But
· As the legal company owner, you remain in full control of the company - and therefore the asset.
· You do not relinquish any control or decision making power regarding the property.
You stay in absolute control of the shares of that company, and you have the final say in who owns those shares.
Therefore - Inheritance tax in Spain and the UK never becomes an issue. Because on your death, the company still remains the owner of the asset, it's just the shares in the company that will change hands when the time comes.
It's simple, isn't it? Well, it is complicated to set up, so we use Spanish and UK Solicitors to do it.
And it's totally legal too!
There are clearly no messy loopholes involved, the mechanism makes use of Spanish, UK and EU legislation to ensure its integrity and is a method that has been used for many years by large firms of accountants throughout the world. Any citizen of any EU State, except the Spanish, owning property in Spain and therefore subject to their inheritance tax rules can use this method.
Who should do this?
· If you own property in Spain of any value, you should seriously consider restructuring your asset to protect it in the future whether you plan to sell it or not.
· If you are contemplating the purchase of a property in Spain then to do so through a Wincham arrangement will represent significant initial financial advantages as well as obvious future tax advantage.
· If you are selling a property in Spain then to do so through a Wincham Scheme will not only speed the sales process up but will also make your property more attractive to buyers as it will be cheaper for them to buy the property to start with and of course provides them with immediate built in tax advantage. It will also ensure that you will not be hindered by capital gains tax issues as well.
Let’s take the case of a married couple with two children with a property in Spain worth €500,000.
· The total Spanish Inheritance Tax that such a property attracts is €116,624.
· Assuming they bought the property originally for €250,000, if it were sold then there would be an 18% Capital Gains Tax charge on the profit of €250,000 or €45,000 because there is no tax free sale of property allowance in Spain as we have on the family home in the UK.
· To make sure they get their pound of flesh the Spanish Tax authorities force a statutory retention of the proceeds of a property’s sale of 3% of the sale Value, the balance is due within a specific time scale.
· The purchaser of a resale property in Spain has to pay 7% purchase tax which for our average example is €35,000. This then is a total tax burden associated with this property of €196,624 or 39% of its value.
· The removal of the 7% Purchase Tax means that the usual purchase cost, equivalent to about 10% of the property’s value, is significantly reduced; in our example here the cost would be just €18,500 instead of €50,000, a useful saving for the purchaser of €31,500.
