I would be very wary of looking at insurance to pay IHT in Spain as our whole discussion is to remove the Tax in Spain which of course a UK Company ownership does. Taking insurance like life insurance does not remove IHT in Spain as it only means the beneficiaries can use the money to pay the Taxes when the owners die. Also to form a UK Company only costs ?50 in the UK from any good Companies House Formation Agent but there are additional costs in setting up that Company to be able to operate and own properties in Spain, nerver the less these initial costs of setting up and investing the property in Spain into the UK Company are far less than the future probate / legal fees in Spain and Spanish Inheritance Taxes on death.
Often the purchase of UK companies is carried out through an agent and the costs can be very high. There is nothing wrong with that as it will solve the problem and probably be a lot cheaper than the tax liability. But that is in the future and not everybody will wish to go that route. For some people who do not wish to go this route they can insure each other for the amount of the tax liability. If they are young and healthy this can be a very cheap option and may be worth considering. It will not get rid of the IHT liability but it will provide a cheap alternative and solution to the problem. It is worth mentioning that the policies must be set up correctly or they may make the situation worse.
Both the UK and Spanish govts are now clamping down on these scams.
UK customs and excise now view it as evasion and are about to stop this from continuing.
Its been covered on here before.
Pay these idiots around ?8,000 to administer this is crazy and in a few years time, useless.
Which explains why there is a mad rush on PR at the moment, there grabbing as much business into 2009 as possible, as 2010 they`ll be sellin other products.
It is not correct to say that when you buy in a UK Company there are increased costs because if you purchase a resale property in Spain in your own name then you have to pay 7% Transfer Tax to the Spanish Government, also most Lawyers in Spain ask you to do a black money deal and under declare the value which does defraud the Tax Authorities in Spain and costs you 18% Capital Gains Tax on the undeclared value if you sell in future.
If a purchaser wishes to acquire a property from a seller into a UK limited company the purchaser can form a UK limited company using this scheme. With the seller appointed as the shareholder of the company, the seller can attend the Notary in Spain and instead of selling the property to the company, he can gift the property to the company. In this instance there would be NO 7% Transfer Tax to the purchaser and NO 3% Retention / Withholding Tax to the seller. There is a simple sale of shares to complete the deal. This is a simple solution costing less than most probate and legal fees in Spain when there is a death of an owner of the property. All nationalities in the world, including both Residents and non-Residents of Spain can own a UK Limited Company that owns a property in Spain.
This solution to the IHT problem in Spain is also for owners who already own Spanish properties as the owner/s can gift the property to a UK Limited Company. There would not be a 7% Transfer Tax in Spain on this transaction unlike other property transfer transactions. This method may eradicate all Taxes in Spain in the future, in respect of the property, as under EU Directive a UK company is only taxed in one jurisdiction, the UK, and No Taxes are payable onwardly in Spain. A UK company is not an ‘offshore company’ like Gibraltar or the Isle of Man - they are charged an annual 3% Tax by Spain for not being part of the EU Community. Shares in the UK company are dealt with in only a UK Will, and depending on the structure of the company the shares may be exempt from Inheritance Tax in the UK too.
The EU treaty allows a Company from an EU county to operate in another EU county and decide in which jurisdiction it wishes to pay it Taxes. This is to encourage international trade and makes it far more manageable for those companies to keep track of their individual Tax liabilities. A UK Company can own a property in Spain and with the CIF number that the Company has in Spain it can elect to pay its Taxes back in the UK, just the same as a Spanish (SL) company can own a property in the UK and elect to pay its Taxes back in Spain. In 2008 the British Government removed the benefit in kind Tax for Directors of UK Companies who own property abroad so this is an incentive and not a deterrent. Any Chartered Accountant in the UK will be able to confirm this.
It would be great if anyone who believes this method is illegal or incorrect can demonstrate and show an alternative as my research shows me this is the only true, legal, tried and tested method to remove IHT & Taxes in Spain.
I have pesonally dealt with a number of companies that offer this service to open a UK company. The opening costs start at 8000 pounds sterling and go to over 10,000 pounds sterling. So you need to be pretty sure that there will not be any changes coming up which will make it a waste of money.
It would be great if anyone who believes this method is illegal or incorrect can demonstrate and show an alternative as my research shows me this is the only true, legal, tried and tested method to remove ecked_word”>IHT</SPAN> & Taxes in Spain.
It would be useful to show any recent cases of IHT being avoided using this method since 2003 when Spain upgraded its Tax laws.
Then try to search companies house concerning Holding Company rules.
For legit Companies the rules are clear, but simply registering a company by individuals wishing to avoid IHT is no longer deemed legal and is now classed as tax avoidance.
Its a very complicated area, almost all info on IHT on the net/forums is provided by the companies charging huge disproportionate costs.
Its best to gain advice by independent tax lawyers who don`t sell products.
The same happened with property laws, people were advised by “experts”, much to there regret.
