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Changes to inheritance tax in Spain

New rules for non-residents

Inheritance in Spain works very differently to how it works in many other countries. For example, even between spouses there is no automatic transfer of ownership. If one of you should die then the remaining spouse does not automatically inherit the deceased spouse’s share of the property. First you must make an inheritance tax declaration and only then, when inheritance tax has been settled, can the name on the title deed be changed in the presence of a Spanish Notary.

If the names are not changed then there will be difficulties when it comes to you wanting to sell the property or hand it over yourself. You are allowed six months to make the inheritance tax declaration. If you miss the deadline then there will be an additional levy of 5% for every three months that expires up to a maximum of 20%. A very good reason to make sure that you do not miss the deadline.

Changes in the law

Until recently, residents and non-residents inheriting property in Spain were treated differently when it came to Spanish inheritance tax. However, following pressure from the European Commission a modified law was passed on the 28th November 2014. This meant that for all inheritance transactions and donations after January 1st 2015, non-residents could not be discriminated against when it came to inheritance or donation tax in Spain.

The result of this is that now most non-residents have much less, if any,Spanish inheritance tax to pay unless it is a very large estate that is being inherited. However, anyone wanting to get an idea of how much inheritance tax there might now be, should take into account that different regions do have different rules. For example, there can be variations in the threshold above which you must start paying inheritance tax in Spain.

Variations also occur depending upon who the inheritor is in relation to the deceased. For example, those closest to the deceased such as spouses, children and parents will pay the least in Spanish inheritance tax, if anything at all.

These recent changes are now seen as an important break through for non-residents who can save a significant amount of money following the changes. However, each case is different and it is important that both resident and non-residents take individual advice to help them calculate inheritance tax bearing in mind the region and relationships to the deceased.

Please do not hesitate to contact our legal department should you have any queries. You can reach them by email legaldpt@abacoadvisers.com

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