Before buying property on the Costa del Sol…

Buying property on Costa del Sol or buying property in Spain in general can be exciting. It is after all a formidable investment, especially now in 2015. Many UK residents visit the South of Spain each year to enjoy the many beaches and of course the warm weather. Lately, we’ve noticed a surge in UK property buyers as well.

No doubt coming to the Costa del Sol each year finally convinces many to buy a second holiday home on Costa del Sol. However, when it comes to real estate in Marbella or surrounding Costa del Sol, guidance is needed to avoid any pitfalls with regard to Spanish law and the always un-avoidable, Spanish taxes.

We always recommend and encourage potential property buyers to please contact an estate agent in Marbella before trying to make a purchase; with all the tax laws on Costa del Sol, property buyers from the UK can save a lot of headache by simply reaching out to one of us.

Because of recent changes affecting the Spanish Inheritance Tax, we thought it best to cover the changes and updates in this blog. For recent expats, and those who’ve lived here for some time, understanding and acknowledging these changes, can certainly help you when the time comes.

The Spanish Inheritance Tax – What you need to know

Over the years, Spain has come under fire for their inheritance tax rates, which previously stated that non-residents had to pay more inheritance tax than Spanish residents. However, in September last year, the European Court of Justice ruled that Spanish authorities could no longer continue with this discrimination against non-Spanish citizens.

This for many was of course fantastic news.

Since the ruling by the European Court of Justice, both residents and non-residents will pay equal amounts of tax, and that taxpayers can claim a refund on the excess of Inheritance Tax that they paid prior to the ruling. The Gift Tax in Spain was also affected by the ruling by the European Court of Justice.

In the past before the ruling, Spain had several options for residents that offered a certain level of tax relief. This unfortunately didn’t apply to non-residents; so basically if you were an expat, and you paid taxes in Spain, it simply meant you got no tax breaks. This is a hefty price to pay for a bit of sun! Thankfully, for the ruling, things have evolved for the better.

We say “evolved” because the Spanish Government only “partially agreed” with the ruling. The Spanish government did make changes to its Inheritance Tax laws, making sure other residents inside the European Union were treated with the same respect as Spanish residents. But, the new Inheritance Law Tax in Spain does not apply to Non – EU residents. In a sense, many feel the Spanish made the right choice by excluding Non – EU residents.

How does the new Inheritance tax law help you?

Although the Spanish Inheritance Tax Law has been modified, each Autonomous Community in Spain can still offer its residents exceptions and reductions. The difference between the exceptions and reductions vary between each Autonomous Community and their residents.

The changes in the Inheritance Tax amendment went into effect on January 1, 2015. Since then, non-residents who paid an excessive amount of tax before the new amendment have been able to claim a refund on the tax paid in excess, and this way have been able to claim back overpaid tax. Since then, several residents have been able to claim back up to thousands of euros in excess tax paid in the years prior to the new amendment.

Also in the reclamation of tax, non-residents have been allowed a maximum time of five years from the date of inheritance in order to claim a refund on excess tax paid. Authorities will also have to pay anywhere between 15% and 20% interest on the refunded tax amount due.

It’s advisable that if someone is planning on claiming back tax, that they enlist the help of someone who specialises in such and understands the system in both Spain and their home country. As expats living, and paying taxes in Spain, this was a welcome bit of news, and a long time coming.

Getting Help from the Professionals
If you think you are owed some of those back taxes and you have yet to seek out any help; it’s best to get in touch with a local lawyer or professional Gestoria.

The same concept of seeking help should also apply to property care or if you plan to buy a property in Marbella. As estate agents on the Costa del Sol, it’s our job to make sure you find the perfect property; it’s also imperative that we guide you through the entire process – because at the end of the day, that’s exactly what real estate professionals do.