Making sure your loved ones benefit from your hard-earned money is a priority for the majority. You can’t take it with you but it’s nice to have control over who you’re leaving it to.
For some, ‘gifting’ their property seems like the best option, particularly now when you can benefit from certain tax advantages in Spain. However, that could change in the near future due to the consequences of Brexit.
Donating a house in Spain was, for many years, one of the most expensive ways of transferring a property. This changed in 2015 when due to a European resolution, Spain was obliged to apply the same fiscal advantages to residents and non residents of the EU.
Following Brexit this new advantage may be removed and the payment of donation tax for non-residents could, once more, mean a considerable drain on inheritors’ resources. With this in mind, some people are taking the decision now to gift their property and avoid excessive donation and inheritance tax in the future.
Every case is different, but here we have put together a couple of examples of just how people might be affected by a return to previous legislation following the Brexit decision.
Case study 1: Parents donating their house in the Valencian Community
Mr and Mrs A have taken the decision to donate their house now to their two children rather than wait for the consequences of the Brexit vote. As things stand, their property in Spain is valued at around €200,000. They have taken this decision as currently their children will have no donation tax to pay.
Case study 2: Parents donating their house in the Murcia region
Mrs. C has a house in Murcia. In this case there is something to pay as in Murcia there are no specific allowances for donation. Each child would have to pay €2,474.46 (total €4,948.92) on the Spanish property which is also valued at €200,000.
Scenario post Brexit
In both of the cases we’ve outlined above, if the donation was made after Brexit or transfer via inheritance has to be done and legislation is reverted, then the cost of the donation or inheritance in Spain would be substantially higher.
As non-members of the EU each child would have to pay €4,948.93 as there would be no allowances or reduction applicable. It is also important to note that these amounts would be payable (in total €9,897.86) before the house could be sold in the case of inheritance.
Therefore, if you are considering donating your property in Spain at some point in the future, and you are a UK national, then it is highly recommendable to proceed now to benefit from the EU tax advantages.