EXAMPLE OF DIFFERENT WAYS TO BUY A PROPERTY IN SPAIN TO REDUCE INHERITANCE TAX

BRIEF EXPLANATION ON DIFFERENT WAYS TO BUY THE PROPERTY

PRICE OF ACQUISITION:827.000 EUR  / VAT : 82.700 EUR (10% on the price – it’s a NEW building)

A+B are a married couple with two sons «I» and «II».

A+B want to buy a NEW BUILDING in Malaga, and, before buying, they consult our company in order to check the eventual inheritance results in the future .

SCENARIO  1.- A+B BUY PROPERTY 100 %

«A» has the 50 % of the property = 413.500 EUR

«B» has the 50 % of the property = 413.500 EUR

– «A» dies, so , the value of the «A» part (413.500 EUR) is passed in equal parts to «B» + I + II :

«B» receives: 137.833 EUR.  In inheritance 137.833 – 100.000 EUR (reduction bonus) = 37.833 EUR. ===> This amount pays : 4.000 EUR in taxes

«I» receives: 137.833 EUR.  In inheritance 137.833 – 100.000 EUR (reduction bonus) = 37.833 EUR. ===> This amount pays : 4.000 EUR in taxes

«I» receives: 137.833 EUR.  In inheritance 137.833 – 100.000 EUR (reduction bonus) = 37.833 EUR. ===> This amount pays : 4.000 EUR in taxes

TOTAL Inheritance tax paid on «A» inheritance: 12.000 EUR

– When «B» dies, then, part of «B» (413.500 EUR) + the part received from «A» (137.833 EUR), makes a total of 551.333 EUR. This amount will be inherited by I + II in equal parts:

«I» receives: 137.833 EUR.  In inheritance 275.666 – 100.000 EUR (reduction bonus) = 175.666 EUR. ===> This amount pays : 26.000 EUR in taxes

«I» receives: 137.833 EUR.  In inheritance 275.666 – 100.000 EUR (reduction bonus) = 175.666EUR. ===> This amount pays : 26.000 EUR in taxes

TOTAL Inheritance tax paid on «B» inheritance: 52.000 EUR

TOTAL «A» INHERITANCE TAX + «B» INHERITANCE TAX = 64.000 EUR

SCENARIO 2.-  “A” + “B” BUY THE USUFRUCT and “I” + “II” BUY THE BARE OWNERSHIP

A+B VALUE OF THE USUFRUCT:(28 %)  = 231.560 EUR / VAT: 23.156 EUR

I + II SONS (72 % ) = 595.440 EUR /VAT: 59.544 EUR

– A+B DIES, AND PASS THE USUFRUCT IN INHERITANCE TO SONS (231.560 EUR) in equal parts (probably less than that because the usufruct value is reduced 1 % per year)

«I» receives: 115.780EUR.  In inheritance 115.780 – 100.000 EUR (reduction bonus) = 15.780 EUR. ===> This amount pays : 1.200 EUR in taxes

«II» receives: 115.780EUR.  In inheritance 115.780 – 100.000 EUR (reduction bonus) = 15.780 EUR. ===> This amount pays : 1.200 EUR in taxes

TOTAL Inheritance tax paid on «A+B» inheritance: 2.400 EUR

I+II  have to pay the VAT not paid when they bought: 23.156 EUR

TOTAL INHERITANCE + VAT = 2.400  + 23.156  = 25.556 EUR

SCENARIO 3.- “A” + “B” BUY IN EQUAL PARTS:

A+B BUYS (28 %)  = 231.560 EUR / VAT: 23.156 EUR

I + II SONS (72 % ) = 595.440 EUR /VAT: 59.544 EUR

A+B DIES:

«I» receives: 115.780EUR.  In inheritance 115.780 – 100.000 EUR (reduction bonus) = 15.780 EUR. ===> This amount pays : 1.200 EUR in taxes

«II» receives: 115.780EUR.  In inheritance 115.780 – 100.000 EUR (reduction bonus) = 15.780 EUR. ===> This amount pays : 1.200 EUR in taxes

IMPORTANT NOTE: I+II  have NOT to pay the VAT not paid when they bought: 0 EUR

TOTAL INHERITANCE + VAT = 2.400  + 0  = 2.400 EUR