Any questions - Finance
SPAIN
Q
Are there any equity
release schemes available in Spain? James Pinkerton, Glasgow
A
There are various schemes available
in Spain. However, although most are called ‘equity release’, they are actually
very different from the well-regulated schemes in the UK. You would need to do
your homework and carefully consider all the risks. Establish whether you can
use the loan for whatever you wish and when the interest and loan have to be
paid back (many loans are only for a number of years and then need to be
renegotiated).
Some schemes force you to make an investment, which means you’ll be borrowing money to invest it. This is risky, especially if the loan must be paid back in your lifetime. There is one scheme, called a ‘lifetime loan’, that works along the lines of regulated UK schemes. The loan and interest don’t need to be repaid in your lifetime and you can use the money for any purpose.
ITALY
Q
My wife and I would like to
move to Italy permanently. Is it true that there is no Inheritance Tax in
Italy? Alan Worral, Reading
A
Tax on lifetime gifts or bequests to relatives was abolished in
2001, but has now been reinstated. Spouses and children pay a rate of four per
cent, siblings and relatives six per cent and unrelated individuals eight per
cent. Children and spouses are entitled to a lifetime exemption of €1,000,000
(£679,320). For siblings, it’s €100,000 (£67,930), but other relatives and
‘strangers’ aren’t entitled to exemptions.
In the case of property,
Cadastral Tax (one per cent) and Mortgage Tax (two
per cent) are also due,
but if it is the beneficiary’s primary residence, these two taxes are fixed at
€168 (£115). Italian gift/ inheritance tax applies to Italian residents, and
Italian assets of non-residents.
Q
I believe the recent Budget made it possible to own overseas property through a
company. Is it now sensible to set up a company when purchasing property
abroad? Derek Lasdun, London
A
The UK has never stopped people from owning
overseas property through a company, but it could apply a tax on the ‘benefit’
of free accommodation provided by the company. Under this you could find
yourself charged tax on the annual rental value of the property if it was
available for your use. The March Budget included plans to remove this charge in
next year’s budget (from April 2008); this is to be applied retrospectively. In
order to avoid this charge, the following must apply: the company’s activities
must only relate to ownership of the property (ie, occupation or letting); it is
the sole or main asset of the company; it has not been funded directly or
indirectly by a connected company, and the company is owned by individuals.
Some countries have penalty taxes for properties owned by offshore tax haven companies. You need to factor in the costs (initial set-up and running costs), Corporation Tax in that country, and also in the UK (if you will be UK-resident), and the tax rules of the country before deciding whether it is the most cost-effective option and the most suitable solution for you.
