Inheritance Tax in Galicia

Author: Sabela P.

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Sabela, a bilingual cross-border advocate, specialises in Spanish inheritance and probate law, tax planning, and intellectual property. With extensive experience in Spanish and UK law, she expertly navigates complex legal and cross-border matters.

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Author: Sabela P.

Sabela, a bilingual cross-border advocate, specialises in Spanish inheritance and probate law, tax planning, and intellectual property. With extensive experience in Spanish and UK law, she expertly navigates complex legal and cross-border matters.

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View Sabela's full Bio

Galicia, like other Spanish autonomous regions, has its own inheritance and gift tax regulations. These rules apply equally to residents and non-residents who are EU citizens, following European Court rulings and Spanish legislation.

Of course, dealing with Spanish inheritance tax is complex. For this reason, it is always recommended to contact an expert in Spanish probate for assistance.

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The regional rules and regulations that govern matters of inheritance and gift taxes in Galicia are contained in the original legislation that devolved responsibility for this area of fiscal law to the regions in 1987 and most notably Legislative Decree 1/2011.

Below we summarise the main aspects of this legislation on residents of Galicia and owners of assets there.

Spanish Inheritance law first assigns beneficiaries to groups according to the degree of kinship with the deceased:               
 

1. Group I: Children, including adopted children, under the age of 21
2. Group II: All other descendants, spouses and parents
3. Group III: Close relatives such as brothers and sisters, grandparents, aunts and uncles
4. Group IV: More distant relatives

The following are the additional deductions available in Galicia:

1. Group I: Children and adopted children under 21 years old (€1,000,000 base reduction plus €100,000 for each year under 21, with a limit of €1,500,000)
2. Group II:  Children 21 or older, spouses, and parents (€1,000,000 base reduction)
3. Group III: Second-degree blood relatives (€16,000); other second and third-degree relatives and in-laws (€8,000)
4. Group IV:More distant relatives and non-relatives (no reduction)

Note, when we speak of deductions, we mean that the amount you would be taxed on is deducted by a set percentage before applying the rate of tax. So, if you have inherited €100,000 and are entitled to a deduction of 95%, this means you will pay tax at whatever rate is appropriate to you - on €5,000 only.

On the other hand, when we speak of rebates, this is applied to the amount of tax you have to pay. So, if after applying any deductions you have to pay €1000 in inheritance tax, and you are entitled to a rebate of 99%, this would mean you would only have to pay €10. 

Galicia has adopted 2 distinct range of tariffs depending on the Group to which the beneficiary belongs, as follows:

Group I & II Beneficiaries

So, as an example, an inheritance by a Group I beneficiary - such as a child of the deceased - of €70,000 (ignoring other rebates and deductions that may be available) would attract €2,500 (tax applicable up to €50,000) + (€25,000 @7% = €1,750) =  €4,250. 

Group III & IV Beneficiaries

Using the same example as above, but this time an inheritance by a Group III beneficiary - such as a sibling of the deceased - of €70,000 (ignoring other rebates and deductions that may be available) would attract €6,789 (tax applicable up to €63,905.62) + (€6,094.38 @14.45% = €880.64) =  €7669. 

Accordingly, if any beneficiary is in Group III or IV, they will find their tax obligation increasing by the amount of the coefficient, depending on their pre-existing wealth.

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Should Group I beneficiaries have a tax obligation after applying the generous deductions already stated above, they shall receive a 99% deduction on their final tax bill.

• 33-65% disability: €150,000 reduction
• Over 65% disability:
  • Groups I and II: 100% reduction if pre-existing assets don't exceed €3,000,000
  • Otherwise: €300,000 reduction

Where the beneficiary is a child, parent or close blood relative, the following reductions to each heir's inheritance tax are applicable in the case of the inheritance of the family home by property value as follows:

Deductions by Property Value

1. Up to €150,000: 99% reduction
2. €150,000 to €300,000: 97% reduction
3. Over €300,000: 95% reduction
4. Maximum reduction limit: €600,000

Additional Rules

1. Spouses receive a 100% reduction
2. Property must be kept for 5 years
3. For collateral relatives, they must be over 65 and have lived with the deceased for 2 years

A 99% reduction applies when:

1. The business is located in Galicia
2. Management centre and tax residence remain in Galicia for 5 years
3. The deceased held at least 50% ownership individually or 20% jointly with family
4. The business has operated for at least 2 years
5. The beneficiary maintains the assets for 5 years
6. Two full-time employment contracts are maintained in Galicia

A 95% reduction applies for inherited assets used to create a new business, with limits of:

1. €118,750 general limit
2. €237,500 for beneficiaries with disability over 33%

Requirements include maintaining the business in Galicia for 4 years and creating employment.

