Make The Most Of Your Investment Purchase Spanish Property Through A Company And Lower Your Tax Bill

W hen buying a property         begin to explain.                  overseas there is more to                                        consider than just            Spanish Inheritance Tax.    finding the right property in the     People that are domiciled in       right location at the right           Britain and/or British resident    price. More and more British          are liable to 40% inheritance tax  residents are purchasing second       on the total value of their        properties in Spain, but not many     global assets which have a value   are fully informed of the best        greater than "£250000. With        way in which to purchase their        Spanish and UK property prices     property and the effect that may      still on the rise many people are  have on their investment.             finding that purchasing an off     Purchasing Spanish property may       shore property will take them      increase liability to either          over the nil rate band.            inheritance tax or capital gains                                         tax, or even both, producing a        On top of British inheritance      hefty tax payment on top of the       tax, under Spanish law people      purchase costs, which are             owning a property in Spain,        considerably larger than those in     regardless of where they are       the UK.                               domiciled, are also liable to                                           Spanish inheritance tax. The tax   Using a corporate structure to        rate ranges from 7.65% to 34%      buy Spanish property can help get     depending on the relationship      rid of these tax liabilities.         between the deceased and the       Corporate purchasing does also        recipient. Also there is no        provides other advantages,            Double Taxation Agreement (DTA)    including lower legal fees and        meaning that in general no credit  stamp duties, therefore making        is given for tax paid in one       the resale of your Spanish            country against tax due in         Property that much easier. Let me     another. Therefore lack of        proper planning could mean            asset protection, confidentiality  getting charged two sets of tax       and flexibility.                   on the same asset. In some cases                                         the tax could actually amount to      Capital Gains Tax. Capital  more than the total value of the      gains tax does not apply if the    asset in the first place!             Spanish property was bought                                             before 31st December 1986.         Corporate ownership can help to       However if the property was        reduce these taxes. Because a         acquired after this date capital   company is considered to be an        gains tax does apply. The rate of  individual legal unit (which can      Spanish capital gains tax differs  never die) a Spanish property         according to a range of factors,   owned by a company cannot be          such as whether you are over 65    charged any Spanish inheritance       years old and whether you          tax. In the event of death a          re-invest in Spanish property      company also offers you a             within three years.                selection of options for                                                 transferring the ownership of the     Spanish capital gains tax is       Spanish property. It is also an       decided by the difference in       option to setup a discretionary       value of the old title deeds and   trust to keep the shares of the       the current sales price. It is     company, not allowing the             applicable regardless of which     property to be subjected to           country the owner is domiciled     Spanish succession laws which say     and is charged at up to 35% for    how an estate must be                 non-residents. Putting this into   distributed. Forming a trust also     perspective, if property prices    provides other advantages,            on the Costa Blanca continue to    including avoiding considerable       rise at 20-25% a year, a property  overheads and delays of probate,      in Alicante currently valued at    capital or income tax savings,        â‚¬200,000 could be worth well     over €600,000 in six years          choice.                            time. With a profit of                                                   €400,000, the capital gains         Other Taxes. Tax has to be  charge could be up to €105,000.     paid by the buyer prior to a                                             title deed or a deed for a newly                                        constructed property can be        Capital gains tax can be avoided      registered in a new owner's name.  by using an offshore company -        This can either be transfer tax    such as a Seychelles company          (ITP), which is levied at 6%, or   owning a Spanish company that in      value added tax plus stamp duty    turn owns the property. Instead       (AJD), at 0.5%, levied when        of 'selling' the property, you        buying from a developer. These     are making a change of ownership      taxes are worked out on the        in the Seychelles company by          stated purchase price stated on    transferring the shares. The          the title deeds.                   capital gain is therefore in                                             Seychelles, where there is no         Local municipalities also charge   tax.                                  a tax on the increased value of                                         the property from previous sale.   For Spanish properties that are       This tax is called 'Plusvalia'     of a lower value, purchasing the      and isn't based on the vendor's    property directly through a           capital gain but on calculations   Seychelles company can lessen the     and values set by the local town   expenses of the double structure      hall. By law, Plusvalia is the     outlined above. While this does       responsibility of the seller, but  result in an annual property tax      it is not uncommon for the         of 3% of the 'rateable' property      liability to be contractually      value, the benefit of an offshore     transferred to the buyer.          property ownership can still                                             make this a cost-effective            On a property worth €600,000     all taxes, lawyer and notary fees     the fees and taxes mentioned       could add up to €53,000.            before and can also sidestep the                                        extensive procedures required to   If the Spanish property was           register new title deeds in        bought using a corporate              Spain.                             structure it can make the re-sale                                        a much easier process which in        The advantages are              turn makes the property a lot         obvious. A little planning     more attractive to potential          prior to purchasing could save     buyers. As previously outlined,       you a large sum of money. Buying   corporate ownership means the         your Spanish property using a      property can be 'sold' by             corporate structure could          transferring shares in the            significantly lower your tax bill  company to the buyer, leaving the     both during and after your         title to the property unchanged.      lifetime.                          This means that the prospective                                       buyer will not be required to pay      About the Author: SpanishInvest.com is a property website specialising in Off-Plan properties to be bought for investment purposes. See http://www.spanishinvest.com for the best investment properties in Spain!! Source: www.isnare.com