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LAWYERS CAN CAUSE CHAOS
This is the second of a series of responses to common misunderstandings. Responses upon questions 1 and 4 can be found in the March 07 BUZZ. No one wants to pay tax that they need not pay. No one wants to think that they have written a will that conceivably might not work. Think for one minute of throwing a lot of your money into the air and watching it blow away That is what either of these things is like doing. Quill has been holding ‘Getting to know Spain’ meetings around the island for two years - in its efforts to help English speaking people who own assets in Spain to know everything they need to know about these subjects . The levels of confusion that people bring to these meetings - about these subject’s - and other related issues is nothing short of astounding. A year ago Quill believed that this was simply a matter of local lawyers not having updated themselves upon the growing body of international private law – that governs these issues. In a world where populations move freely it has been necessary to introduce global laws about succession. That happened in 1961 with the Convention of the Hague – which has been adopted around the world – including by the UK, Eire and Spain. Spain’s adoption in 1964 and the UK’s adoption in 1963 – and subsequent High Court / supreme court rulings in BOTH countries has made it ABSOLUTELY CLEAR. The succession of the estate of every person on earth – following death – since 1964 is governed NOT by where they are – BUT by their nationality. OTHER – it seems – than in the eyes of the (non existent) ‘LANZAROTE LAW SOCIETY’ – comprised of two out of date – local law firms – who say that the world is flat. Consider more of their ‘edicts’ by comparison with the most up to date rulings and practice:
5. British citizens resident in Spain and
only owning assets in Spain are subject to Spanish testamentary law.
The Abogado making this statement have surprisingly - completely misled themselves upon Spanish law. Spanish internal law relating to succession is set out in a number of acts under which either all of the assets (if there is no valid Will) - or two thirds of the assets (where there is a valid Will) - must pass ‘down’ to the children of the deceased. Foreigners - whether they are living full or part time in Spain - or who live abroad and have property assets in Spain are treated identically under the rules of private international law, which Spain has adopted by way of 9.1 to 9.12 of its civil code.
FOREIGN PROPERTY OWNERS
IMPORTANT NOTICE DIRECTED TO FOREIGN PROPERTY OWNERS REGARDING WILLS AND FOREIGN COMPANIES (ALSO DENOMINATED SHELTER COMPANIES) OWNING PROPERTY IN SPAIN EITHER DIRECTLY OR THROUGH A SPANISH COMPANY.
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Only a will that is granted before a Public Notary can be considered a valid Spanish will. Any other kind of will that has not been granted before a Public Notary will require a legal validation from the country of origin or probate to be accepted as valid for the inheritance of assets in Spain. Neither the British nor the Irish Authorities will grant probate if the deceased does not own any asset in England or Ireland. Consequently, any will for British or Irish citizens who do not own any assets in British or Irish territory will be of no use to the testator if it has not been granted before a Notary in Spain.
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The inheritance tax applicable will be the same, independently as to whether the deceased holds an English, Irish or Spanish will, or is intestate British citizens resident in Spain and only owning assets in Spain are subject to Spanish testamentary law. British citizens with assets in various countries are subject to British law and therefore if they wish to prepare a will in Spain, this would be granted before a Spanish Notary but according to British law. In this case English wills with probate would also be valid.
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Any sale of property or shares owned by a Spanish Company is liable for taxation. Pursuant to the recent legislation enacted on the 30th November 2006 to prevent tax evasion, any transfer of shares of nonresident companies owning real estate property in Spain, or any transfer of shares in a Foreign Company with shares in a Spanish company owning real estate property in Spain will be considered as a transfer of the property itself and taxed accordingly. This applies to any kind of transfer, including by inheritance.
Only those British citizens who do not write a valid Spanish Asset Will that are subject to Spanish testimony law. The proof of this is to be seen in English through google - in the supreme court of Spain judgement of Senor D. Pedro Gonzalez Poveda on the 5.5.1999. In a matter concerning the assets of a British testator who lived (only) in the district of Salvatierra de los Barros, Spain - and with all of his assets scheduled in the Will being in Spain - those assets were ruled in a judgement - that has never been superceded - to be distributed under the UK law of succession - and NOT that of Spain. This is the definitive position that exists in Spain today - and NOT that as stated by ‘The Law Society’ Abogados.
If you have all your assets in Spain you have a choice to (1) have a notarised Spanish internal law Will dividing two thirds or more of your estate between your children - or - (2) a Spanglish Will giving everything to your spouse – or – (3) you can write a Will under your national law giving your estate to who you like. If you follow (1) it will be upheld – under UK and Spanish internal law - even if challenged by your wife. If you follow (2) it can be overturned – exactly as Timothy Denney’s ‘SPANGLISH’ Will was – and – two thirds of the property you had given to your spouse would be transferred to your children. You may feel your children would ‘never do this to you’. They might not – BUT – could be forced an ex spouse or creditor. It is (3) that is the ONLY SAFE method. Anyone with assets only in Spain should have their Wills checked by Quill.