Civil partnerships registered in Galicia's Registry of Partnerships (or equivalent EU registers) are treated the same as marriages for inheritance tax purposes.

When managing an inheritance of an asset in Galicia - or if you are a tax resident in Galicia, make sure to adhere to the following requirements:

1. Benefits must be specifically requested when filing tax returns
2. Tax must be paid within 6 months of death
3. Supporting documentation must be provided
4. Requirements must be maintained for specified periods
5. Failure to maintain requirements results in tax due plus interest

Residents of Galicia who maintain tax residency status in Spain face specific inheritance tax obligations when receiving assets from abroad. This consideration is especially relevant given the region's growing international community.

Understanding Galicia's regional tax deductions is essential, as these take precedence over national Spanish regulations in inheritance matters. The potential tax savings can be significant, particularly regarding inherited foreign assets. Notable examples include Galician tax benefits that may extend to inherited properties overseas, such as provisions for primary residences.

Several nations maintain Double Taxation Agreements with Spain, including France, Sweden, and Greece. These bilateral treaties establish clear protocols for determining tax jurisdiction and preventing duplicate taxation on inherited assets.

Following inheritance, recipients must register foreign assets using Spain's Form 720 (overseas asset declaration). This mandatory reporting requirement operates separately from inheritance tax procedures, with strict penalties imposed for failure to comply.

The intersection of international tax agreements and Galician regional allowances creates a complex landscape for cross-border inheritances. Professional tax guidance is essential to navigate these requirements effectively, ensuring optimal use of available deductions while maintaining compliance with both regional and international regulations.

Estate Planning: Gift Tax in Galicia

An alternative to assets in a person's estate passing upon their death, is to make a gift of those assets during their lifetime. There are certain benefits to this, such as being able to specify with precision who will receive the benefit of any particular asset. However, as with any transfer of wealth in Spain, consideration must be given to gift tax, which applies to any such transfers.

The gift tax rates applicable depend on whether the gift has been declared in a notarial document, and also on the Group they belong to, based on their proximity to the donor, as follows:

Gift Tax Rates for Groups I & II, declared in Notarial Deed

Gift Tax Rates for Groups I & II - NOT declared in Notarial Deed

Gift Tax Rates for Groups III & IV

 Once the amount of tax payable has been determined, this must then be adjusted based on the existing wealth of each beneficiary, (as with inheritances) as follows:

 So, applying this to an example, if a sibling were to make a gift of, say €80,000 to their brother or sister, and that brother or sister had existing wealth of €500,000, the approximate gift tax would be calculated as follow:

gift tax for Group III on €80,000 = €9,166 x 1.6676 (coefficient multiplier for Group III with this pre-existing wealth = € 15, 285.

Galician tax law provides significant reductions for lifetime gifts ('inter vivos' transfers), offering an alternative to traditional inheritance planning. These provisions include two major tax benefits: 
 

A 95% tax reduction applies when parents gift funds to their children or descendants specifically for purchasing their first home. This benefit comes with specific qualifying criteria:

1. The recipient must be under 35 years old, unless they are a victim of gender-based violence, in which case the age restriction doesn't apply. However, in both cases, they must not own any other property.
2. There's a ceiling of €60,000 on the total amount that can be gifted to a single recipient.
3. The recipient's total taxable income (minus personal and family allowances) must not exceed €30,000 in the previous tax year.
4. The gift must be formally documented through a public deed explicitly stating that the funds are intended for the purchase of the recipient's first primary residence.
5. The property purchase must be completed within six months of receiving the gift.

A 99% tax reduction is available for the transfer of:

1. Individual enterprises
2. Professional businesses
3. Business entity shares or participations

To qualify for this reduction, the donor must either:

1. Be aged 65 or older, or
2. Have a permanent disability classified as either total or severe

This deduction allows for an efficient transfer of business assets during the owner's lifetime while minimizing tax implications. 
 

Together these gift tax reductions offer Galician residents strategic alternatives to traditional inheritance planning, potentially providing more tax-efficient ways to transfer assets to the next generation.

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