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:
- Christopher Stone, Ibiza, SpainTuesday, November 06, 2018Perfect English. Complete understanding of the problem. Hints and tips. A great help.
- David W Baker, MalagaTuesday, November 06, 2018We were extremely satisfied with Alvaro: He explained the law to us and gave us a solution to our problem. He could not have been more helpful and we will definitely use him again.
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She is professional, dedicated and took care to understand the needs of my situation. Her service offers exceptional value for money and gives complete peace o...f mind.
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Also, she provides confidence and reassurance that what we are doing is in our best interests and within the law - very important when working in a foreign country.
In summary, she is an excellent professional that we are so pleased we found and will continue to use for all our legal matters.
I think you have a perfect solution for supporting people abroad. I was lucky to find you on the internet. Perhaps you could promote your services to all estate agents abroad, so more people can get access to your service when buying or selling abroad.
- Colin Wilson, AustraliaTuesday, October 30, 2018Overall it was great. Rosa always answered all questions asked and provided clear, concise and well explained answers.
When there was a delay in responding she did offer an apology which was appre...ciated. Rosa always instilled a sense of confidence that she knew exactly what was going on, what I was asking, and what the applicable law was.
When not a Spanish local and dealing with her remotely, this provided great comfort in a sensitive matter.
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She was very accomodating, quick response to everything while thinking outside the box for solutions. Also, her English was mo...re or less fluent.
- Tony Rothero, United KingdomMonday, October 22, 2018My lawyer Luis was bilingual and I was very satisfied with the service provided, particularly his prompt replies. He was very efficient.
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Also there was a ridiculous situation with my Spanish bank account where I could not access the money even though it was in the account. Thankfully I had given Juan power of attorney and he managed to sort-out the problem.
He went above and beyond the call of duty and I am very grateful for all his help. I would strongly recommend him to anyone looking to buy in the Almeria region.
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Only issue was that some of the documents I needed to provide were not mentioned. However, would defini...tely recommend his services to friends.
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Unlike American attorneys (and I know, because I am one), he didn't even bill me for a few follow-up emails/calls that he made on my behalf which... he easily could have done.
I was supremely happy with his legal services.
- David Roots, EnglandMonday, October 01, 2018We were very satisfied with the service we received. Rosa dealt with the matter in hand promptly and efficiently.
- Mrs Ruth Rettie, AustraliafemaleMonday, October 01, 2018We found Teresa to be very helpful , supplied useful information regarding getting our Fiscal number, and about getting help with purchasing a property in Portugal.
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Oscar is very competent, polite and showed a lot of effort to solve my ...problem. I strongly recommend him.
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She immediately started to communicate with me via WhatsApp which was very helpful and I could speak to over the phone to get updates any time. This was a massive contrast to o...ther lawyers I spoke to in Turkey.
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He was fluent in our phone conver...sations and email correspondence, he never misunderstood what our requirements were. He was was clear in explaining how this process works and what the price included.
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