Does Spanish inheritance tax and Spanish inheritance law apply to your worldwide assets? In this guide we will explain in detail who is subject to inheritance taxes in Spain and if you need to write a Spanish will.
We understand inheritance as the set of goods, rights and obligations that a person leaves after his or her death. This set is not extinguished but transmitted with the death of the owner, and that is why it is called inheritance law.
Receiving an inheritance is not all about benefits. For some time now, the inheritance tax in Spain has been in question. This tax, of very ancient origins, is regulated by a state law, but its concrete management is up to the different autonomous communities, within the framework of the regional financing. This can result in very marked differences in the amount to be paid for the inheritance, depending on the autonomy in which the deceased resided during the last five years, as established by the legislation in general.
The inheritance tax law in Spain
The Inheritance tax is one of the main taxes paid in Spain by both residents and non-residents.
We are talking about a progressive tax paid by the person who receives an inheritance from a friend or relative; be it property, money or any other type of asset.
Although an inheritance is the most common object of this tax, there are two other conditions under which it will also apply. Those cases are:
- You accept a gift
- You receive a monetary amount derived from life insurance of any kind.
In that sense, you cannot receive the inherited assets until you pay the tax in full.
You will have 6 months in order to pay, with the possibility of requesting an extension of 183 additional days. Please note that you can also request payment in instalments.
There are two factors that can explain the difficulty of this tax: the differences with other European countries and the different laws that are applicable within the same region.
Therefore, it is worth mentioning that if UK expats will notice certain differences regarding inheritance law in Spain.
In the UK this tax is exempted when the spouse is involved in the inheritance process. This is not the case in Spain. Here, after the death of one of the two members of the couple, the survivor must pay the inheritance tax for the assets he or she receives worldwide.
Who has to pay inheritance taxes in Spain?
Inheritance tax must be paid if the heir is resident in Spain and receives an asset from abroad, or if the assets being transferred are in Spanish territory.
This means that both residents and non-residents are subject to this tax. And, in fact, they will enjoy the same rates and allowances.
In the past, the law was different for both groups. Non-residents could end up paying up to 80% more inheritance tax on assets received.
However, after a new law came into force in 2015, the situation changed completely. Now the law cannot be discriminatory: it applies to residents and non-residents alike.
Assets subject to inheritance tax for non residents
If you are a non-resident, but you receive assets in Spain through inheritance, you must take into account that you must pay inheritance tax. That is, in order to inherit the assets that a person has in Spain, the heir, although not resident in our country, must pay the corresponding tax, as well as the municipal capital gains tax, in case of inheriting real estate.
In this case, only the assets that the deceased had in Spain are taxed, not the foreign assets.
Assets subjects to inheritance tax for Residents in Spain
In the case of residents in Spain, if you receive an inheritance, either from assets that are in the national territory or abroad, you must pay for all of them in the Spanish State. Nevertheless, in this case, it will be possible to deduct from the Spanish Inheritance Tax the taxes already paid in the foreign country because of the assets abroad.
Inheritance Tax Rates And Allowances.
The exact amount that you will need to pay is calculated using a complicated formula that takes into account several factors, such as your age, place of residence, relationship with the deceased, etc. That is why our advice is to contact us and explain your specific situation so that we can provide you with the best estimation of the exact amount you’ll have to pay.
As a general rule, the closer to the deceased, the less you will pay. And that applies to both the exact percentage to be paid in terms of tax and allowances.
Here you can find the tax rates established by national law:
- With an inheritance of up to €7,993 you will pay 7.65% on the inheritance value.
- From €7,993 to €31,956: 7.65 to 10.2% on the inheritance value.
- Inheritance from €31,956 to €79,881: 10.2% to 15.3% on the inheritance value.
- From €79,881 to €239,389: you must pay between 15.3% and 21.25% on the inheritance value.
- €239,389 to €398,778: you must pay the 25.5% on the inheritance value.
- €398,778 to €797,555: 29.75% on the inheritance value.
- And finally, above €797,555: 34% on the inheritance value.
Keep in mind, that’s not the final amount you’ll end up paying. There are several allowances that will likely apply to you, and they will reduce that amount.
How can you avoid inheritance tax?
This is everyone’s favourite part: the exact amount of money you can avoid paying.
The law of succession has changed recently. And it has to be said that in this case, for worse. Before you could get a tax break of almost 100%. However, with these new updates, the tax allowances reach a maximum of 50%, and only in some cases.
Again, the exact bonus will depend on the relationship you had with the deceased. To define this number we must understand which group the heirs are in:
*Be aware that each region can change these numbers, thus differing from the general rule.
- TAX GROUP 1: This group consists of the children of the deceased, including adopted children, who are under 21 years of age.
They can obtain a bonus of 47,859 euros in total.
- TAX GROUP 2 In the second group we found children over 21 years old, grandchildren of the deceased, their parents and grandparents, and finally their spouse. If you live in regions like Catalonia or Andalusia, you are lucky. For they recognise many single couples who are registered as common law unions as members of this group. They can get an allowance of 15,957 euros.
- TAX GROUP 3: In the third group, the law recognizes brothers, nieces, nephews, aunts, uncles and their descendants and ascendants, as well as in-laws.This group receives an allowance of 7,993 euros.
- TAX GROUP 4: And, finally, the last group; the one that includes cousins, unmarried couples in those regions that do not recognize common law couples, and all other unrelated individuals (such as friends). Unfortunately, they do not receive any kind of allowance.
There are a few additional cases that can achieve a positive result anyway. People with disabilities enjoy a bonus ranging from 47,000 to 50,000 depending on the degree of disability.
In addition, you may also be entitled to a tax reduction of €100,000 if you are the child or spouse of the deceased. This allowance can be increased to €156,000 provided you are under 26 years of age.
And finally, if the inheritance corresponds to the deceased’s main residence and the heirs don’t sell it after 5 years, an additional tax allowance can be claimed.
Frequently Asked Questions on the Spanish Inheritance Tax
Do I have to pay inheritance tax in Spain?
In Spain, the inheritance tax is referred to as the succession tax, which is both an inheritance tax and a gift tax on foreign properties. The tax shall NOT apply ONLY if the properties are outside Spain AND the receiver is not resident in Spain.
What can I avoid the inheritance tax?
In Spain, you can choose to renounce an inheritance and thereby stop taking on interest, but you have to renounce the inheritance as a whole. This has to be addressed and is irrevocable by a public notary. You are not responsible for the succession tax that would have been owed if you actually renounced the inheritance.
Do I need to pay taxes if I sell an inherited property?
Yes. You pay capital gains tax depending solely on the valuation of the property as of the date of death if you inherit property and then sell it… If you have doubts about property tax you can check out this page.