BREXIT & INHERITANCE AND DONATION TAXES FOR BRITISH NON-RESIDENTS. ARE DONATIONS FROM PARENTS TO CHILDREN FREE? WHAT WILL HAPPEN AFTER THE BREXIT?

Following my previous publication of last April about this issue, I insist again on the negative tax repercussions that the departure from Great Britain will cause to all British citizens with properties in Spain, both for the Non-Resident Income Tax (IRNR) as for the Inheritance and Donation Taxes (ISD).

Indeed, after Brexit, British citizens with properties in Spain, when they cease to be citizens belonging to the EU, will proceed to pay these different taxes:

1. a) They will pay a rate of 24% (until now it was 19%) in the IRNR Tax.

1. b) They will pay according to state regulations instead of according to the regulations of the Autonomous Community in the ISD Tax. Remember that state regulations are much more burdensome, not being able to take advantage of the 99% reductions established by the Andalusian Community in the ISD.

For this reason, and to avoid very high inheritance taxes for the heirs at the time of death, someone may consider the possibility of DONATING the property located in Spain to their children or wife. This option should be made BEFORE Brexit and could be a feasible and beneficial solution for future heirs.

Now, we have to be careful when proceeding with this Donation and make a fiscal study of the fiscal repercussion for the heir (grantee) regarding the ISD and for the client (donor) regarding the IRNR.

Remember that if you do it BEFORE Brexit:

– The grantee or heir will be taxed by ISD in accordance with the regulations of the Autonomous Community in which the property is located. If it is the Andalusian Community, the reductions will be 99% as I have mentioned before.

– The donor or client will be taxed by the IRNR at 19% for the profit generated by the donation, that is, for the difference in value that the real estate has experienced since it was acquired until the donation occurs.

Remember that if you do it AFTER Brexit:

– The grantee or heir will be taxed by the ISD in accordance with the State regulations that are very burdensome, without being able to benefit from the reduction.

– The donor or client will be taxed by the IRNR at 24% for the profit generated by the donation, unless said percentage is modified in the future.

In conclusion, it is necessary to be well advised when planning the inheritance for both residents and non-residents and when deciding to make a donation between family members in order not to lead to tax problems that are difficult to repair.

For this, MAR Consultores Lawyers offer advice on these issues, offering you a free first consultation with an approximation of taxes and tax implications in your specific case. Do not hesitate to contact us as soon as possible.

We will assist you in Mojácar: Multicentro Playa El Cruce Local num. 48 (Behind Banco Sabadel).

info@abogadosmarconsultores.com; marconsultoresjuridicos@gmail.com

1^st of June 2020

Maria Jose Arroyo – Lawyer