Spanish Inheritance Tax: Regulations for Estates
Considering your estate planning or needing to claim an inheritance in Spain?
This article provides information on Spanish inheritance tax, along with details on succession laws, what happens when someone dies without a will, and the applicable tax rates.
Inheritance tax applies to both, those who reside in the country and non-residents. This tax, also known as succession tax (impuesto de sucesiones y donaciones or ISD), is a progressive tax that becomes due when an individual receives inherited assets – whether property, money, or any other form of asset – from a friend or relative.
While national regulations exist, the specifics of Spanish inheritance tax can vary significantly between the different autonomous regions. For those considering making Spain their home, it's essential to understand these rules. This guide provides an overview of Spanish inheritance tax, covering the following topics:
- Spanish inheritance legislation and succession rules
- Mandatory heirship regulations in Spain
- Spanish inheritance rules for EU expatriates
- What happens if a foreign resident dies without a will in Spain?
- Unclaimed inheritances in Spain
- Spanish inheritance tax
- Spanish inheritance tax rates
- Strategies for reducing inheritance tax in Spain
- Inheritance tax for spouses
- Tax exemptions on property
- Gift taxes in Spain
- Paying inheritance and gift taxes in Spain
- Deadlines and penalties for Spanish inheritance tax
- Guidance on inheritance tax in Spain
- Useful resources
Spanish Inheritance Legislation and Succession Rules
Spanish law outlines how your estate can be distributed. However, these regulations are not uniform across the country and depend on your place of residence. Although Spanish inheritance law originates from the national civil code, regional laws enacted by the autonomous communities lead to considerable differences in how similar estates are treated regarding inheritance tax. Catalonia, Aragon, Galicia, the Balearic Islands, the Basque Country, and Navarre have their own specific succession rules.
In the absence of regional regulations, the Spanish Civil Code is applied.
Mandatory Heirship Regulations in Spain
Several regulations govern how your estate is distributed in Spain. If Spanish inheritance law applies to your estate, mandatory heirship rules (known as the Law of Obligatory Heirs in Spain) come into effect. This means there are limitations on how you can distribute your assets, as a certain portion must be reserved for close relatives. Again, these rules differ significantly from one region to another.
Nationally, the Law of Obligatory Heirs specifies that if the deceased was married at the time of death, the surviving spouse retains 50% of all jointly-owned property. The remaining 50% goes towards the estate, which is divided into three equal parts:
- One-third is to be divided equally among all surviving children.
- A second one-third is also for the surviving children, but the deceased can specify in a will whether it is to be divided equally or unequally. The surviving spouse has the right to use and benefit from this portion during her lifetime (usufruct), and the children inherit it only upon the spouse's death.
- The deceased can have freely disposed of the last third in a will.
If there are no children, surviving parents are entitled to one-third of the estate if there is a surviving spouse, or 50% if there is no spouse. If there are no children, parents, or spouse, the deceased can leave their estate to anyone through a will made in Spain or elsewhere.
Foreign residents in Spain are limited to freely disposing of only one-third of their estate, as the remaining portion is reserved for mandatory heirs. However, if an international or Spanish will states that the laws of the deceased's home country should apply, then Spanish inheritance law will not govern either the Spanish or worldwide assets.
Spanish Inheritance rules for EU citizens
Changes in European Union regulations in 2015 have provided EU citizens residing in Spain, as well as individuals from several non-EU countries, with the option to choose whether the inheritance laws of their home country or their country of residence will apply to their estate.
Furthermore, the updated regulations concerning Spanish inheritance and gift tax ensure that non-residents from within the EU/EEA are treated in the same way as residents for tax purposes.
What happens if a foreign resident dies without a will in Spain?
If a foreign resident dies intestate (without a will) and owns any kind of property or assets, a potentially lengthy and complicated process will ensue. Spanish law mandates that the inheritance process must be completed within six months, making it crucial to contact a lawyer promptly.
If the death occurred outside of Spain, the beneficiaries of the estate will need multiple original death certificates for official purposes. If these certificates are not in Spanish, they must be officially translated and either legalized or apostilled.
To claim or manage a Spanish estate when the owner died without a will, you must apply for a grant of probate. EU citizens can typically apply for this in their own country. Again, these documents must be translated and then legalized or apostilled before they can be presented to a Spanish public notary to claim the inheritance. Your lawyer can also request confirmation from the Central Registry of Spanish Wills El Registro de Actos de Última Voluntad that the deceased did not have a will in Spain.
