How much is Inheritance Tax in Spain?

 john.hayward@spectrum-ifa.com or call me on (+34) 96 558 7633.ID-100126560

There are two sets of rules that could apply to Spanish Inheritance Tax; one by the autonomous region and one by the State. For these purposes I will focus on my region, the Valencian Community, which covers the provinces of Castellón, Valencia, and Alicante.

There are several factors which determine how you and your estate are treated. These include;

  1. Your relationship to the deceased or the beneficiaries.
  2. Country and/or region the different parties are resident.
  3. How much pre-existing wealth the beneficiary has.

Unlike the UK, where the total estate of the deceased is taxed after allowances, in Spain it is the individual inheritor who is taxed. A Spanish resident who inherits could be liable to tax on the worldwide assets of the deceased. A non-resident would only be liable to tax on Spanish sited assets.

State rules

  1. Basic allowance of €15,956.87 for those who qualify.
  1. 95% reduction on the value of the main residence (max. €122,606.47). The property cannot be sold for 10 years from the date of death to retain this reduction. If sold within 10 years, the tax will be recalculated. This reduction only applies to married couples and close family.

Valencian Community rules

If you are resident in the Valencian community you, or your beneficiaries, can benefit from much higher allowances and less restrictions.

  1. 95% reduction on the value of the main residence (max. €150,000). This cannot be sold for 5 years from the date of death to retain this reduction. If sold within 5 years, the tax will be recalculated. Again, this reduction only applies to married couples and close family.
  1. €100,000 allowance for each qualifying individual. The allowance is more for younger children.
  1. 75% reduction on the final tax bill.

Simplified example (Husband (deceased) and wife resident in Valencia)

Main residence value                                 €350,000ID-10097428

Wife inherits husband´s half                       €175,000

less 95% reduction (up to €150,000)           €142,500

Net value                                                  €  32,500

less Tax allowance                                    €100,000

Result?                                                NO TAX TO PAY*

If the property was sold within 5 years, or the wife did not want the restriction of having to keep hold of the property for 5 years, the tax bill would work out to about €8,500. However, this would then be reduced by 50% (as she is resident) giving a net tax bill of just over €2,000.

For a non-resident, the tax bill could be around €26,000 if no allowances or reductions are applicable.

This is a simplified example and there are other factors to take into consideration such as the deemed value of household contents (ajuar). However, it does illustrate the enormous difference in tax treatment. For a resident couple, there is not likely to be a huge potential tax bill. Now non-resident beneficiaries can benefit from the same allowances if they live in the EU (subject to relationship to the deceased).

If you would like to know how much inheritance tax you or your loved ones could be obliged to pay, and look at ways at reducing or even negating the tax, send an email to john.hayward@spectrum-ifa.com or call me on (+34) 96 558 7633.

Please note that these rules are subject to alteration. We are not employed as tax advisers.

*There could be capital gains tax to pay.

Source: Generalitat Valenciana (More information)