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!
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 independent 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.
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.
To be added to the list is free on a no-win-no-fee basis. 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.
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.
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 individual law firms by going to our: lawyer locator section.
Client reviews of our legal services, as uploaded by clients directly to the Wufoo survey platform:
- Caroline R, BarcelonaTuesday, April 24, 2018Miguel has been great!
His English is excellent, he explains everything clearly, emails when he says he will, and is very efficient in the service he provides.
I'd definitely recommend him to ...friends.
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He also assisted me by advising of the most suitable area according to my needs. His com...mitment and dedication is excellent.
Jose Antonio was very easy to approach and happy to help in any way he can.
I will definitely recommend him to my family and friends.
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I am so blessed I got Rosa to help me I co...uldn't have gotten a better lawyer she's the best.
Thank you Rosa from the bottom of my heart you are a wonderful person, I am so grateful to you.
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- Julie Smith, TorrellanoFriday, April 20, 2018I can't compliment my solicitor enough.
From our initial meeting right through to my ultimate divorce (with no unpleasant surprises the entire duration of the entire process), he immediately respo...nded to my many enquiries, always had mine and my daughter's best interests at the forefront of any considerations and was well worth every penny of his extremely reasonable fee.
Excellent value for money, totally approachable and very professional and understanding. I highly recommend him and will continue to retain his services for other matters in the future.
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- Vicky S, UKTuesday, April 17, 2018Alvaro answered my emails and all my questions efficiently and helped me were I did not understand through the whole process of moving the tenant and selling the property and arranging and introducing... an estate agent.
He has exceeded my expectations after being let down by previous lawyers in Spain when its been a very traumatic time for me.
- Pernilla, LondonFriday, April 13, 2018We had excellent service from Esther at Advocate Abroad when buying a property in Las Palmas, Gran Canaria.
Esther speaks both Spanish and English, and is very friendly, professional and genuine. ...She took care of the whole purchasing process and explained all the steps for us, including giving advice on Spanish bank account, NIE numbers etc.
We are very pleased with all the help we have received and can highly recommend Esther. Thank you so much!
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- ESP, LondonWednesday, March 28, 2018Cristina was extremely helpful, she couldn't have done more. Her English is sufficient and I would definitely recommend her to friend.
- L Marshall, LondonWednesday, March 28, 2018Rosa was excellent. Very efficient and professional.
Responsive and always available. Extremely helpful - we did not understand the process and she guided us through.
We would not hesitate to ...recommend her.
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- A. Kavanagh, GlasgowThursday, March 15, 2018Miguel provided a great service and fully explained to me about the procedures with tax & business registration. My emails and questions where always answered straight away with an immediate response ...or solution.
Very helpful and very friendly I would definitely recommend to anyone considering using Advocate Abroad
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This was a big move for me and Rosa fully explained everything to me in detail so I had a full and clear understanding of the lega...l side of things as well as always promptly responding to any emails or questions I had.
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Great service could not be happier.
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Many thanks to him for his high level ...of service.
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He consulted with my lawyer in the UK and explained to her what needed done. Without him the situation would not have be...en resolved. He was very understanding and I would have no hesitation whatsoever in recommending him. Outstanding.
- M Pearce, MarbellaMonday, March 05, 2018Miguel was extremely helpful, he couldn't have done more:
Always kept us updated on the progress of our purchase
Always responded to emails in a professional and timely manner
Always explained to... our understanding all aspects of the legalities about the purchase
Very approachable,courteous and professional
So much better to deal with than UK property lawyers!
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The tasks were completed to the highest standard and would definitely use her services again in the future. All correspondence was received in a ...very timely manner. Highly recommended.
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...Miguel is now acting as my fiscal representative in Spain and I plan to continue to use his firm's services for all my tax requirements.
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Juan explained the plus and the negatives on various subjects and allowed us to make up our own mind.
I have already recommended him to our fri...ends.
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I wouldn't hesitate to use Rosa in the ...future for any legal issues I have.
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I have continued to use Anna since my firs...t meeting as I trust her judgement and know that she will look after my best interests.