Some of the communities have already amended the state rules to make them more beneficial but only for residents, not non residents, and in order to classify as resident for this purpose, you have to have lived in Spain for 5 years.

As an example, in Murcia, Madrid, Valencia and the Balearic Island, up to 99% of the estate assets can be exempt from succession tax if the beneficiaries are children and/or the spouse of the deceased, but in Andalucia, 175,000 euros can be inherited by the spouse or children tax fee. In Catalonia this rises to 650,000 euros for the spouse and 400,000 euros for the child.
The current figures suggest that around 60,000 UK families have been hit for inheritance tax amounting to some 400 million pounds. Meaning that the recent verdict could lead to thousands of claims by ex pats. So far, the Spanish government has kept silent on the ruling but they have 6 months in which to make the changes to their laws, so standby for fireworks.

Claims need to be perfect regards paperwork as the tax authorities will certainly be looking for ways to wriggle out of this one. There will be time limits to making an appeal but the amount outstanding if repaid will be repaid with interest.

But, before we all crack open the bubbly to celebrate the thought of the Spanish Tax Authorities raiding the office petty cash to drum up enough money to replay all the over payments, consider the following:-

A new tax on property about to come in to effect stands to have a significant impact on the property market. Some will gain but some will most definitely lose.

The new law is set to get rid of the restatements and abatement coefficients which were previously applied to the IRPF for the purpose of calculating capital gains generated in the sale of a property. The new law effective from January 2015 will especially affect those who bought the property prior to 1994.

A rough example of the difference this new law makes was produced by Cinco Dias, the Spanish newspaper. A property bought in 1976 for 12,020 euros and sold now for 220,000 euros would, under the current legislation attract a tax of 10,869 euros but under the new laws, this would rise to 43,995 euros, a considerable difference of 33,216 euros.

The new reforms will see the disappearance of inflation and abatement coefficients which effectively meant that a property acquired before 1986 would not pay tax for capital gains and those bought between 1986 and 1994 would benefit from reductions in their tax liability.

With the coefficients and tax reform of 1996, capital gains generated by the sale would be reduced by 11.1% for every year after the second year. This effectively meant that after 11 years, no tax would be due.

The new ruling means that taxes applied to capital gains from 31 December 2014 are indirectly increasing. Another example given is a property acquired in 1980 for 9,000 euros and sold in 2015 for 245,000 euros would attract a tax of 55,520 euros but if the buyer and seller could bring forward the sale date to within 2014, the tax paid would drop to 15,359 euros.

So all those sitting on inherited property which they have owned for many years are about to get a nasty shock when deciding to sell. Even a house bought in the year 2000 for 150,000 euros and sold now for 200,000 euros will be paying 8,220 euros more in 2015 than if sold this year.

Will this help the Spanish property market, NO, I am afraid it is back to the gun and foot days which all agents hoped to leave behind in 2014. What will people with old property most likely do? I suspect they will just hang on to the family inheritance and hope that when the government changes this law might get kicked in to touch.

Feeling a bit depressed? I can´t leave you like that just before Christmas so here is some good news about income and corporate tax. Of course, it only helps you if you work or own a company but we must be thankful for any allowances.
The Economy Minister Luis de Guindos has given his support for plans to lower income tax. That said, his government did say when they came to power that no increases would be made in the first place but then politicians have short memories for such things, as we all know. He says that he aims to make income tax “much more reasonable” in the future and to get the government to remove as he describes them “disincentives” for economic growth. He then went on to say that saving should be encouraged and the tax burden lowered.

In an aim to achieve this, they are looking at reducing corporate tax from 30 to 25% by 2016 and those earning less than 12,450 euros per annum would see their tax reduced from 24.75% to 19% in the same time period. Initial reductions coming in during 2015 with a final reduction in 2016 to take us to these figures.

Tax brackets will reduce from 7 to 5 under the new reforms to simplify matters and make income tax calculation easier and it is thought that 62% of tax payers, i.e. those earning less than 24,000 euros per year will see a tax rebate of 23.5% by 2016.

So a little bit of light at the end of the tunnel.

I have heard horror stories of people sitting in official offices with someone keeping watch at the door while large brown envelopes of money were counted and exchanged, like some clandestine exchange of government secrets by two characters from a cheap spy thriller.  They don´t have unmarked drops in secluded woods  or write messages in invisible ink but it is pretty cloak and dagger and certainly not something to be discussed at a polite gathering.

Black money is not an invention of the Spanish and hard cash is common currency in countries which have experienced civil unrest or civil war in living memory.    People like to have a bit of cash on hand  “just in case”.   If you need to pack up and move in a hurry then cash is good.  You are not going to end up with your life savings stuck in a bank where you cannot access it, just as you need to leave the country.  Likewise, some cash can smooth your journey as you flee an area or country.  Crossing palms with silver could mean the difference between survival and death. When the crisis is over the desire to be in control of your money stays and people prefer to have a mattress full of bank notes than a cheque book or credit card.

A distrust of government and a dislike of banks also plays a part.  The Spanish do not like the thought that your money is somewhere that the government can keep their eyes on it or in the hands of some organisation who might do something silly with your hard earned shekels.  Perhaps we in the UK should have been more cautious about giving the banks free reign with our wealth!!
The downside to black money is that you can never use it legitimately.  You cannot buy investments with it as the government will wonder where you got this sudden wealth from and you cannot use it to pay the mortgage of domestic bills if times get tough.  I once asked a bank manager friend what you could do with this dodgy currency and he said buy a car, buy a boat or go a holiday.  Fine if you fancy any of those options but tough if you are suddenly made redundant and need to draw on your savings to get by.

The problem  with black money is being the last in the chain.  The practise is dying out and will one day gasp its final breath and then anyone who paid black money when buying property will be stuck with the big bill because they will have to declare the full value of the property on the paperwork and pay up accordingly, so think carefully before you get involved with the practise.  It is not legal and you may end up being the Patsy.