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Spanish Inheritance Tax

Spanish Residents

Spanish inheritance tax is applicable if you are resident in Spain. Allowances are available depending on the relationship with the deceased. In the first instance the State rules apply but these can be amended by the different autonomous communities, providing conditions set by the relevant autonomous communities are met.

Non-residents

As a non-resident you are liable to Spanish inheritance tax if you inherit any property situated in Spain, irrelevant of whether or not the owners of the property were Spanish residents. The only exception to this is property owned by a company.

Expenses

Some expenses may be deducted from the value of the inheritance:

  1. Burdens and encumbrances imposed directly on the asset which reduce its value (e.g. pensions, annuities and long leases).
  2. Duly documented debts (e.g. mortgages, pledges, state and local taxes).
  3. Certain expenditures (e.g. medical costs; and expenses with regard to burial, cremation, and inheritance-related litigations).

The State Rules

The tax rates differ depending on the value of the amount inherited. These range from 7.65% on the first €7,933 and up to 34% on €797,555 and over. Beneficiaries are divided into four different groups and the more remote the beneficiary’s relationship to the deceased, the lower the tax allowance and the higher the tax rate.

The four groups are:

  • Group 1: natural and adopted children under 21.
  • Group 2: natural and adopted children aged 21 and over, grandchildren, parents, grandparents, spouses and unmarried partners registered as a pareja de hecho (domestic partnership) in Andalusia or Catalonia.
  • Group 3: in-laws and their ascendants/descendants, stepchildren, cousins, nieces/nephews and uncles/aunts.
  • Group 4: all others including unmarried partners unless registered as a domestic partnership.

Since the autonomous communities may modify their own rates and allowances, these groups may differ from one locality to another.

Resident or Non-resident

There is a reduction in the amount of Spanish inheritance tax to be paid when the deceased was a resident and the property involved is the family home. The reduction ranges from 95% to 99% of the value of the property and represents a significant difference to the amount of inheritance tax payable in Spain.

As a result, you will be required to prove residency using Town Hall certification, utility bills and tax declarations. The deceased must also have been resident for a specified period of time, generally for at least three to five years.

In cases in which the deceased was a Spanish resident but the inheritors are non-residents, if  the beneficiaries are close relatives to the deceased, such as children, then 95% of the estate value, up to a maximum of €122,606.47, can be exempt from inheritance tax. However, the inheritor has to make a commitment not to sell the inherited Spanish property for at least 10 years. If they do sell within that time they must pay the non-resident fee plus interest.

Period for Payment

The filing deadline for the inheritance tax return is 6 months from the date of death. Upon submission of form 650, the Tax Agency will calculate the tax payable. Alternatively, the taxpayer can opt for self-assessment, submitting the simplified form 652. The forms can be downloaded from the Tax Agency’s website.

Our Advice

Taking advice from someone who understands the implications of Spanish inheritance tax can help you mitigate taxes. Contact us in order to arrange a consultation, in person or over phone/email. We have experience in reducing taxation in Spain so you can be confident that you are not paying more tax than is strictly necessary, nor will you get caught out with an unexpected tax bill.

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Spanish Wills

We recommend to all our clients that at some point they make a will in Spain.

A will made in your home country can cover all your worldwide belongings, including any you have in Spain. However, there will be increased bureaucracy and administration costs in dealing with the estate as a result. The relevant documents will need to be translated and notarised before the Spanish inheritance tax can be resolved; a time-consuming and easily avoidable additional step for your family to have to take at a difficult time.

What should I do then?

The Spanish Civil Code allows foreigners to leave Spanish assets in accordance with the national law of their country of origin. Our advice is that two wills are made: one for property in Spain and another for that outside of Spain.

How can we help you?

We can advise and inform you about writing a will according to your specific situation, drafting and reviewing the content of the will before signing it before a notary. We also provide an inheritance tax planning service to ensure your chosen beneficiaries only pay the minimum amount of inheritance tax possible.

Wills and Inheritance

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Appointing a Representative

It is not obligatory for EU residents who own a property in Spain to appoint a fiscal representative. However, non-resident taxpayers must appoint a fiscal legal representative in the following cases:

  1. You carry out your business in Spain on a permanent basis (a permanent establishment).
  2. When certain expenses are deductible in order to calculate the taxable base subject to tax in Spain.
  3. When an organization established abroad and operating under the system of attribution of earnings carries out an economic activity in Spain, and all or part of said activity is carried out in an ongoing or regular manner, in facilities or workplaces of any kind, or it acts in Spain through an agent authorised to contract on behalf of and in representation of the organisation.
  4. When you own assets in Spain and have your main residence in a country with no tax information exchange with Spain. This excludes securities traded in official secondary markets.
  5. When required to do so by the Tax Office.

Even if your situation means you are not required to appoint a fiscal legal representative in Spain, you may choose to do so to save yourself time and avoid missing correspondence from the Tax Office in case of change of address or absence.

Appointing a fiscal representative, such as ourselves, provides you with the peace of mind that all communications from the Tax Office will be received by your representative, who can then inform you and act upon them according to your wishes.

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