Capital gains and inheritance tax

Fiscal and legal advice from Webster Asesores

Dear Sirs,

In your previous article you stated the CGT was not 3% for non-residents, but omitted to say what the correct percentage was. Perhaps you could clarify this, thanks.

Also it would be of interest to myself, and perhaps to others, to have a short article on inheritance tax for nonresidents and what the rules and rates apply.

You mention also a “plusvalía tas”. What exactly is that and when does it apply?

All pretty factual queries, and possibly of limited interest, but if you wanted to use this letter for publication, fine, but please do not publicise my details.

ANSWER

The rate of Capital Gains Tax for non-residents is 19% of the taxable profit on the sale. This means the actual difference between the purchase and sale price, minus any deductable expenses.

Regarding inheritance tax, this is quite complex to explain, as it will depend on the family kinship between the deceased and the beneficiaries and also on the value of the estate.

If the beneficiaries are direct descendants or the spouse of the deceased, the fist 100.000 Euros are tax free. The balance is taxed according to a sliding scale starting at 7´655 and rising to 34%.

There are also some tax reductions regarding the main residence, but this is not applicable to non-residents.

Further, when Brexit eventually happens, it is very possible that current tax free allowances will not apply to UK residents, unless the UK becomes a member of the European Economic Space (like Norway, for example).

Because there are so many variables regarding inheritance tax, we do not have the sufficient space to provide a more general explanation, as it depends on the relationship between the deceased and the beneficiaries and the value of the estate, and also in which country any beneficiary might be a tax resident.

This tax can be even more punitive is the beneficiary is a resident in a tax haven.

The Plusvalía tax is a local tax payable to the Town Hall and is due when a property changes ownership by any means, i.e. purchase, inheritance, gift etc.

In a purchase it is paid by law by the vendor, and if it is an inheritance oor gift, it is paid by the beneficiary.

If the vendor is non-resident, the this can be attached to the property and the buyer will have to pay it. A buyer´s lawyer, in this case, will usually deduct this amount from the sale price to ensure it is paid correctly.

This tax is based on the increase of the rateable value of the land where the property is situated when it is purchased and the rateable value of the land when the property is sold, inherited or gifted. Note that it is based on the rateable value of the land and excludes any buildings.

This tax is calculated by the Town Hall or one can use a website to calculate it, as it varies from town to town and sometimes depending on the area of the town.