Inheritance tax in Spain can be relatively complex compared to inheritance tax in the UK. There are some fundamental differences that are set out below. In addition, the nil-rate band and various other deductions vary depending upon the location of the assets in Spain.
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Further, depending upon whether there are assets in the United Kingdom or in other jurisdictions it may be necessary to obtain documentation in Spain to ensure that inheritance tax is not paid twice upon the same assets.
Hence if you are administering an estate of inheriting assets in Spain it is recommended that you seek expert Spanish legal advice at an early stage in order to avoid problems in the future.
Current Spanish Inheritance tax rates
Depending upon where in Spain the property of the deceased is located, Spanish inheritance tax rates will vary. Also, the amount of inheritance tax payable will depend upon the reductions available in the various autonomous regions, which in turn will depend upon the relationship of the beneficiary to the deceased.
Inheritance Tax in Spain - How does it work?
When the beneficiaries of an estate with assets in Spain are identified, whether that is set out in a will or by following the intestacy rules, each beneficiary will be entitled to a share of the overall assets. When it comes to calculating the inheritance tax payable each beneficiary benefits from a nil rate band. That means that if the share of the estate they inherit is below the nil rate band, they will pay no inheritance tax in Spain.
If the share of the estate to be inherited by the beneficiary is higher than the nil rate band, then inheritance tax will be payable. The rate of that tax depends upon the overall value of the estate. The higher the value of the estate, the higher the rate of taxation.
The value of the nil rate band depends upon the relationship of the beneficiary to the person who has passed away. The closer the relationship, the higher the nil-rate band. If there is no blood relationship or marriage between the deceased and the beneficiary, it is unlikely that there will be a nil-rate band. Spouses and children of the deceased benefit from the highest nil rate band. In addition, the autonomous communities in Spain are entitled to offer further reductions and many do.
It is vital that you seek independent Spanish legal advice in relation to Spanish inheritance tax to ensure that you benefit from all of the possible deductions in place.
Find out more about Spanish inheritance law
Inheritance Tax in Spain - Jointly owned property
It is important to note that the way property is jointly owned in Spain can affect the inheritance tax position.
When a property is jointly owned by, for example, two people who are married, in Spanish law this means that each joint owner owns 50% of the property. The property will not pass automatically to a surviving spouse, nor will it be exempt from inheritance tax.
If one owner passes away before the other the the acceptance of inheritance process must be completed before the surviving owner can sell, transfer or mortgage the property. When the acceptance of inheritance is completed it may be that there is some inheritance tax to pay in Spain. This depends very much upon the value of the property and its location in Spain. In the vast majority of cases a surviving spouse will pay no Spanish inheritance tax or a very small amount as a result of the nil rate band.
Because of this situation a number of companies exist purporting to solve this problem by advising you to form a company. Please read our article on the subject to find out why this approach is not recommended.
Inheritance Tax in Spain - Brexit
Notwithstanding that the UK has left the EU, subject to the effect of the transition period, the rules regarding the imposition of inheritance tax have changed in Spain to such an extent that Brexit will not affect at all the amount of inheritance tax payable by those resident in the UK, as everyone inheriting in Spain, no matter their nationality or country of residence, is now subject to to the same rules as those resident in Spain.
For more information on the possible impact of Brexit, please see here.
What is the inheritance law in Spain?
According to Spanish inheritance law children and parents can inherit a part of the estate of the deceased with priority over a spouse.
Does an English will revoke a Spanish will?
Clients often ask us whether it is necessary to make a Spanish will if one owns assets in Spain. Spanish law recognises a will made lawfully in any jurisdiction. That means that if you make an English will relating to all of your worldly assets, it will include your Spanish property.
Who inherits property in Spain?
In Spain, the children and the spouse of the deceased can be the forced heirs of the deceased. Because of this, even if you make a will in Spain or in the UK you may only be able to determine the beneficiaries of one third of your estate in Spain.
How can Spanish inheritance tax be minimised?
When it comes to calculating the inheritance tax payable in Spain each beneficiary benefits from a nil rate band. That means that if the share of the estate they inherit is below the nil rate band, they will pay no inheritance tax in Spain.
Inheritance Tax in Spain - Next Steps
If you are administering an estate or you are a beneficiary of an estate with assets in Spain feel free to contact us for a free initial consultation. E&G Solicitors in Spain has considerable experience and expertise in this area. You can reach us by email at info@solicitorsinspain.com, by telephone on 020 3478 1420 or by completing our contact form.
