Inheritance tax has been effectively delegated by the central government to the autonomous communities in Spain which has allowed the regional governments to set the exemptions that can be claimed by beneficiaries. However, it is important to note that many of the Spanish regions have enacted legislation which requires residency in the area to benefit form the exemptions.
This obviously prejudicially affects those who are ordinarily non-resident such as foreign nationals with property and their non-resident heirs. The legislation has caused a great deal of confusion and has in fact been condemned by the European Commission who have informed the Spanish government that the legislation must be changed.
The standard response to this has been that the rules discriminate equally against non-resident Spanish as well as other community nationals and so is not discriminatory – at least as between European community nationals. It remains to be seen how the Spanish government will respond to the European Commission.
Exemptions are available from the central government and which apply regardless of whether the beneficiary is resident or not. For transfer of assets via inheritance, the following exemptions apply:
For the purposes of determining the proximity of a relationship to the deceased, the legislation dealing with Gift and Inheritance Tax in Spain (Ley 29/1987) considers there to be four categories or groups:
Group I – Children, including adopted children, under the age of 21
Group II – All other children, spouses and parents
Group III – close relatives such as brothers and sisters, grandparents, aunts and uncles
Group IV – more distant relatives
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