Inheritance Tax Spain: General Principles

 

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 :

  • Property,
  • Vehicles,
  • Cash,
  • shares,
  • 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 Exemptions

  • 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:

 

 

 

State Exemptions

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:

 

deductions
 

Group Definitions

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

 

Example

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.

 

Other Deductions

A number of other exemptions exist at the state level. These include:

Disabilities

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.

 

Regional Deductions

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 Testimonials

Client reviews of our legal services, as uploaded by clients directly to the Wufoo survey platform:

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    Christopher Stone, Ibiza, Spain
    Tuesday, November 06, 2018
    Perfect English. Complete understanding of the problem. Hints and tips. A great help.
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    David W Baker, Malaga
    Tuesday, November 06, 2018
    We 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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    Thom Koller, London
    Monday, November 05, 2018
    Francisca provided a perfect service!

    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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    Michael O'Sullivan, Ibiza
    Thursday, November 01, 2018
    Understanding Spanish law regarding buying and selling properties is a minefield for English speakers. Cristina provided the legal expertise, the translation of legal documents, explanations for all i...ssues, and solutions for our challenges.

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    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.
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    Colin Wilson, Australia
    Tuesday, October 30, 2018
    Overall 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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    Mohammed Muzamil Husain, Riyadh Saudia Arabia
    Wednesday, October 24, 2018
    My lawyer Joao was extremely helpful and I was very satisfied with the outcome. I would definitely recommend his services to friends.
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    Campbell Reynolds, Spain
    Monday, October 22, 2018
    We were very satisfied with the service provided by our lawyer Sabela.

    She was very accomodating, quick response to everything while thinking outside the box for solutions. Also, her English was mo...re or less fluent.
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    Tony Rothero, United Kingdom
    Monday, October 22, 2018
    My 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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    David Edwards, England
    Wednesday, October 17, 2018
    Very Satisfied with the service provided by Oliver. He was quick, efficient and value for money. Would definitely recommend to friends.
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    Andrew Morecroft, Lubrin
    Monday, October 15, 2018
    Juan was extremely helpful during every part of the purchase. As I was buying an older property there were slight complications but Juan explained every issue and managed to work through the difficult...ies with supreme efficiency.

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    Brian Abram, Totana
    Saturday, October 13, 2018
    Excellent service around super quick and a good price: 5*.
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    Saturday, October 13, 2018
    Jose-Antonio was extremely helpful and prompt and also it was helpful that he could be contacted via social media like Whatsapp
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    Michele Jansen van Vuuren, Benajarafe
    Saturday, October 13, 2018
    Alvaro was extremely helpful, he couldn't have done more. Very quick to respond to my query.

    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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    Friday, October 12, 2018
    Good understanding. Applied sufficient pressure as needed to get the issue resolved. Reasonable charge for service provided. Would definitely recommend this service to friends.
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    Rosemarie Byrne and John Cooper, Dublin Ireland
    couple
    Tuesday, October 09, 2018
    We found Francisca extremely helpful with a great amount of knowledge about buying a house and re-locating to Spain.
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    Jane Evanson, London, UK
    female
    Tuesday, October 09, 2018
    Francisco was very helpful and professional. I was very happy with the advice and service.
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    David McChesney, Puerto Banus
    Wednesday, October 03, 2018
    Alvaro was very professional, Knowledgeable of the subject at hand, did not over-charge - in fact cut costs in the best way for me. Very efficient in the entire process. Thank you.
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    Martha Kimes, Scottsdale, Arizona USA
    female
    Tuesday, October 02, 2018
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    I was supremely happy with his legal services.
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    David Roots, England
    Monday, October 01, 2018
    We were very satisfied with the service we received. Rosa dealt with the matter in hand promptly and efficiently.
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    Mrs Ruth Rettie, Australia
    female
    Monday, October 01, 2018
    We 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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    David Knors, Barcelona
    Wednesday, September 26, 2018
    Oscar was very kind, professional and fair. He was able to help me with my problem and he was very determined that he would.

    Oscar is very competent, polite and showed a lot of effort to solve my ...problem. I strongly recommend him.
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    Tuesday, September 25, 2018
    Luis was very professional , did a lot of efforts , called us many times, so very approachable and really value for money! I would not know what he could do any better!
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    Tauri, Estonia
    female
    Tuesday, September 25, 2018
    Very satisfied with the service. Francisco is bilingual English-Spanish and was always quick to respond and was very professional at all times.
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    Mohamed kheder, Dublin, Ireland
    Monday, September 24, 2018
    Every thing was great ... Rosa was really helpful and understanding. And I see the value for money was good enough.. of course I would recommend it to any of my friends.

    And I would like to have th...e chance to thank Rosa and the whole company for everything.
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    Ritchie Ross-Forrester, London
    Monday, September 24, 2018
    Kubra was fantastic.

    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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    Daniel Elias, New York
    Tuesday, September 18, 2018
    Excellent service, delivered exactly as promised, and at half the cost a different translator had requested for the same project!
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    Darren & Gemma Nesbitt, Valencia
    Tuesday, September 11, 2018
    Inmaculada has been of excellent service to us, as a family and in helping to set up a business in Spain. She has now undertaking several project for us and has delivered high quality on all of them. ...Perfect service!
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    Patsy Valentin, Granada
    Tuesday, September 11, 2018
    Extremely accommodating and highly professional and very pro active. Excellent result and service. Highly recommended.
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    Jovie, Malaga
    Wednesday, September 05, 2018
    My lawyer Alvaro was extremely helpful and very efficient. I would definitely recommend his services to friends.
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    Albert Roldan, France
    Tuesday, September 04, 2018
    Alfonso was extremely helpful, particularly since we requested a quick turnaround for the 18 documents needing to be translated from English and French to Spanish.

    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.

    I would highly recommend him to anyone needing these services.
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