Have a look at your spanish will !!!! (Before August 2015)

If you live in spain and do not state on your will that you wish english law to rule your inheritance, your estate will go to your children and not your spouse.

Certainly, is now essential that people retired in a country different of their country of nationality within the European Union revise their wills. What is all this fuss about? An European Regulation (eu) 650/2012 will come soon into force and have important consecuences on how your will is going to be construed by the Spanish Authorities. 

We recommend you ask your solicitor about how it may affect your inheritance in case you need to make changes to your wills. Changes must be in place before 17th of august of 2015, the sooner the better.

Particularly. English citizens need to look at their will because of this new Regulation of the EU establishes that:

1. When a person dies resident in one country of the European Union but national of another, the law applicable to his/her inheritance will be the one that he/she has established expressly in his will and not the one established by the International Norms of each country (which may be in conflict). 

This is good news because an English national living in Spain can establish that he/she wishes English Law to rule his/her inheritance and this will avoid any possible risk of claims from children against the spouse on the basis of the system of obligatory heirs established in Spanish law, which has always caused worry and concern in the case of children from previous marriages etc.

2. If a person passes away after the 17th of August of 2015, unless he has said differently in his will (as explained above), the legislation applicable to his inheritance will be that of his country of last residence . This is very important for English people living in Spain, because under Spanish law you cannot leave everything to your wife as 2/3 of the estate have to be left to children. In other words if you are resident of Spain, have children and do not establish on your will that you wish English Law (your national law ) to rule your inheritance your Spouse will not be allowed to receive his/her full inheritance as it would contradict the Spanish rules of obligatory heirs which would be applicable automatically because of the new regulation.

Consequences:

1. If you have children but have made a will leaving all assets to your spouse, make sure that you have clearly stated on your will that you wish your national law (English law) to rule your inheritance. If you have not, you need to speak to a solicitor about this new European directive and add this statement to your will.

2. If you are married and you have been concerned with possible claims by your spouses children against your estate this risk can be completely removed by your spouse stating on her/his will that it should be English law that rules the inheritance.

Conclusion:

The new regulation has given much more strength to the testators /testatrix, letting them choose between English or Spanish Law, which is good, but precaution is a must because under the new regulation if nothing is said and you are a resident in Spain automatically the law applicable will be Spanish law which does not permit that spouses leave everything to each other if there are children.

To avoid nasty surprises visit your solicitor and ask if you need to change the wording of your will due to the new Regulation of the EU. 650/2012.

Javier Herrera Llamas

No more Offshore Companies holding spanish Assets !!!

For some time now I have been advising on the dangers of owning assets in Spain through an offshore company.


Over the last twenty years many thousands of foreign investors have channelled their property investments in Spain directly or indirectly through offshore companies. This has enabled many individuals to avoid the payment of many Spanish taxes such as capital gains tax and inheritance and gift tax.

From 2007 these tax avoidance measures came to an end and owning assets in Spain through an offshore structure could have no commercial or fiscal benefit. Continuing to hold assets in an offshore structure could now increase exposure to taxation.

From there onwards, the offshore company must pay annually a tax consisting of 3% on the Value of the Property for Rates Purposes (Valor Catastral). The Valor Catastral has no resemblance with the real value of the property and normally does not exceed 50% of this.

Just very receinlty Tax Authorities are now considering that the transfer of the capital shares of the company is taxable under transfer tax, and this will be based on the market value of the real estate, regardless of the property price declared or the shares face value.

In line with the rest of Europe, the Spanish authorities have been continously (and will be) trying to introduce legislation that will lessen the amount of tax evasion and money laundering that is perceived to be enjoyed by entities located in offshore tax centres. The tax office does not want to leave any stone unturned in its quest to eradicate all investments channelled through tax haven countries.

The main thrust of the legislation is aimed at forcing such companies to demonstrate beyond reasonable doubt that their underlying activities are truly carried out in their respective offshore centre, and that these are indeed normal business activities.

Finally, if all this was not enough, there has been also cases for chriminal prosecution against the lawyer, the ultimate beneficiary and the director of the offshore companies, by which were all sentenced to jail terms.

So we can really say that the times offhsore companies were easily used to avoid the taxation on spanish assets are gone. Now, this requires a much more careful approach.

Javier Herrera Llamas