Lower Cost of Spanish Inheritance Tax in 8 legitimate ways that you can reduce the costs associated with claiming an inheritance in Spain.
If you are reading this then you have probably received an inheritance in Spain.
Or possibly you own assets in Spain and are concerned about how much of your estate will be gobbled-up in taxes, charges and legal costs. The first piece of advice is: Don’t Panic!
Keep reading and learn how to lower cost of Spanish inheritance tax in 8 legitimate ways that you can reduce the costs associated with claiming an inheritance in Spain.
Many scare stories are written about Spanish inheritance tax which are either untrue or simply don’t apply to most of us.
Nevertheless, there are ways that you can reduce the costs associated with claiming an inheritance in Spain. Below you will discover 8 tips that will go a long way to ensuring you pay as little as possible.
Please note that you can arrange a full inheritance management service via our network of probate lawyers in Spain.
We also provide a very convenient and cost effective method of incorporating the following tax-saving ideas by providing a will-making service that allows you to maximise savings to potential inheritance tax liability.
1. Do I need to be in Spain to handle an inheritance?
No. One possible way to reduce expense is to manage the inheritance remotely. By signing a power of attorney you can have your solicitor manage the documentation in Spain and facilitate transfer of the assets to the beneficiaries.
The power is created in both English and Spanish and needs to be legalised in the country where you are located before it can be used in Spain.
Lower Cost of Spanish Inheritance Tax by reducing travel expenses.
2. Are there any simple ways to reduce the tax?
If there is a mortgage on any inherited property this can be deducted from it’s total value before reaching the taxable value. Any other quantifiable legal debt likewise may be deducted from the value of the estate.
While not appropriate for everyone, in general, bequeathing the estate to as many beneficiaries as possible is sensible as each one has an exemption (Approx. €15,000) that can be used to reduce the taxable value.
Leaving a life interest instead of the full interest in the estate can reduce tax substantially also.
3. Is it possible to claim back inheritance?
Currently actions are being filed for the return of taxes against Hacienda and the Spanish government on behalf of those non-residents in Spain who have paid inheritance taxes on the basis of discriminatory treatment. Please contact us for more information on how to join the list.
4. Are there fines or surcharges for late payment?
Spanish law stipulates that any taxes due on an inheritance must be paid within six months of the date registered on the death certificate. If this is not complied with then penalties are charged and interest begins to accrue. The surcharges applied are as follows:
- 3 months after the deadline: 5% surcharge
- 6 months after the deadline: 10% surcharge
- 12 months after the deadline: 15% surcharge
- Over 12 months since the deadline: 20% surcharge.
In the first three scenarios, the surcharge is a percentage of the amount payable alone. In the last scenario where 12 months have elapsed since the deadline, interest also becomes payable, currently at a rate of 4.75%.
You would obviously be well advised to act quickly enough to avoid the surcharges and fines becoming payable.
5. What if I am unable to pay the tax?
If you are unable to pay the tax initially then one option to avoid surcharges would be to defer the payment. The rules may be summarised as follows:
- You may opt to delay payment of the tax or to pay in instalments if a request has been submitted within the correct time-frame (six months from date on death certificate)
- In general, approval of a request to delay or pay the tax in instalments will incur a levy for legal interest
- The deadline for making an application to delay or pay in instalments is six months from the date of death of the testator.
- For requests of a delay of a year or less in payment of the tax it is required that the request has been made within the allowed time period and that there are not sufficient liquid assets to pay the tax
- For requests to pay instalments over five years in addition to the rules regarding requests for a delay of one year, it is additionally required that a guarantee that covers 125% of the amount of the tax and interest payable.
Lower Cost of Spanish Inheritance Tax (added fines or surcharges) by defering taxes payment.
6. Will I lose an inherited property if I cannot pay inheritance taxes due?
A major fear that beneficiaries can have is that, should they be unable to pay the tax on the inheritance of a property in Spain, that they may lose the property. This is not the case though complications can arise.
For example, it is certainly not possible to sell a property until any inheritance taxes that are due have been paid.
Often the solution here can be to arrange for the lawyer to prepare the inheritance tax papers and wait until a suitable buyer appears. In such cases, the taxes and legal costs can often be dealt with by using the deposit transferred to purchase the property.
7. Do I still pay taxes if I inherit the family home?
If the property was the habitual home of the deceased then a special tax exemption exists for close family members. The exemption is currently worth approximately €122,000 or up to 95% of the value of the property.
There are strict rules governing what constitutes ‘habitual’ residence and the property may not then be re-sold for a period of 10 years.
8. My partner and I are not married. Can we benefit from inheritance tax exemptions?
This problem can be avoided in a number of regions by registering as a ‘pareja de hecho’ (common law couple) in the relevant local registry and which henceforth permits the partner to benefit from typical spousal tax advantages. More information is available on regional inheritance tax deductions in Spain
Need Advice on A Spanish Inheritance?
Our lawyers are located throughout Spain and are able to provide assistance from simple legal advice through to a complete inheritance service including payment of inheritance taxes and vesting of asset titles in new owners. You can find more information on the lawyers in Spain page.