Inheritance tax for your heirs.
At present we are unable to know exactly if there will be any changes on Inheritance Tax after the Brexit. Currently British citizens are no longer considered as EU citizens but as third countries citizens, and this involves that they cannot benefit from the tax allowances offered by the autonomous communities on Inheritance tax. However, we think that Spain and the UK will sign some sort of Agreement for tax purposes in the near future.
In the case of third countries citizens, Inheritance tax is higher. However, in previous years there have been judgements in favour of these cases, the last one in 2018, in which a judge recognized the heirs the right to benefit from the same allowances than EU citizens, under some conditions :
If the deceased is resident in Spain, he/she will be able to have the same allowances of the Autonommous community of residence.
If the deceased person is not resident in Spain, and the heirs aren’t either, they can benefit from the allowances where most of the assets of the Estate is situated.
To sum up, even if the UK is not in the EU anymore, according to previous case Law, it will be possible for British citizens to benefit from the current allowances.
Current allowances in the Autonomous community of Valencia are as follows:
100,000 € allowance for children (adopted included), partner and parents.
If you inherit a property which is the permanent residence of the deceased person, there is a reduction of 95% of the tax, up to a value of 150,000€, provided that the deceased person lived in the property for the last 2 years, and the heirs do not sell it until 5 years later.
Should I make a gift of my assets during my lifetime?
The tax for gifts varies also depending on each Autonomous Community.
In the case of the Autonomous Community of Valencia, the allowances are the following :
156,000 € for children (adopted or not) under 21 years old, or grand- children if their parents have passed away.
100,000 for children (adopted or not) over 21 years, parents or grand-children if their parents passed away.
100,000 for grandparents, if their children (father /mother of the donor) have passed away.
It is compulsory to sign the Gift before Notary Public, and after that we have one month to pay the taxes.
The current tax conditions are quite beneficial, but this could change in a near future.
Therefore, if you are thinking about making a gift, we would recommend you to do it as soon as possible. You can always keep the Usufruct, this is, the right to enjoy the property until the moment of the inheritance.