Many people are reaching saturation point with the subject of
Brexit. But there are a number of recurring themes in questions being asked by
concerned clients who own Spanish properties. Some are clear, irrespective of
the final outcome of Brexit- others not quite so. Briefly to deal with the top

1. Validity of Spanish Wills

We have always strongly recommended
British nationals who own Spanish assets to make a separate Spanish Will
covering those assets. This helps to minimise the risk of delays and excessive
costs in Spanish probate; and also ensures procedural and beneficial certainty.

The Brussels IV Directive
provided that with effect from 2015, the place of ‘habitual residence’ of a
deceased British national would principally determine which country’s
succession law applies to the succession of their estate in Spain. However, a
lifetime declaration can be made (usually in a Will) overriding that- so a British
national can, for example, elect for the law of England and Wales to regulate
the succession of Spanish assets instead of Spanish ‘forced heirship’. This is
the case even if the British national testator is resident in Spain.

Brexit will not affect the
validity of properly executed and registered Wills of Spanish assets previously
signed by British nationals; nor will it invalidate correctly made declarations
of choice of applicable succession law.

However, this is still a
very opportune moment for Spanish Wills to be reviewed, in particular to ensure
maximum tax efficiency; in view of the succession tax changes which are on the

2. Spanish Succession Tax Impact

EU citizens (wherever they are resident), who are inheriting
Spanish assets, currently have the benefit of the individual Autonomous Regions’ Spanish Succession Tax (SST) exemptions and
allowances. In Andalusia for example, this currently includes a 1 Million Euro
exemption per beneficiary.

In contrast, non-European beneficiaries of Spanish assets who are not
fiscally resident in Spain, have the benefit a ‘National Rules’ SST exempt
amount per beneficiary of just under 16,000 Euros.

Once Brexit occurs, (so British nationals will no longer be EU
individuals), it is anticipated that they will only have the benefit of the individual Autonomous Regions’ SST exemptions
and allowances if they are fiscally resident in Spain. Conversely, for others
who are not fiscally resident in Spain, this would operate drastically to
increase SST impact- even on Estates with relatively modest Spanish asset
values; and even on inheritance between spouses.

There are SST saving provisions which can be incorporated in Spanish
Wills in appropriate cases, to mitigate SST impact. This is whether the concern
is about post-Brexit SST changes, or the consequences of the future unification
of the SST system (considered to be inevitable, for Spain to continue to be
EU-compliant). The latter is anticipated to provide for standard / averaged SST
impact across Spain, wherever assets are located (in the way that UK IHT is
applied, for example). Many areas of Spain could see an increased SST impact as
a result of this.

3. Spanish Fiscal Registration/ NIE Numbers

Spanish individuals are required to have a Spanish Fiscal (‘NIE’) number in
order to acquire or inherit Spanish assets. New requirements are being
introduced currently across Spain for non- Europeans (including British
nationals already), for obtaining NIE numbers. These include the annexing of a
colour copy of every Passport page to the Notarised Power of Attorney- when a
Spanish professional representative is dealing with the fiscal registration.
Also, it can take many weeks to get an appointment at the Spanish Police
issuing office (Comisaría de Policía), so this is something which must be
attended to urgently at the outset of any Spanish inheritance or property case;
to ensure timescales can be met in completing fiscal registration. Otherwise,
inheritance cases can stall/ or property transactions can even fall through-
all over what used to be a swift and simple process, but which is now lengthy
and full of traps for the unwary.

4. Becoming Spanish Resident

For EU citizens, becoming Spanish resident has generally
been a relatively straightforward exercise in recent years. However, non- EU citizens (who do not have the benefit of ‘freedom of
movement’ rights within the EU), have always had to meet additional
requirements. Throughout Spain, there has been a rush of British nationals
seeking Spanish residency in recent months- in the lead-up to Brexit. As such, waiting
times for appointments have become greatly extended, meaning that many now will
have to satisfy tougher (non- EU) criteria to qualify for Spanish residency. These
include: a criminal record check; proof of adequate income/ capital; and a
place to live. Also, (and expensively in insurance terms for older people), proof
of medical cover. Until now, it has been straightforward for British nationals
to prepare for and attend Spanish residency appointments personally. But with
the changing requirements and greater scrutiny of the information and
documentation required, it is recommended that the services of a Spanish
administrative specialist (‘gestor’) are engaged. Otherwise, this can become an
extremely protracted and frustrating process.

5. Taxation of Spanish Holiday Homes

Many British nationals who
own holiday homes in Spain rent them out from time to time, to cover running
costs; and/or to derive some asset income.

A consequence of British
nationals no longer being EU Citizens, is that we anticipate the loss of the
beneficial tax treatment which EU Citizens enjoy for non-resident rental income
received. This impacts on: income tax rate; permitted deductions for income tax
purposes; and also capital gains tax. Coupled with recently introduced laws in
Spain to regulate holiday lettings, (the fiscal and bureaucratic complexities
involved in letting out a Spanish holiday home- even for a few weeks each year-
are such that many are concluding that it is no longer feasible. Renting out a
Spanish property may well prove to be less profitable than hoped). For those
who do wish to persevere, it is extremely difficult to sidestep the need to
engage a Spanish accountant to deal with the compliance/ accounting- further
adding to the cost base, of course.

The Legal 4 Spain team is always
available to provide preliminary advice on a no-obligation basis in relation to
Estate Planning and Inheritance cases where there are Spanish assets; and Spanish property transactions.