What is Spanish inheritance tax?
Spanish inheritance tax is a tax that is levied on the value of the assets of someone who dies when they are inherited by the beneficiaries.
Also called succession tax, the amount of inheritance tax payable will depend on a number of factors, including the relationship between the deceased and the beneficiary, the value of the estate, and the autonomous community in Spain in which either the deceased resided, or the assets were located, depending upon the circumstances.
How is inheritance tax calculated in Spain?
Inheritance tax in Spain is set by the national government and calculated using a progressive tax rate. This means that the more valuable the assets to be received by each beneficiary, the higher the inheritance tax rate will be. The inheritance tax rate can range from 7.65% to 68%, depending upon how close the relationship is between the deceased and the beneficiary ,as well as the value of the assets inherited.
There are 17 autonomous communities in Spain. Each autonomous community is able to determine the nil rate band available to family members inheriting from a deceased relative, as well as the reductions available to those family members from the tax payable.
In short, how much inheritance tax you pay almost always depends on the region in Spain in which the assets are located.
It is also important to note that both residents and non residents alike pay the same amount of tax, no matter where in the world they live. BREXIT has had no impact on this.
What are the inheritance tax thresholds in Spain?
The inheritance tax thresholds in Spain depend on the relationship between the deceased and the beneficiary, as well as the autonomous community in which the assets are situated. If the deceased is resident in Spain and most of the assets are located in the same autonomous community as that in which the deceased lived, then it will be the inheritance tax payable in that autonomous community that applies to all of the estate assets, even if some of them are located in a different autonomous community.
How can I reduce my inheritance tax in Spain?
There are a number of inheritance tax reliefs and planning strategies that can be used to reduce the inheritance tax payable in Spain. These include making use of the inheritance tax thresholds and gifting assets during your lifetime, which may include putting assets in trust, which means giving some of your assets to trustees for the trustees to look after for the beneficiaries.
Some people buy property in autonomous communities in Spain to benefit from the inheritance tax reductions available to the beneficiaries of their estate in that autonomous community. However, it is important to bear in mind that if the inheritance tax laws of another country also apply to the assets, for example if the deceased is domiciled in the UK when they die, then inheritance tax may be payable in the UK in any event. That means that any inheritance tax payable in Spain may be set off against any obligation to pay inheritance tax in the UK, effectively reducing the inheritance tax payable in the UK, but not reducing the total tax payable in the UK.
Our Spanish inheritance tax calculator can help you to calculate the inheritance tax payable on your estate.
How to pay inheritance tax and gift tax in Spain
You pay inheritance tax in Spain directly to the relevant Spanish tax office, which will depend whether the beneficiary who is liable to pay the tax is resident in Spain or elsewhere.
It is possible to ask the relevant Spanish tax office to calculate the inheritance tax payable, but that is not a task for the faint hearted as any queries may be difficult to answer and you may get stuck.
We advise using a specialist Spanish inheritance lawyer to help you through the inheritance process and navigate the payment of inheritance tax in Spain.
Gift tax in Spain
Depending on where in Spain or outside of Spain the assets are located, gift tax may be payable by the person receiving the gift within one month of receiving the gift. In any event, it is far preferable to receive the gift formally. It is highly recommended that you engage the services of a lawyer specialising in Spanish gift tax, rather than trying to work it out yourself.