Daniel’s talk, accompanied by slides (click here) covered the four main tax types – Inheritance, Capital Gains, Plusvalia and Income – setting out the current laws and, as far as it is possible to know, likely changes when the UK leaves the EU. His presentation was very good, keeping people interested in spite of the weighty nature of his subject.
A few interesting points that came out:
Inheritance Tax: The tax rules are set by the Valencian Community for tax arising on assets within the Community; reductions apply to beneficiaries who are married to or directly related to the deceased—in-laws, adopted and step-children, etc do not qualify—wherever they live; the position after Brexit would depend on any new agreement set up between Valencia and the UK.
Capital Gains Tax: This applies to gains realised on the sale of an asset, and the rules vary depending on whether the vendor is resident in Spain; in order to qualify as ‘resident’ for this purpose, the vendor must obtain a Certificate of Residence from the Tax Office (Hacienda), and this will only be supplied if the vendor has completed and submitted the relevant Income Tax returns, even if there is no liability arising; non-residents are subject to a 3% retention on the sale price against possible liability, and this will be deducted by the buyer and paid to the Tax Office—any overpayment is reclaimable but may take a long time to process; Brexit is not likely to change these rules.
Plusvalia Tax: This is calculated only on the Catastral value of the land—the residency of the owner makes no difference; each local Council has its own rates of charge, but there is a calculator on the SUMA website; no change after Brexit.
Income Tax: The Spanish tax year is 1 January to 31 December, and residents should make their return of worldwide income, wherever received, by the end of the following June; since there is a Double Taxation Agreement in place, preventing the paying of tax twice on the same income, certain pensions which must be taxed in the UK—eg, Civil and Public Service, Forces, etc—do not have to be included; non-residents who own a house must file a non-resident return of income and pay tax calculated on the Catastral value—failure to do so leaves the Hacienda free to claim back-tax for up to four years; no major changes after Brexit.
Daniel also answered several questions, eliciting the following information:
1) You can apply for Spanish nationality if you have lived in Spain for ten years and can pass a language test—however, you have to give up your British nationality in return.
2) On health rights, the Valencian President has confirmed in writing that all British citizens are welcome, and ‘should not worry about their rights after Brexit’.
3) On the subject of your Will:
a) Following an EU ruling of August 2015, your Will must expressly state that you wish UK law to be applied to it—if this is not done, then any of your dispositions that do not comply with Spanish Law (eg leaving 66% of your assets to your children) will not be carried out, although the same Inheritance Tax rules will apply.
b) Charities have to pay Inheritance Tax on donations.
c) If you do not make a Will and you leave assets in Spain the matter will be settled through the Courts and it will be time-consuming (up to three years) and very expensive.
At the end of his talk, Daniel did say that he would answer questions from members who had been unable to attend, so you can email him on info@dhtaxand law.com for a quick question, or ring on 965 731 634 for an appointment at his offices in Benissa to deal with anything more complex—but please don’t expect a fullscale meeting to be free!