9tH ANNUAL
U.S.-LATIN AMERICA
TAX PLANNING STRATEGIES
CROSS-BORDER ESTATES: DO YOU
REALLY KNOW HOW THEY WORK?
Decedent
Decedent’s spouse
Decedent’s children
Active buisness interests in…
Decedent’s estate
Primary Residence
Decedent’s estate
Vacation residences in…
Decedent’s estate
Vineyards in…
Portugal
Decedent’s estate
Spain
Bank accounts in..
Decedent’s estate
Decendent’s estate
Personal Relationships
U.S./Spanish/Portuguese
Spanish /Portuguese
Resident
Minor 1
Spouse
Minor 2
Spanish/Portuguese
Spanish /U.S./Portuguese
Adult Resident
Real Estate /Artworks
Spanish /
Portugal Resident
Spouse
Primary Residence
BVI
Vacation Residences
Vineyards
Financial Accounts
Spanish/Portuguese
Investor
…Active Business
Countries
U.S.
New Zealand
Switzerland
Colombia
COUNTRY OVERVIEW - Portugal
 Portugal has no specific “gift and inheritance tax.”
 A 10% stamp duty is levied on gratuitous transfers of property to individuals.
However, this tax has a very limited application because:
 (i) it is subject to strict territoriality rules; and
 (ii) a full exemption applies on transfers between spouses and parents and children.
 Transfers of real property located in Portugal and cars or boats registered in
Portugal are subject to tax regardless of the residency of the transferor and
transferee (close family exemption applies).
 In the past 5 years a large number of individuals from other EU countries and
some South American countries (most noticeably Brazil) have been
transferring their residence to Portugal, essentially for two reasons:
 Virtually no inheritance taxation; and
 An individual income tax exemption on financial and pension income from foreign sources.
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COUNTRY OVERVIEW – Spain
 Inheritance and gift tax is imposed on the beneficiary and is triggered when:
 Beneficiary is tax resident in Spain (PIT rules).
 Spanish situs assets are transmitted.
 Taxable base: net market value of the assets acquired.
 Tax rate: 34% when taxable base is higher than € 800,000. Multipliers up to 2.4
apply depending on the family ties with the decedent and the net worth of the
beneficiary. Capital gains on transmitted assets by deceased: exempt.
 Autonomous Regions: they can modify the effective tax rate when there is a
nexus to their jurisdiction, making the effective tax rate vary substantially from
one region to another.
 E.g., Madrid allows a 99% tax credit when beneficiaries are ascendants, descendants or spouses.
 E.g., Catalonia allows a tax credit of 99% for the surviving spouse and a tax credit that ranges from
99% to 20% for ascendants and descendants.
 Nexus to the autonomous regions requires the deceased and the beneficiaries to be resident in
Spain or the EU or European Economic Area.
 Changes in political landscape could reduce tax advantages in Autonomous
Regions. Gifts as way to consolidate current tax rates.
 Closely held family businesses: 95% exemption.
 Tax treaties: France, Greece and Sweden.
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COUNTRY OVERVIEW - Colombia
 Colombia has no specific “gift, estate, inheritance or death tax.”
 However, the full amount of gifts, inheritances, legacies and any inter vivos
gratuitous transfers are treated as capital gains in the hands of recipients,
with no allowance for basis. It functions as an inheritance or gift tax.
 Capital gains tax in Colombia applies both to resident and non-resident
recipients at a rate of 10%.
 Colombian resident recipients: tax applies to worldwide assets.
 Non-resident recipients: tax applies only with respect to assets located within Colombia
or capital gains sourced to Colombia. Tax generally withheld at source, however, nonresidents must file a tax return if tax liability was not satisfied by withholding at source.
 Certain capital gains within threshold amounts are exempt from tax, including:
 Forced allocations established by Colombian law (i.e., marital share, legatees)
 Transfers of certain real estate (i.e., personal use home, certain rural real estate)
 Community property system.
 Generally, a testator can only make discretionary allocations with respect to
25% of his or her estate, unless forced allocations do not apply.
 Assets and rights generally valued at December 31 of the year immediately
preceding the date of the estate settlement or gift.
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COUNTRY OVERVIEW – United States
 A person is not subject to U.S. income tax unless a U.S. citizen or resident
and is not subject to gift or estate tax unless a U.S. citizen or domiciliary.
Residency for federal income tax purposes is different from domiciliary
status for federal gift and estate tax purposes.
 Distinction can often result in a person having residency for income tax but not for
estate or gift tax purposes (or vice versa).
 The Federal estate tax is neither a property tax nor an inheritance tax. It is a
tax imposed upon the transfer of the entire taxable estate and not upon any
particular legacy, devise, or distributive share.
 “Executor” of the estate is responsible for the payment of the federal estate tax.
 Donor of a gift is responsible for paying the federal gift tax.