7. Any sale of property or shares owned by a Spanish Company is liable for taxation. The Spanish Abogados have - surprisingly - misled themselves upon a matter of Spanish law. If this point is supposed to refer to the shelter structures created by Quill then we are not certain of its purpose - because a situation where a Spanish company owns shares in another company does not arise in a Quill formed shelter structure. For good order however - it is perfectly possible for a Spanish company that owns shares in another Spanish company to sell those shares without being liable for any tax whatsoever. If the shares are sold at a loss or at the price they were purchased then there would be no capital gains tax and in most cases nor will there will be stamp duty. If the shares are sold at a profit - then there will be capital gains tax - and - if the shares are of a company whose assets are more than 50% property - or - if the shares are sold before one year - or - where the sale creates a single shareholder with more than 50% - then stamp duty (though not tax) will apply. Also whether or not Capital Gains Tax is payable in Spain by a foreigner depends entirely upon the double taxation treaty between the two countries.
Fact: Succession of the estate of every person on earth is governed by their nationality.
8.
Pursuant to the recent legislation enacted on the 30th November 2006 to prevent tax evasion, any transfer of shares of non-resident companies owning real estate property in Spain, or any transfer of shares in a Foreign Company with shares in a Spanish company owning real estate property in Spain will be considered as a transfer of the property itself and taxed accordingly. This applies to any kind of transfer, including by inheritance. If this statement is intended to apply to Quill shelter structures - then ‘The Law Society’ Abogados have failed to understand the nature of a shelter structure - and - the above act. What appears to be referred to here are regulations governing companies in ‘tax havens’. Quill shelters involve Spain and the UK. Neither is a tax haven. Shelter structures have no shares. They are controlled by votes. There is NOT - therefore - any transfer of shares in a foreign company referred to - either on resale of the shelter - or on the death of one of its founders. Quill shelter structures perform exactly as we say - which is to eliminate all inheritance taxes potentially capital gains taxes - wealth taxes - and gift taxes - in respect of the assets in Spain that are sheltered - from both UK / Eire and Spanish taxes.
Why are they attacking Quill? What is behind their activity is, we consider no longer ignorance but is wholly commercial. They no longer wish to see English speaking people - from whom they have earned very large
sums of money over twenty years - continuing to turn to Quill for their more effective Will and tax advice - which these Spanish Abogados simply cannot compete with.
What if you are one of their clients? Lawyers should be making life easy for you. You need a Will and you do not need to pay any more tax than you need. Lawyers should be writing you a Will that will give you security and tranquility. You want to know that you have taken adequate precautions that will work - and then when you die should not involve your families in the potential of having to argue in a Spanish court - in a language they do not understand - about issues that are foreign to them - with a very good chance of losing - under the set rules of Spanish internal law. No Quill Will can ever put you in that position. What your lawyers should also be doing is providing you with tax advice that suits your circumstances and nationality - Not just treating your tax situation with indifference. You should bring your affairs to Quill - to hear what you should have been told about these matters.
What if you are a Quill client? You should ignore these so called ‘facts’. On the basis of their own jointly worded literature / article - these two firms of lawyers - ASG and Izuierdo de la Cueva y Lleo - and / or The Lanzarote Law Society - and / or any other Abogados who endorse or share their views are UNSAFE for an English speaking client to listen to - on questions of Wills and succession - and the legitimate avoidance of homeland and Spanish taxes.
A ‘Lanzarote Law Society’?
Solicitors in the English speaking world - belong to their national Law Society which exists pretty much throughout the entire commonwealth. It is a world renown regulatory body - providing among other things - unlimited Professional Indemnity Insurance, in respect of losses caused to a client by negligence of the Solicitor. Lawyers in Spain are called Abogados and belong to the Colegio de Abogados - or Collegiate of Abogados. Most importantly - membership of the Colegio de Abogados does not include mandatory professional indemnity insurance cover in the event of an Abogado being negligent. It is curious - and potentially very confusing for some Abogados to refer to themselves in advertisements that appear in English speaking magazines - though nowhere else - as being members of the Law Society (or Lanzarote Law Society). It would be much clearer to say what is fact. They are members of the Collegiate of Abogados. The Law Society - seemingly - has six Members No. 27. Eileen Izquierdo Lawlor. [IDL] No. 33. Jorge de la Cueva Terrer. [IDL] No. 39. Ángeles San Gregorio. [ASG] No. 50. Santiago Lleó Fernández. [IDL] No. 225. Mario Izquierdo Lawlor. [IDL] No. 295. Mari Nieves Domínguez Castro. [IDL] People who attend our open days OFTEN think that these Abogados are ‘Spanish Solicitors’ who (somehow) are members of the UK or Irish Law Society - and are covered by the same indemnity insurance as an English or Irish Solicitor. Other than for a very few lawyers who practice in two countries and belong to both organisations - they are not. Why - (would any reader like to tell us?) - would 5 abogados belonging to IZQUIERDO , DE LA CUEVA Y LLEO and 1 belonging to ASG - present themselves to readers of the Gazette as ‘THE LAW SOCIETY’. The least you would be expected to believe was that they were elected members speaking on behalf of the 300+ College of Abogados - which they are not. You might equally however have thought this notice was an official LAW SOCIETY statement - which it is not. You might have expected it to be authoritative and correct, which it is not.
Time is running out for those who are confused by what they see or hear about Spanish law & tax What should you do? ur, Puerto del Carmen
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