Transferring Spanish Property To A UK Private Limited Company ? Not Recommended.

02.06.14

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

There have been those who have been advising people to place their Spanish properties into UK companies for some years now, saying that Spanish Inheritance Tax can be avoided.  Now the Directorate General of Taxes has released a Tax Binding Consultation.

There have been those who have been advising people to place their Spanish properties into UK companies for some years now, saying that Spanish Inheritance Tax (Succession Tax) can be legally avoided by transferring a Spanish property into a UK Private Company.

 

Blevins Franks has been advising against this for as many years, for several reasons:

  1. It will not avoid UK Inheritance Tax (and may even create a higher tax charge).
  2. If you are resident in Spain, the company can become Spanish resident and therefore subject to Spanish taxes on income from the property or gains made by the company, or even on sale of the company.
  3. If you are not resident in Spain, the company is still subject to Spanish taxes, because the assets of the company consist of Spanish property, so it is, under Spanish law, liable to tax in Spain.

Now the Directorate General of Taxes (DGT) has released a Tax Binding Consultation (number V3350-13). A translation of part of this statement has been published by Lawbird Legal Services in the SUR in English 23rd May edition:

In relation to the tax scheme consisting in legally transferring a property to a UK based company, with the sole purpose of avoiding IHT in Spain through relocation of the taxation of the shares of the said company to the UK, there cannot be a favourable response by this Tax Department in relation to the lawfulness of the scheme. Only via the appropriate inspection procedures will the Tax office be able to establish whether the scheme conforms to the law or, as the case may be, infringe it in which case, the tax office will be able to regularise the anomaly by initiating the required procedures to combat tax fraud.

Lawbird Legal Services go on to say that unless the DGT does not officially rule otherwise, the employment of the above scheme to avoid Spanish Inheritance Tax could be deemed tax evasion and, where the unpaid tax exceeds €120,000, a criminal offence.

Blevins Franks has, for many years advised against using these schemes. Such a structure can be used for tax evasion purposes, and for this, and the reasons given above, such a scheme can clearly come unstuck and end up costing you much more. There are other, legitimate, ways to minimise taxes both during your lifetime and on death, and Blevins Franks will help you come up with a solution or solutions specific to your circumstances, rather than a one-size-fits-all scheme.

28 May 2014

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

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