Inheritance tax is a huge concern for anybody who owns property in Spain. It is a vast subject but I will attempt to clarify for you the basics. For more in-depth information, you will need to do further research.
Wills
Although foreign wills are valid in Spanish inheritance cases, it is advisable to have a Spanish will to avoid complications during the inheritance process. Spanish law requires that two-thirds of an estate must go to the children, as compulsory heirs. However, all British property owners can choose their heirs and this will not be challenged by forcible heirs under Spanish laws.
The most commonly used form of will is the “open will”. It is usually in double barrel column format, in both Spanish and English. This is signed before a Notary Public and is directly enforcemed without the need for grant of probate. The Notary Public will keep the original and a copy is sent to a central registry of wills in Madrid.
Who pays Inheritance Tax in Spain?
Expats resident in Spain and paying tax are liable to pay Spanish Inheritance tax regardless of the country in which the inheritance is situated. Non-residents are liable to pay Inheritance Tax in Spain only on assets which are physically located in Spain. There is no exemption on inheritance tax in Spain.
Categories of Inheritors
Inheritors fall into four categories with the allowances conceded shown in brackets::
Group 1: Descendants and adopted children under 21. The older the child, the more tax to pay (15,956.87€).
Group 2: Descendants and adopted children over 21, spouses, parents and adoptive parents (15,956.87€).
Group 3: Brothers/sisters, nephews/nieces, aunts/uncles (7,993.46€).
Group 4: Relatives in forth degree or friends (No allowances).
Calculating Inheritance tax
Once the above allowance has been deducted the Tax authorities apply the following tax rates on the remainder of the inheritance, with Group 1 paying the least and Group 4 the most.
| AMOUNT |
Percent (%) |
| 0 up to 7,993.46€ |
7.65 |
| Up to 15,980.91€ |
8.50 |
| Up to 23,968.36€ |
9.35 |
| Up to 31,955.81€ |
10.20 |
| Up to 39,943.26€ |
11.05 |
| Up to 47,930.72€ |
11.90 |
| Up to 55,918.17€ |
12.75 |
| Up to 63,905.62€ |
13.60 |
| Up to 71,893.07€ |
14.45 |
| Up to 79,880.52€ |
15.30 |
| Up to 119,757.67€ |
16.15 |
| Up to 159,634.83€ |
18.70 |
| Up to 239,389.13€ |
21.25 |
| Up to 397,55.08€ |
25.50 |
| Up to 797,555.08€ |
29.75 |
| Over 797,555.08€ |
34.00 |
Ways to avoid and minimise Inheritance Tax
- Buy jointly with future inheritors
- Sell the property to future inheritors either fully or partly.
- Take out a mortgage loan on the property.
- Organising life insurance ensuring adequate funds to cover the Inheritance Tax bill.
- Buying or owning through a Spanish limited Company
- Buying or owning through an EU company
- Buying or owning through a UK limited company
Again, this is a very basic but uncomplicated guide to Inheritance Tax. For a more in-depth guide, you will need to investigate the subject further and get professional financial advice.