Inheritance Tax in the Valencia Region

Author: Francisca E.

Profession: Lawyer

Completed cases: 92

Francisca is an expert in Spanish property and probate law with over 15 years of experience. Fluent in English, she guides clients through the complexities of Spanish probate law in the Valencia region with ease.

View Francisca's full Bio

Author: Francisca E.

Francisca is an expert in Spanish property and probate law with over 15 years of experience. Fluent in English, she guides clients through the complexities of Spanish probate law in the Valencia region with ease.

Speaks languages:

View Francisca's full Bio

Dealing with Spanish inheritance tax in Valencia can be overwhelming for expats. Here we provide you with an overview of the most important aspects of inheritance tax in Valencia, useful for English-speakers who - more and more - area having to deal with this issue, following a huge increase in foreign residents in the area.

Want to hear what other clients
are saying about us?

E x c e l l e n t !

See our Independent reviews

4.8

457

ratings

4.8

457

ratings

Consult an Expert

Like other autonomous regions in Spain, the Valencian Community has established its own inheritance and gift tax framework. The regulations, specifically Law 13/1997 and, more recently, Law 6/2023 - as well as Spanish Law 26/2014  - detail the main provisions relating to inheritance tax in Valencia and furthermore recognize and treat equally registered civil partnerships (parejas de hecho) as married couples, provided they are registered in Valencia's Registry of Civil Partnerships or equivalent registries in other EU member states, EEA countries, or third countries.

Tax Exemptions and Deductions in Valencia

The Valencian tax system offers a comprehensive range of reductions and exemptions designed to minimize the tax burden on inheritors, particularly for close family members and vulnerable groups. These deductions vary significantly based on the relationship to the deceased, the type of assets being inherited, and specific circumstances such as disability or age.

 A notable feature of Valencia's system is its generous treatment of business assets and agricultural properties, with reductions of up to 99% available under certain conditions. 

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

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

The following are the additional deductions available in Valencia:

• Group I: €100,000, plus €8,000 for each year under 21, with a maximum limit of €156,000
• Group II: €100,000

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. 

As an example, an inheritance of €10,000 (after all other deductions applied) would attract inheritance tax of €611.50 (tax applicable up to €7,993.46) + remainder up to €10,000: €2006.54@ 8.5% = €782.06.

The following are the additional deductions available in Valencia:

• Group I: €100,000, plus €8,000 for each year under 21, with a maximum limit of €156,000
• Group II: €100,000

In Spain, inheritance tax accrues to the individual beneficiary, and as a result, in order to calculate the inheritance tax payable, it is necessary to take into account the both the existing personal wealth of the beneficiary and the group of beneficiaries (as defined above) that they belong to. In Valencia, the coefficients are as follows.

To take the previous example of an inheritance of €10,000, if the beneficiary is the sibling of the deceased, with existing wealth (including all assets) of €1,000,000, then as a sibling they would be in Group 3 and with an existing wealth as stated, a multiplier of 1.6676 would be applied to the inheritance tax payable i.e.  €782.06 x 1.6676 = €1,304.16.

Want to hear what other clients
are saying about us?

G o o g l e reviews

222 reviews

4.7

4.7

Consult an Expert

In Valencia Region, there is a 99% rebate on inheritance tax adjudged to be payable by beneficiaries in Groups I and II (children, spouses and parents). This also applies to registered civil partnerships.

A similar 99% rebate applies to beneficiaries with physical or sensory disability of 65% or more, or with psychological disability of 33% or more.

The Balearic Islands offer specific deductions for disabled beneficiaries:

• €120,000 for those with a physical or sensory disability between 33% and 65% 
• €240,000 for those with a physical or sensory disability of 65% or more, or a mental disability of 33% or more

A 95% deduction applies to the acquisition of the main residence, with a limit of €150,000 per beneficiary provided that:

• The beneficiaries are spouse, ascendants, descendants, or relatives over 65 who lived with the deceased for the two years before death
• The property must be maintained for 5 years following the acquisition

When inheriting the family home in Valencia, it's worth carefully considering the declared value of the property when applying the generous inheritance tax reductions that are normally available to direct family members like parents, children, aunts, and nephews - especially if the inheritance tax amount is relatively modest.

Here's why:
If you're a non-resident planning to sell the inherited property later, the capital gains tax (fixed at 19% for non-residents) could potentially result in a higher tax burden than what you would have paid in inheritance tax without the reductions.

So, by declaring a low value for the purposes of reducing inheritance tax, while you benefit from lower inheritance tax, you are storing-up a larger capital gains tax for later, when you seek to sell the property (at the market value).

Obviously, this is particularly relevant for non-resident inheritors who plan to sell the property rather than keep it. We recommend discussing your specific situation with a qualified tax advisor to determine the most advantageous approach for your circumstances.

(Also, don't forget that that the special rebate available to family members when inheriting the family home of the deceased requires that the beneficiaries maintain ownership of the property for a minimum of 5 years).

