially registered in the sale.

Short term or holiday rentals are subject to different laws and this type of rental is normally conducted by using a Contract by the name of Temporada. Under some circumstances it may be necessary to establish from the beginning which type of Contract will be used.

The law permits a Landlord to hold a suitable cash deposit against possible damages. When considering an unfurnished property it is normally equivalent to the rent for one month. In the case of furnished properties (such as a temporary or holiday rent), it can be equal to the sum of two months rent. This deposit is known as a Fianza, and should be held by a third party in case of any future dispute.

UK Inheritance Tax related to Overseas Assets
The worldwide assets of a UK expatriate are also liable to Tax in the UK. When the deceased is not domiciled in the UK, the Tax is assessed on UK sited assets. As many UK expatriates in Spain retain their UK domicile so they are therefore liable for Tax in the UK and in Spain.

The Tax in the UK is assessed on the total worldwide wealth of the deceased. Currently the first -
234,000 is exempt from Tax - this is known as the nil-rate band. A single rate of 40% applies to the excess. An important point is that no Tax is payable on transfers between spouses providing that the surviving spouse is also a UK domicile. A non-UK domiciled spouse enjoys a Tax allowance of 55,000.

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