The other day a client was in the process of filing an Inheritance tax form and he asked me which value he had to give to a Spanish property he had just inherited. In England the answer is quite simple: you must use the open market value. This generally means getting the property valued. In Spain the situation is, as usual, quite different.

Spanish law states that it should be the “real value” but there is no clear definition as to what the real value is. There is some guidance as to what could be understood as “real value”. For instance, the price shown on the deeds when the property was purchased or the value used by the tax office the last time the property was assessed by the tax man. However, the most common practice is to use the fiscal value. This is obtained applying a specific multiple to the rateable value of the property, which is usually shown on the annual property tax receipt.  

In the end, what happens in most of the cases is that the beneficiaries give the values that they consider appropriate and then these values are assessed by the Tax office. If the Tax office believes that the property is worth more, the Tax office will issue a tax request for the difference and any interest accrued.

In my opinion, it is advisable to use the market value and ensure that this value is definitely higher than the fiscal value. However, each case needs to be looked separately as there could be many factors affecting the final decision i.e. was the property  purchased a few years before the death? is there an intention to sell the property in the short future, etc.

What is clear is that if you are an executor of the estate, both English and Spanish, then the best way to proceed is to get the property properly valued and use that value for tax purposes, both in England and Spain. Otherwise, there could be some personal liabilities for the executor.

Picture by www.dreamstime.com

To be, or not to be, that is the question:
Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,
And by opposing end them? To die, to sleep,
No more; and by a sleep to say we end
The heart-ache, and the thousand natural shocks
That flesh is heir to: ’tis a consummation
Devoutly to be wished. To die, to sleep;
To sleep, perchance to dream – ay, there’s the rub:
For in that sleep of death what dreams may come,
When we have shuffled off this mortal coil,
Must give us pause – there’s the respect
That makes calamity of so long life.
^{Hamlet by William Shakespeare}

 ^{Amazing monologue of the genius William Shakespeare. By the way, who do you think has best incarnated Hamlet on the silver screen? Many generations think of Laurence Olivier.  Personally, I really enjoyed Kenneth Brannagh’s take on Hamlet}