 However, if tax is not paid by executor or donor, the person who receives the property
will then be responsible for the payment of the tax.
 Currently maximum U.S. estate and gift tax rate is 40%.
 Absent a treaty, a non-domiciliary alien decedent is subject to U.S. estate
tax only on U.S.-situs assets.
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COUNTRY OVERVIEW – United States
 Non-U.S. residents are not eligible for the more generous estate tax filing
exemptions available to U.S. residents.
 Available deductions
 Debts attributable to the U.S. situs asset, administrative expenses in the U.S.
 $60,000 estate tax exclusion for non-U.S. residents compared with the $5.45 million
(adjusted for inflation) unified lifetime exclusion for U.S. citizens and U.S. residents.
Note: Treaty countries may have nondiscrimination provision which increases
exclusion to citizen/resident level.
 Annual gift tax exclusion (currently $14,000 – adjusted for inflation).
 Unlimited marital deduction for U.S. citizen/spouse (only $148,000 gift tax exclusion
for noncitizen spouse - adjusted for inflation).
 U.S. provides a Foreign Tax Credit for transfer taxes paid in foreign
countries
 Results in a transfer tax at the highest tax rate
 Assets are valued according to their “fair market value” at the time of the
decedent’s death.
 Special (favorable) valuation rules for farms and family businesses are not available
for nonresident aliens.
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COUNTRY OVERVIEW - Brazil
 Inheritance and gift tax currently levied at rates that vary from state to state,
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but may not exceed 8%.
Tax applies if either decedent or heir/beneficiary is domiciled in Brazil, as
well if real property (or real property rights) is located in Brazil. The legality
of said levy is, however, debatable if decedent is domiciled abroad or
property is located abroad.
Taxable base is the market value of the transferred asset.
No relevant exemption. No possible treaty reduction.
Income tax exemption applies so long as asset is received at cost value.
 If heir/beneficiary elects to receive assets at a higher value, positive difference is deemed
taxable gain to the estate, to be collected by the estate administrator/executor, at a rate of 15%
(as from January 1, 2017, capital gains will be taxed at progressive rates that range from 15% to
22.5%).
 As Brazil’s inheritance and gift tax has historically been low, pre-death
structures are not as common as in other jurisdictions. This might change in
the near future, though, as there are a number of bills under discussion in
Congress aiming at increasing taxation on inheritance and gift transfers.
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COUNTRY OVERVIEW - Peru
 Inheritance Tax: No gift, estate, inheritance or death tax.
 Capital Gains for transfer of inherited assets: Transfer of inherited real
state and/or shares are treated as capital gains subject to Peruvian Income
Tax in head of recipients, according to the following:
 Peruvian resident recipients.- Taxed on income they earn worldwide. In this
case, Peruvian source income is levied with a 5% rate and foreign source
income with accumulative progressive rates of 8% to 30%. Personal use home is
tax exempt.
 Peruvian non- resident recipients.- Taxed on Peruvian source income. The
general rate applicable is 30%.
The rate applies over the gross amount of the transfer price, unless the
recipients prove the original cost through public or legalize private
document).
 Filing Tax Returns: In general, spouses file their tax returns individually.
Exceptionally, they can elect to file it as a conjugal community, case in which
they must appoint one of them as the representative.
 Tax Treaties: Peru has signed tax treaties to avoid double taxation mainly,
based on the OECD Model Tax Convention on Income and Capital, with the
following countries: Chile, Canada, Mexico, Andean Community (Bolivia,
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Colombia and Ecuador), Korea, Switzerland and Portugal.
Discussion Issues
 Dual nationality/residence
 Decedent
 Spouse
 Children
 Domicile
 Marital or separate property regime
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Discussion Issues
 Estate process and tax issues
 asset valuation
 deemed location of financial assets
 timing of tax
 heirs or estate subject to tax
 treatment of estate expenses
 Tax treaties
 risk of double taxation
 Liability for unreported assets
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Discussion Issues
 Common holding structures
 tax and reporting implications
 practical transfer issues
 Life insurance
 Treatment of common law trusts
 Anti-tax haven legislation
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Thank you!
Mauricio Bravo
Firm:
Email:
Turanzas, Bravo & Ambrosi
[email protected]
Rashad Wareh
Firm:
Email:
Kozusko Harris Duncan
[email protected]
Iñigo Aguirrezabala
Firm:
Email:
Cuatrecasas, Gonçalves Pereira
[email protected]
Pedro Vianna de Ulhôa Canto
Firm:
Email:
Ulhôa Canto
[email protected]
Percy Castle Álvarez-Maza
Firm:
Email:
CASAHIERRO Abogados
[email protected]
António Rocha Mendes
Firm:
Email:
Campos Ferreira Sá Carneiro
[email protected]
Natalia Velez
Firm:
Email:
RSM US LLP
[email protected]
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