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.
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.
Some expenses may be deducted from the value of the inheritance:
- Burdens and encumbrances imposed directly on the asset which reduce its value (e.g. pensions, annuities and long leases).
- Duly documented debts (e.g. mortgages, pledges, state and local taxes).
- 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.
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.