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Inheritance tax in Spain
Calculating what your Spanish inheritance tax might be
25/04/2013
It often comes as a surprise to foreigners with property in Spain that there is Spanish inheritance tax to pay when someone dies. In many other countries inheritance tax no longer exists or only applies to very large estates.
In Spain there are two laws that govern inheritance tax:
- National law (Ley estatal)
- Local law exercised by the autonomous regions of Spain
The layering of national and local law is a particular feature of Spanish inheritance tax. Although all non-residents are treated in the same way according to national law, regional or local laws create some significant differences across the country. For this reason it is important that you take advice from a lawyer who understands Spanish inheritance law in different regions as well as national law.
There is the possibility that as a result of European legislation some of the differences between rates of inheritance tax might be removed. However, as the law stands, direct relatives are exempt from paying tax on some of their inheritance. At the moment, according to national law, there is an allowance threshold of approximately €16,000 per person.
Therefore, if you want to reduce the overall amount of inheritance tax to pay in Spain you should consider sharing inheritance between more close relatives. For example, including your spouse and children as benefactors. In this way, they will each be able to take advantage of their own, separate allowances.
Additional exemptions
Children inheriting from their parents can receive an exemption of up to 48,000€ if they are under the age of 21. However, for other relatives, such as uncles, cousins and nephews, there is an allowance of approximately 8,000€. Where it’s a more distant relative or just a friend then there might be no exemption at all. In some regions this means that a partner, no matter how long you have lived with them, may have no exemption.
The amount of your estate that you pay inheritance tax on also depends on whether the deceased was an official resident of Spain or not. It can mean that up to 95% of the value of your property is exempt from taxation in some parts of the country and according to certain requirements. If the beneficiary is also resident, in some areas there is up to a 99% reduction on the tax payable. However, there are usually conditions attached to this and a good lawyer will help explain how you can prove your residency and how long you must have lived there to benefit.
The actual percentage of inheritance tax that is applied is on a sliding scale ranges between anything from 7.64% to 34% depending on the value of the Estate. This is a feature of the Spanish tax system that inheritors need to made aware of and prepared for.