I am glad I am not the only person who has used these services before and you are correct as I paid ?5000 for the formation of the UK Company, all the Company documents translated into Spanish, and all Legal & Notary fees in Spain & the UK including the registration of the property to the Company in Spain. I was very happy with my Consultant who helped me purchase this way as I received a very detailed written quotation from them, which included the full costs and onward fees including any Taxes which may have to be paid at purchase. I did find it impossible to receive anything from Lawyers in Spain who documented my costs and Taxes in Spain if I purchased in my own name, this made me very wary of what I could be walking into. There was the initial cost when I purchased in the Company but paying the initial fee instead of instructing a Lawyer directly in Spain has saved my Family just under 50,000 euros in probate, legal and IHT Taxes in Spain in the future, which to be honest I do not know where we would have got the money from when we needed to pay it.
I 100% agree with the statement made above by Santi that IHT in Spain is, and will be a huge mess, but if you own a property in Spain using a UK Limited Company then that removes Taxation in Spain all together, so surely this is a positive step in removing property owners from that mess.
Probably the most important issue here is to make people aware that there is a problem. 99% of the people that I talk to do not realise what the IHT situation may mean to them when the time comes. This forum is doing a good job in getting the discussion going but the word needs to be spread. I am a licensed IFA in Spain and I understand broadly what the issues are and can point people in the right direction for expert assistance to sort these problems out, but be aware there are a lot of unregulated people offering advice on this subject who are out to make a fast buck without any thought for the clients well being and of course if they are unregulated and give the wrong advice there is probably no recourse.
If anybody wishes to pointed in the right direction for advice please call Catalunya Insurance Services on 977493607. Ask for Chris. If I do not know the answer I no a man that does. The information is free.
Who just happen to be the people all over the net sellin this as quick as possible before it becomes general public knowledge.
You see it doesn`t look good stating this,
“I have purchased on Finca Parc near Murcia and was advised by my Agent as how to combat Spanish Inheritance Tax. They informed me that if I buy the property in a UK Limited Company and not my own name, I could leave the shares of the Company, which I own instead of the property to my Heirs & Beneficiaries”.
When you are a company registered at the same address as the company who advised you.
Who just happen to be the people all over the net sellin this as quick as possible before it becomes general public knowledge.
You see it doesn`t look good stating this,
“I have purchased on Finca Parc near Murcia and was advised by my Agent as how to combat Spanish Inheritance Tax. They informed me that if I buy the property in a UK Limited Company and not my own name, I could leave the shares of the Company, which I own instead of the property to my Heirs & Beneficiaries”.
When you are a company registered at the same address as the company who advised you.
Ops 😉
I joined this forum on the strength of this thread, wanting to learn how to minimise my family’s IHT/ISD liabilities after my days (a serious heart attack being something of a ‘spur’). I contacted Wincham via Royal Mail - but heard nothing in response. I contacted W.C.D. not knowing that their Consultant was indeed Wincham - and W.C.D. responded immediately with Wincham’s contact details (but that RM letter was already in the post). I also contacted our fellow member ‘Brin’ who was meeting Malcroach/Wincham back in June. I’ve heard nothing from Brin so maybe he also drew a blank. I also contacted member ‘W.. P..’ - but apart from an initial response, I have heard no more.
Although I originally had ample Life Insurance to cover the ISD, the cover ‘ran out’ and obviously the new terms were prohibitive, however, research has now led me to offer one of my properties for sale, and pay the 18% CGT, and split the other between myself (35%), my wife (35%) and my son (30%) whilst retaining the usufruct. This latter has the effect of giving me total control over the apartment and also reduces it’s value for the transfer tax etc etc, by approximately (in my case) 27%. The net result will be my heirs facing a tax bill of 20% of 35% of one apartment instead of my wife facing a ?90,000 bill for 150% of two apartments. Result!
I am still researching the Family Trust/Corporation angle but so far the property split seems the most likely route for me - unless you know better??????
As with all govts and tax rules, you cannot hide forever and anybody who sells you a product that claims to save you money, yet charges almost ?10,000 is a scam, pure and simple.
I fear others will find out much to there cost once they need to dispose of the asset.
It may well have cost them extra for nothing, I`m sure the authorities will impose a suitable fine to anybody found guilty of Tax avoidance.
I`m sure the sellers have indemnified themselves from any responsibility.
Independent advice should always be taken before handing huge sums of money away on such schemes.
You did well on that….........
Independent advice should always be taken before handing huge sums of money away on such schemes.
Thank you - and it’s the independent advice I’m busily seeking right now before departing for Spain. Maybe I should give the Blackbird a little call and seek his advice and opinion.
Maybe worth a PM to ROBI who contributed at the begining of this, he may no a man to help.
Also have a look around at articles on this site.
You may also find a really old method of research in the form of a book, Amazon do some really useful guides, although not fashionable in these modern times, they tend to be more reliable than the internet.
Excellent thread, Thanks to everyone for trying to clear the murky water.
Pity the advice has gone cold :roll:
I have been discussing this with a local lawyer friend( British ,living in Spain) He thinks the system using the Uk Company if fraught with danger and advised seeking information from the Spanish Tax authorities.
Others here also have their doubts on the future implications and with the big brother thing in full swing worldwide,, caution must be used.
I must say reading Winchams site the plan looks worth considering, but like you all we will have to research more before making any decisions.
Our personal situation is: that we have been out of Europe for over 25 years, all our income has been offshore and at this time we are not resident..anywhere? but considering buying in Spain for retirement.
