There are many reasons why you might want to transfer or ‘gift’ a Spanish property to a child, family member or other person. Maybe to avoid inheritance tax, as part of a divorce settlement or merely out of the goodness of your heart.
Unfortunately, transferring or gifting Spanish property is not as straightforward as it may initially seem and you will need to consider the effect of transferring your Spanish property. In particular the fact that it’s likely that the transfer will trigger Spanish taxes.
The amount of Spanish taxes payable when transferring Spanish property should be given proper consideration as this might affect the way in which you decide to structure the transfer of your property in Spain or if you decide to proceed at all.
How to transfer a property in Spain
In Spain, a property or a share of a Spanish property can only be transferred in one of the following ways:
- Sale and purchase of the Spanish property
- Gifting/donating the Spanish property
- By inheritance of the Spanish property
- Transfer of Spanish property in payment of a debt
So, if you plan to transfer the ownership of your Spanish property to someone else you will need to decide which form the transfer will take.
Each of the methods of transfer will incur some form of Spanish tax (which is likely to be gift tax, property purchase tax, capital gains tax, inheritance tax or a combination of these).
The amount of Spanish tax payable in each case varies, as it will be dependent on a number of different factors. These include:
- the value of the property in Spain (this may be the cadastral ‘town hall’ value of the property as opposed to the ‘market’ value)
- the location of the Spanish property (Spain has 17 autonomous regions which have different tax rates)
- the age of the parties (some reliefs may be available)
- whether or not the parties are tax residents in Spain
- the blood relationship between the parties (different relatives pay different rates of tax depending on how closely they are related to the property owner).
In order to determine the most tax efficient way to transfer your property in Spain, it is advisable to obtain specific advice about which method would be best for you, given the your specific circumstances.
If you have not yet bought your property in Spain, it may be better to consider buying property in Spain in the names of your children from the outset, as this may be more cost effective than transferring it later down the line.
Things to consider when gifting or transferring Spanish property to children
It is common for parents to want to gift their property to their children. If you are thinking of transferring your Spanish property to the kids, it is wise to first consider the following:
Inheritance tax – Transferring a Spanish property to your children can be a good way of avoiding inheritance tax both in the UK and Spain. It can also help to avoid you children having to go through the probate process in Spain after you’ve gone.
You will however need to understand what the likely UK and Spanish inheritance tax liability will be and weigh up any inheritance tax savings against the costs of transferring the Spanish property into the names of one or more children.
Death – Although we all expect (and hope) that our children will outlive us, unfortunately this is not always the case. If ‘your Spanish property’ or a share of it is in the name of a child – consider who might receive this should they die before you.
Divorce – If your put your Spanish property into the name of your child the property in Spain is likely to form part of the pot of ‘matrimonial’ assets to be divided should they get divorced.
Debt – Giving a Spanish property to a child who later becomes bankrupt is likely to make the Spanish property available to the trustee in bankruptcy to use to settle the debts.
If you are considering transferring a Spanish property to your child/children, spouse or other person, contact Worldwide Lawyers for more information on 01244 470 339 or at firstname.lastname@example.org.
We can put you in touch with a recommended English-speaking Spanish lawyer who can advise you about the best way to transfer your Spanish property and provide a no-obligation quote for assisting you.