If you buy a house in Spain don’t forget that you’ll need to make a new will

I recently bought a holiday home in Spain. Do I need to write a Spanish will — or can I just ask my Irish solicitor to modify my existing will? If I need to write a Spanish will, what are the advantages of doing so — and how would I go about it? Tony, Ashbourne, Co Meath YOU should make a Spanish will now. It is not advisable to simply ask your Irish solicitor to make provision for your Spanish property in your Irish will. There are strict formal requirements for the making of a Spanish will and an Irish will made in accordance with the Irish Succession Act, 1965 does not meet Spanish requirements.

The main advantages of making a Spanish will are that it will be less expensive — and quicker — to administer your estate than it would be under an Irish will. It will still be possible to administer your Spanish estate if you have an Irish will — however, it will be more costly to do so. It is possible to bring a grant of probate from an Irish will to Spain and administer a deceased person’s estate using that. However the procedure is far more involved and may cost more than twice an ordinary administration.

The simplest way of making a Spanish will is through a Spanish notary. If buying a Spanish property, the most convenient way of making a will is usually to arrange it with the same notary and at the same time as completing the property purchase.

The Spanish notary will look after the formalities of lodging the will in the country’s central registry of wills. In certain circumstances, where the testator (that is, the person making the will) wishes to engage in a more complex disposition of their property, the testator may request the assistance of a lawyer to draft their will — which they would then sign then and have witnessed by a Spanish notary. This may be advisable where the testator is a foreigner and has property in Spain and in other jurisdictions — as is the case with you.

Alternatives to this procedure are to have your will prepared in double column (in English and Spanish), and witnessed by a notary in another EU State. This document should then be apostilled and lodged with Spain’s central registry of wills. This option is more convenient for those who do not have the time to travel to Spain to make their will and also offers the possibility of drawing up a slightly more sophisticated will than might generally be granted before a Spanish notary.

I own a holiday home in Spain which I am hoping to put on the market early next year. Do I face Irish or Spanish taxes (or both) should I sell this property — and if so, what type of taxes do I face? Are there any steps I can take to reduce the tax bill I would face when selling this property? And are there any other charges I need to be mindful of when selling the property? Maria, Glasthule, Co Dublin

A vendor can expect to pay, by law, two taxes in Spain — Capital Gains Tax (CGT) and Plusvalía tax. CGT is paid by residents of Spain on their worldwide assets — and by non-residents on property that they own in Spain. Special attention has to be made on whether one holds resident or non-resident status because reliefs and allowances differ depending on the case.

CGT can be defined as the tax applicable on the profit you make on selling an asset. It is the profit that is taxed (that is, the gain) — not the amount of money which you receive. Since the beginning of this year, non-residents of Spain pay a CGT rate of 19pc if they are residents of the EU or European Economic Area (EEA). Non-residents of Spain who are from outside the EU or EEA pay a CGT rate of 24pc.

Before 2007, CGT was a massive flat rate of 35pc for non-residents, while residents paid 15pc.

When a non-resident sells property in Spain, the buyer is obliged to retain 3pc of the price and pay it to the tax authorities to cover the vendor’s CGT liabilities. The reason behind this is that the Spanish tax authorities want the money in case the vendor does a runner without paying his taxes.

To avoid such a situation unfolding, a buyer’s lawyer is forced — under law — to withhold 3pc of the agreed sales price and pay it to the Spanish Tax Office (AEAT).

Any capital gains made by resident taxpayers over 65 will go untaxed when the sale proceeds (up to a limit of €240,000) are reinvested in pension annuities. The sale proceeds must be reinvested within six months of the sale.

Plusvalía tax is a local tax levied by the local town hall. It is a tax levied on the increase in value of the land from the date the owner acquired the property to the date of sale.

I am considering retiring overseas to Spain. I have spent a lot of time over there and have my eye on a property which is within my budget. I will have a small private pension from my current Irish employer — as well as the State pension when I retire. These pensions will be my only income. I have heard of some countries where pensioners get their pension tax-free — is Spain one of these countries? If not, does it have any other tax perks for Irish pensioners like myself who retire over there?

Harry, Artane, Dublin 5

UNDER Spanish legislation, to be considered a resident in Spain you must reside there for a minimum of 183 days in the year. Being a resident, you are obliged to pay tax in Spain on all of your income from wherever its origin.

Therefore, on the basis that you will be residing in Spain on a permanent basis, this will mean that your pension and any other income will be subject to taxation by the Spanish authorities. Pension payments are not exempt from taxation in Spain unless it is your one and only pension and is less than €11,200. It is advisable that you complete a tax return for the Spanish authorities even if no tax is due.

There are tax-free allowances of €2,652 and €4,080 available which can be offset against other income such as interest gained, capital gains or dividends. The higher your income, the lower the tax deduction you are entitled to. However, the least you can reduce your income by is €2,652.

In addition, other reliefs such as children’s allowance and disability allowance are available.

Your finances should not be your only consideration if planning to retire in Spain. It is important that you know the region you are planning to move to.

Consider security. Move somewhere you feel safe and which has a good infrastructure — so that you can get around easily.

You should also be sure that you will be happy living in Spain full-time. It’s easy to come back from a holiday in the likes of Spain and be tempted to retire there. However, you will face a number of challenges. You and your partner (should you have one) will be separated from your family, you could have language issues, and it could also be difficult to develop a social life in a country you have little or no connection with.

Retiring abroad is not a decision that should be taken lightly. It could be worth your while living in Spain on a trial basis for between four and six months — so you get a real feel for the lifestyle there. That would help you decide whether a full-time move to Spain is for you.