There is a 90% reduction (where the deceased is between 60-64 years old at the time of death) and 99% reduction (if the deceased was over 65 years old at the time of death) applied to the acquisition of an individual business, professional practice, or shares in companies when:

• The business was the main income of the deceased
• Assets must be maintained for 5 years
• Where there are no descendants, ascendants and collateral relatives up to the third degree may apply the reduction

• 95% reduction for entities involved in cultural patronage, where the rights have been ceded for 20 years
• 75% reduction for entities involved in cultural patronage, where the rights have been ceded for 10 years
• 50% reduction for entities involved in cultural patronage, where the rights have been ceded for 5 years

• 100% reduction on amounts received by beneficiaries of life insurance policies, with a limit of €9,195
• This applies when beneficiaries are spouse, ascendants or descendants
• The same deduction applies to amounts received from life insurance that accrues in acts of terrorism and from public services provided in international humanitarian or peace missions

Tax residents in the Valencia Region who inherit assets located abroad must navigate both Spanish inheritance tax obligations and international regulations. This is particularly relevant for the substantial international community in areas like the Costa Blanca.

Valencia's generous regional deductions and rebates can apply to foreign inheritances, potentially reducing the tax burden significantly. However, careful attention must be paid to qualifying conditions, especially regarding business assets and main residences located outside Spain.

Spanish double taxation agreements with certain EU countries may affect how the inheritance is taxed. Additionally, inherited foreign assets must be reported on Form 720 after the transfer of ownership is complete. Given the interplay between Valencia's regional tax benefits and international regulations, seeking professional guidance is essential for cross-border inheritances.

As a beneficiary of an inheritance in Valencia, you will need to take some or all of the following steps in order to process an inheritance. Given the complexity and potential taxes and fines if not processed correctly, it is highly advisable to contact a specialist in probate law for assistance:

• Obtain the Death Certificate
• Secure the Certificate of Last Wills
• Locate the Will
• Gather Necessary Documentation
• Obtain the NIE Number for Heirs
• Assess Applicable Inheritance Law
• Prepare the Inheritance Deed
• Pay Inheritance Taxes
• Settle the Plusvalía Tax
• Register the Asset Transfer

The Valencia Region offers significant tax advantages for lifetime gifts between close family members, making it an attractive alternative to inheritance in certain circumstances. However, careful planning is essential as the tax implications can vary considerably based on the type of assets and the relationship between donor and recipient.

Firstly, it should be taken into consideration that gifts in Valencia are also subject to tax, as follows:

Key Benefits:

• 99% tax rebate for gifts between parents, children, and spouses
• Additional benefits for gifts of business assets and agricultural properties
• Special provisions for the disabled

Documentation Requirements:

• Gifts must be formalized in public documents i.e. via notary
• For monetary gifts, the origin of funds must be documented
• Tax must be paid within 30 days of the gift date

Local Tax Considerations: As with all Spanish property transfers, municipal Plus Valía tax applies to gifted properties. The tax is calculated based on:

• The property's cadastral value
• Length of ownership
• Local municipal rates
• Must be paid at the time of transfer

Given the complexity of Valencia's gift tax regime and its interaction with other local taxes, professional advice is recommended before proceeding with significant gifts, especially those involving real estate.

Want to hear what other clients
are saying about us?

E x c e l l e n t !

See our Independent reviews

4.8

457

ratings

4.8

457

ratings

Consult an Expert

Has Valencia abolished inheritance tax?

Inheritance tax in the Valencia region of Spain has been effectively abolished for immediate family members. A 99% tax reduction now applies to inheritances and gifts between spouses, parents, children, and grandchildren. This substantial tax relief, introduced to ease financial burdens, makes most family transfers virtually tax-free. However, it does not apply to more distant relatives, who remain subject to standard tax rates.

How much can you inherit tax free in Spain?

In Spain, beneficiaries of an estate are entitled to a tax-free inheritance allowance, which depends on their relationship to the deceased. These allowances typically range from €7,993 for distant relatives to up to €47,859 for direct descendants under 21. If the inheritance falls within your personal allowance, no tax will be due. Regional variations may apply, so it’s essential to check the rules in the specific autonomous community where the estate is located.

How to avoid inheritance tax in Spain?

A common strategy to avoid inheritance tax in Spain is to transfer assets as gifts during your lifetime. Spain's gift tax (Impuesto sobre Donaciones) can be significantly lower than inheritance tax, especially if you take advantage of regional exemptions and tax reductions. Careful planning, such as timing the transfer and consulting a tax advisor, ensures compliance with Spanish tax laws while minimizing the overall tax burden.

What is the inheritance tax in Spain 2024?

In Spain, inheritance tax rates in 2024 vary by region and follow a progressive structure. For example, in Andalucía:

1. Up to €7,993, the tax rate is 7.65%
2. Between €7,993 and €31,956, the rate increases progressively from 7.65% to 10.2%

Tax rates and deductions differ significantly across regions, with many offering reductions or exemptions for immediate family members. It’s advisable to check specific regional regulations or consult a tax expert to understand applicable rates and benefits.