Inheritance tax rules change in the Valencia region


ARE you aware that inheritance tax rules (ISD) in the Valencia Region have recently changed and could have a significant impact on the amount of inheritance tax (ISD) your spouse or beneficiaries will have to pay upon your death. You may need to take action and look at how you can re-structure your assets to effectively mitigate this.

If you are married and live in Spain, you should be aware that passing assets between Spouses on death in Spain is not tax free, unlike the UK where spouse to spouse is tax free. Your spouse will get an allowance of only Euro 100,000 before ISD tax is calculated. ISD tax will be calculated on your worldwide assets, so that includes UK Bank accounts, UK based assets and any assets held here in Spain, like Spanish bank accounts, Spanish property etc.

A few years ago this was not an issue as in the Valencia Region you had a discount of 95% on any ISD due, this reduction was then reduced to 75% and has now been reduced to 50%.

This could now mean that on death your spouse could have to pay a lot more in ISD tax.

You can legally mitigate the amount of ISD tax by utilising the tax advantages of a tax compliant bond, which means that if money is invested on a joint life basis, on first death there is no taxable event, the policy just continues as is, in the survivors name, so no enforced encashment and so no ISD tax liability.

A tax compliant bond also has the added advantage of being sited outside Spain, so if your beneficiaries reside outside Spain they are (usually) not subject to ISD tax in Spain.

If you would like a review of your financial assets to ensure they are tax efficient from an inheritance and income tax point of view, please contact me by email [email protected] or call me on 658 892 330.

The above information was correct at the time of preparation and does not constitute investment advice and you should seek advice from a professional adviser before embarking on any financial planning activity.

Blacktower Financial Management Ltd is authorised and regulated in the UK by the Financial Conduct Authority and is registered with both the DGS and CNMV. Blacktower Financial Management (Int) Ltd is licensed in Gibraltar by the Financial Services Commission (FSC) and is registered with both the DGS and CNMV in Spain.

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