An Overview Of Inheritance Tax in Spain
In Spain it is a standard practice to apply the law of a person’s nationality to any wills made with regard to their Spanish assets.
However, this does not mean that inheritance tax is also determined in this way. Spanish inheritance tax must be paid in Spain where Spanish assets are involved.
It is therefore important to understand how these laws operate as they can have a serious economic impact on a family’s wealth.
This can be important where for example a beneficiary wishes to sell an asset. In order to do so, the beneficiary will need to demonstrate proof of payment of due taxes before being able to pass good title.
How Is Spanish Inheritance Tax Applied?
Inheritance tax is payable on all bequests of assets including :
- bonds, and
- any cash paid out by the maturity of a life insurance policy
The amount payable is the net amount after deductible costs and charges. Admissible costs and charges would include:
- Social Security Debts,
- Tax Debts,
- Outstanding Mortgage Debt,
- Health Care Expenses,
- Funeral Costs
Not included would be debts owed to any of the beneficiaries even though they chose to turn down the bequest.
Factors That Determine Spanish Inheritance Tax
The first major difference between Spanish inheritance tax and elsewhere is that in Spain the tax payable is determined with reference to the heir or beneficiary rather than merely considering the size of the estate itself.
Whereas in the UK inheritance tax is only payable where the threshold (currently £325,000) is exceeded and there is no need to consider any other factor if the estate is valued below this, in Spain the following factors are important:
- Tax Rates,
- The Wealth of the Beneficiary
- The proximity of the relation of the beneficiary to the deceased,
- Funeral Costs
It should be pointed out that, at a state level, no exemption exists for spouses as is the case in other countries. A couple would often be considered to own half of a property each. Upon the death of one of the spouses the surviving spouse is considered to have inherited the other half (if this is provided for in the will).
Tax Exemptions At State Level
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.
Previously, many of the Spanish regions enacted legislation which required residency in the region before beneficiaries might benefit from the exemptions. This situation has now changed, finally allowing foreign EU citizens to benefit from the same generous deductions previously only available to local residents. For an overview of the regional tax exemptions available view the relevant section under Spanish Inheritance Law by Region.
However, non-EU citizens must continue to avail of the less generous ‘state level’ tax deductions. Below is an overview:
Before looking at the regional exemptions we can look at the exemptions available from the central government and which apply regardless of whether 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
A 16 year old child who inherits from her parents falls into Group I and so may claim an exemption of
€15,956.87 + (€3,990.72 * 5) = €19,953.60 to give a total exemption of €35,910.47.
A number of other exemptions exist at the state level. These include:
In addition to the above exemptions, should any beneficiary be disabled, further exemptions ranging between €47,858.59 and €150,253.03 are available.
Life Insurance Policies
If the deceased took out a life insurance policy in favour of a beneficiary there is an exemption up to the value of €9,159.49 where the beneficiary is a spouse, child or parent.
The Family Home
An exemption also exists for tax payable on the permanent or habitual residence. This exemption applies equally to spouses, children and parents of the deceased at a rate of 95% of the value of their inherited portion of the property up to a maximum value of €122,606.47 each.
An important proviso exists in that the property may not be sold for a period of 10 years after the inheritance.
Other relatives further removed, may also benefit from this exemption but must have been living with the deceased in the property for a period of at least two years prior to the date of death.
The Spanish regional governments’ inheritance tax deductions tend to me more generous than the state level deductions. For example there are often almost 100% deductions available to spouses and children ,relating to the the primary family home and businesses. For an overview of the regional tax exemptions available view the relevant section under Spanish Inheritance Law by Region.
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.
- George Salib, LondonMonday, April 23, 2018Jose Antonio was very professional and has assisted me in every step of the purchase of my flat in Alicante.
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.
- Liezl Pulido, PhilippinesMonday, April 23, 2018Rosa never stopped working very hard, she went way above what she needed to do...she never gave up on me and always did more than I thought anyone would.
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.
- KJB, United KingdomFriday, April 20, 2018Francisco was professional and efficient. Very good value for money.
- 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.
- SH, EnglandFriday, April 20, 2018Very satisfied with the service provided. Miguel was approachable and prompt in replying.
- 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!
- David Pratt, Alhaurin del GrandeFriday, April 13, 2018Alvaro gives me confidence that he understands the issue and gives me practical solutions. He works rapidly and efficiently. I would strongly recommend his services.
- 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.
- Phil Loughton, Las Lagunas de MijasTuesday, March 20, 2018Alvaro was extremely helpful and the simple process I needed managed was dealt with quickly and efficiently. I would certainly recommend him to friends.
- John Burchell, Arroyo De la MielTuesday, March 20, 2018Alvaro was very professional, helpful and friendly. Understood things quickly. Explained things well in English. Very easy to contact at any time.
- 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
- Robert Davies, MallorcaMonday, March 12, 2018Very supportive and clear on producing a suitable divorce settlement. Efficient, understanding and professional.
- A.Kavanagh, GlasgowFriday, March 09, 2018Rosa was exceptional at helping me setting up my business abroad.
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.
I couldn’t of asked for a better lawyer and I would 100% recommend Rosa to anyone who is deciding to move abroad.
Great service could not be happier.
- Adam Clark, TenerifeFriday, March 09, 2018Oliver was very professional. He explained things very clearly and honestly at all times and in the end we got the best result possible in my particular case.
Many thanks to him for his high level ...of service.
- Patrick Martel, CanadaWednesday, March 07, 2018For being in another country and all our back and forth communicating over emails .. I thought Rosa did a brilliant job. Thankfully she was able to help where no one else was willing ..
- Robert Scott, UKWednesday, March 07, 2018First class service. Rosa's professionalism, advice and patience were all exemplary! Keep up the good work. Will certainly recommend the service to friends!
- Martina, PlymouthMonday, March 05, 2018Erardo was fantastic and helped immensely during a very difficult situation.
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!
- Tony, LondonWednesday, February 28, 2018The service I received from nada was very helpful.
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.
- Holly, LanzaroteFriday, February 23, 2018The divorce process could have been explained more clearly and accurately so that a more realistic time for completion can be attained.
- Julia Alcock, Puerto Rico, Gran CanariaThursday, February 22, 2018Esther was very friendly and approachable. She was professional and answered any questions I asked. We would definitely use her again in the future.
- Tamara Malcolm, MallorcaTuesday, February 20, 2018Rosa was and is extremely knowledgeable and helpful. Her advice was excellent and i will definitely be using her expertise again in the future.
- Nick Nicolaou, OviedoTuesday, February 20, 2018Very Satisfied with Miguel's work. He was very helpful and we would definitely use his services again in the future.
- Gavin Jones, UKMonday, February 19, 2018It was a real pleasure to have Miguel working on my behalf to file my non-resident taxes. He was extremely helpful, gave reassuring advice and I had a high level of confidence in the transactions.
...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.
- Martin Hickey, BenidormSunday, February 18, 2018Very friendly and knowledgeable and professional.
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.
- Andrew Bullen, UKFriday, February 16, 2018Rosa was very professional at all times when dealing with me. Her English was second to none and she always kept me informed of progress via email promptly.
I wouldn't hesitate to use Rosa in the ...future for any legal issues I have.
- Tamara Reeves, AustraliaThursday, February 15, 2018Anna was very knowledgeable and had prior experience dealing with English clients. She spent a lot of time explaining information and I was never rushed.
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.