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Inheritance and Capital Gains Tax

Advice Needed

garywaller@rocketmail.com
post 25.Jan.2018, 05:56 PM
Post #1
Location: United Kingdom
Joined: 25.Jan.2018

Hi,

My wife's mother recently passed away and she and her sister will inherit their mother's house.

If they sell the house, will they have to pay capital gains tax on it?

I thought that the house would be passed on without any inheritance tax and that the existing capital gains tax liability would be written off with their mother's death.

Therefore any capital gains tax would only be payable on the increase in value since they inherited the property.

However, her sister believes that it is due on the increase since their mother bought the house.

The tax office are not very helpful! Does anyone know the rules for capital gains tax on inherited property?

Thanks in advance! Gary
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Essingen55
post 25.Jan.2018, 07:44 PM
Post #2
Joined: 12.Dec.2013

The sister is correct. You will find the answer here.

http://lawline.se/answers/skatt-pa-hus-som...rvats-genom-arv
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john.boy
post 25.Jan.2018, 07:50 PM
Post #3
Location: Stockholm county
Joined: 27.Sep.2017

And do not forget that within the EU the rules changed. For EU citizens they can choose in advance if it is the State they are a citizen of or the State they are resident in when it comes to inheritance rules that should count. There are some opt-outs e.g. UK.
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Mib
post 25.Jan.2018, 08:52 PM
Post #4
Joined: 7.Jul.2006

So, if you inherit a property in the UK, what happens then? There is inheritance tax in the UK.So for example. if your parents bought a house for 100,000 and then it's worth 500,000 at the time you inherit it, does that mean that you pay 22% CGT on the 400,000 gain if you're a resident in Sweden?
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Essingen55
post 25.Jan.2018, 09:54 PM
Post #5
Joined: 12.Dec.2013

I think...but am not sure... that the house is valued at the time of your parent's death and...together with other assets...the estate is assessed for inheritance tax. You then pay that tax and are deemed to have acquired the house at that value. If you then sold it at some future point in time and were resident in SWeden, you would pay CGT on the difference between the value at inheritance and the eventual sale. (Note...if you had been resident in the Uk and the parents house became a second property then you would also have to pay CGT on it.)
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garywaller@rocketmail.com
post 26.Jan.2018, 12:30 AM
Post #6
Location: United Kingdom
Joined: 25.Jan.2018

Thanks. For the eu law change it seems that this applies when making a will, not when inheriting, so we would be bound by the Swedish tax system. But it seems strange to me that they would inherit the tax liability of their mother. I know in the UK that capital gains liability of the parents property is wiped out upon death and inheritance so children can sell the property and pay tax only on the gain since the inheritance. This tax must affect many families, especially where property is divided between children and they sell it. It almost seems like a backdoor inheritance tax!
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garywaller@rocketmail.com
post 26.Jan.2018, 12:51 AM
Post #7
Location: United Kingdom
Joined: 25.Jan.2018

Also worth mentioning that we are UK residents now so I wonder if the UK inheritance laws apply.
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yet another brit
post 26.Jan.2018, 06:17 PM
Post #8
Joined: 5.Jan.2013

QUOTE (garywaller@rocketmail.com @ 26.Jan.2018, 12:51 AM) *
Also worth mentioning that we are UK residents now so I wonder if the UK inheritance laws apply.


It is your mother-in-laws will, not yours. My belief is that would be probated where she lived (presumably Sweden), and it is her estate that is subject - or in that case, not subject - to inheritance tax. But ask a (Swedish) lawyer...
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TLSucks
post 26.Jan.2018, 11:38 PM
Post #9
Joined: 12.Dec.2013

QUOTE (garywaller@rocketmail.com @ 25.Jan.2018, 05:56 PM) *
Hi,My wife's mother recently passed away and she and her sister will inherit their mother's house.If they sell the house, will they have to pay capital gains tax on it ... (show full quote)


Tax liability, or any financial liability, is not written off after death. All debts are either settled with the estate before inheritance, or inherited if allowed by the creditors. Tax liability will also be inherited if not settled by the estate, i.e. it is the initial purchase price that counts.

However, since you are not living in Sweden you may be able to use this to your advantage since you may not be subject to Swedish capital gains tax. Thus if you inherit the house, and later sell it, you may be subject to UK tax laws instead. You need to contact a tax specialist to sort this out.
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Essingen55
post 27.Jan.2018, 03:36 PM
Post #10
Joined: 12.Dec.2013

QUOTE
However, since you are not living in Sweden you may be able to use this to your advantage since you may not be subject to Swedish capital gains tax. Thus if you inherit the house, and later sell it, you may be subject to UK tax laws instead. You need to contact a tax specialist to sort this out.


No chance. I have never heard of anyone avoiding capital gains on Swedish property.

https://www.gov.uk/government/uploads/syste..._-_in_force.pdf

Look at Article 13 of the double taxation agreement between Sweden and the UK

"Gains derived by a resident of a Contracting State from the alienation of
immovable property referred to in Article 6 and situated in the other Contracting
State may be taxed in that other State."
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john.boy
post 28.Jan.2018, 03:51 PM
Post #11
Location: Stockholm county
Joined: 27.Sep.2017

QUOTE (TLSucks @ 26.Jan.2018, 11:38 PM) *
Tax liability will also be inherited if not settled by the estate, i.e. it is the initial purchase price that counts.

It is the change in asset value that is taxed not the person per-se. You can give a house away without any tax implication, however when the asset is sold the change in value is taxed. If there is a loss then whoever sold it gets the rebate, jsut as they have to pay tax on any gain the asset has.

In that context, you do not inherit tax liabilities, rather assets that change in value and may or may not become liable for capital gains tax.
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