A recent report from the UK Office of National Statistics makes clear that British owners of property in Spain are increasingly over 65 years of age. Given how long it can take to find a buyer for a resale property in many parts of Spain, an increasing number of them will pass away before selling up, which means someone close to them will inherit the property. In many of cases the heir or heirs do not live in Spain,.
Inheriting a property in Spain, especially if you are not a resident, presents challenges that many people I have spoken to in this situation find hard to deal with. The loss of a loved one is always a difficult time in life, and having to cope with the stress of probate, foreign bureaucracy, and paying Spanish inheritance tax in the aftermath of bereavement is almost always stressful for those involved. In most cases they find themselves on complex, unfamiliar, and unsettling ground.
The first problem many non-residents face when they inherit a property in Spain is not knowing how probate works in Spain, or anything about Spanish inheritance tax. It’s this lack of understanding that makes it feel so overwhelming. So here are ten key points to bear in mind if you find yourself in this situation.
For inheritance tax purposes, the laws and jurisdictions involved in each case can depend on several factors, but the way in which the property is transferred and new title registered to the heir will be determined by the laws of the region where the property is located.
If a property is not mentioned in the last will and testament of the deceased this is no obstacle for transferring title to the heir or beneficiary. That can be done by mentioning and describing the property in a deed of acceptance and adjudication / partition of inheritance.
If a deed of acceptance and adjudication / partition of inheritance is prepared outside of Spain it will have to be witnessed by a Notary Public and translated into Spanish with Hague Apostille. If you are not a resident of Spain you will need a Spanish NIE number to inherit a property and register the title deed in your name.
In order to register a property you inherit in your name you will first have to pay Spanish Inheritance Tax (IHT) to the corresponding tax authority.
In Spain, the heirs or beneficiaries are liable for inheritance tax, not the estate of the deceased. Any Spanish Inheritance Tax due must be paid by the beneficiary within six months from the date of death. An additional six months extension to the deadline can be obtained if requested within five months from the date of death (so twelve months in total). If the inheritance tax owed is paid late the Spanish tax authorities will apply surcharges and penalties.
When a foreign owner of property in Spain passes away, it is common for several jurisdictions to be involved in determining the inheritance tax liability, and probable that tax declarations must be filed in each of them. You will need help from professionals with expertise in cross-border inheritance tax declarations to make sure you pay the correct amount of tax. International conventions will need to be checked to avoid double taxation.
If you inherit a property in Spain and wish to sell it you will not be able to do so until your title to the property has been inscribed in the Spanish Land Registry, even though the date of transmission of title in your favour is the date of death. From a potential buyer’s perspective, what counts is inscription of your title of ownership in the Land Register, so this is a key step you will have to take before you can sell.
If you need to sell a Spanish property you have inherited in order to pay the inheritance tax bill you can do so if you get authorisation from the corresponding tax authority and provided that you guarantee that the proceeds from the sale will be used to pay the inheritance tax before before anything else.
If you inherit a property in Spain you cannot sing rental or sales contracts in the name of the deceased as doing so is unlawful and can have serious consequences. Those powers passed away with the deceased, and they are not yours to exercise until the property title is registered in your name.
If you own a property in Spain you would be well advised to seek professional help on Spanish inheritance tax planning to avoid leaving a problem for your heirs.
Written by Romà Bosch, Attorney-Lawyer and Partner of DiG Lawyers. 2017 © DiG Advocats