Generally, the key documents required include:
- Death certificate (translated and legalized)
- Legalized copy of the deceased's passport
- Spanish Tax Identification Number for Foreigners (NIE)
- Power of attorney from the heirs
- Copies of the heirs’ passports
- Birth and marriage certificates, if applicable (to prove relationships)
- NIE numbers of the beneficiaries, if applicable
- A list of the deceased's assets
- Up-to-date bank statements, if applicable
Unclaimed Spanish Inheritance
If an inheritance is not claimed, if there are no legal heirs, or if all beneficiaries refuse the inheritance, the estate will be transferred to the Spanish state.
Spanish Inheritance Tax
The Spanish General Directorate of Taxes (Agencia Tributaria), often called Hacienda) is responsible for administering inheritance tax and related allowances in Spain. This is done according to the country’s Inheritance and Gift Tax Act (IGTA), which provides a general framework for regulating these taxes. However, each autonomous region has the authority to modify the applicable tax rates and allowances within their own territories.
Unlike some other countries, in Spain, the individual who receives the inheritance pays inheritance tax on assets received after death and on gifts received during the donor's lifetime. Inherited pension funds are also subject to succession tax.
Since the implementation of new legislation in 2015, both residents and non-residents are treated equally for tax purposes regarding rates and allowances.
Spanish Inheritance Tax Rates
The national government sets the Spanish Inheritance tax rates, which are progressive and fall into the following brackets based on the value of the inheritance:
- Up to €7,993: 7.65%
- €7,993 – €23,968: 7.65 to 10.2%
- €31,956 – €79,881: 10.2 to 15.3%
- €79,881 – €239,389: 15.3 to 21.25%
- €239,389 – €398,778: 25.5%
- €398,778 – €797,555: 29.75%
- Over €797,555: 34%
Reduction of your inheritance tax in Spain
Spanish law provides several allowances that can reduce inheritance tax. These allowances vary depending on the relationship between the heir and the deceased. For inheritance tax purposes in Spain, beneficiaries are categorized into four groups:
- Group I: Children (biological and adopted) under 21 years old receive an allowance of €47,859.
- Group II: Children (biological and adopted) over 21, grandchildren, spouses, and parents/grandparents (including adoptive) receive an allowance of €15,957. Some regions may recognize unmarried partners registered as a pareja de hecho.
- Group III: Siblings, aunts, uncles, nieces, nephews, in-laws, and their ascendants/descendants receive an allowance of €7,993.
- Group IV: Cousins, all other relatives, unmarried partners (unless recognized regionally), and unrelated individuals receive no allowance.
Individuals with disabilities are entitled to an allowance of either €47,859 or €50,253, depending on the degree of disability.
Each Spanish region has the discretion to modify these tax allowance amounts. For example, Valencia, Andalusia, and Catalonia all offer significant inheritance tax reductions for spouses and children. Therefore, it is important to consult with regional authorities to determine the exact amount of Spanish inheritance tax owed.
Inheritance Tax for Spouses
Currently, there are no universal exemptions between spouses, unlike in other countries. When a married couple resides in Spain, the surviving spouse may be fully liable for inheritance tax on the deceased's worldwide inherited assets, subject to applicable deductions and reductions.
In certain Spanish regions, unmarried couples who are registered as a pareja de hecho and live together have the same legal rights as married couples. The specific term for this registration can vary by region. Additionally, in some cases, minor children may be eligible for an additional exemption for each year until they reach the age of 21.
Tax Exemptions on Property
There are also allowances related to Spanish property. The inherited value of the deceased's primary residence may qualify for a 95% reduction, up to a limit of €122,000 per inheritor. This reduction is only applicable to beneficiaries in Groups I or II, or if a relative over 65 years of age had been living with the deceased for at least two years before their death.
Furthermore, if the heirs do not sell the main residence of the deceased within five years, they may be eligible for an additional tax allowance.
Gift Taxes in Spain
The Spanish state treats gift tax and inheritance tax together. Inheritance tax is levied on any increase in wealth resulting from someone's death. Conversely, gift tax is payable on increases in wealth due to gifts from a living person. The definition of what constitutes a gift for tax purposes can be complex; for instance, allowing someone to use your property might be considered a gift. Such gifts may also be subject to personal income tax on any potential capital gains.
However, unlike Spanish inheritance tax, gift tax in Spain must be declared within 30 calendar days of the gift being made. The beneficiaries are responsible for these payments from the date the gift is received.
Gift tax is calculated based on the net value of the assets and rights involved. It is levied at the same progressive rates as Spanish inheritance tax, as detailed in the table above. The same allowances also apply to gift tax.
A specific rule applies to gifts of real estate. In these cases, the municipal tax on the transfer of real estate is also triggered, although certain exemptions may exist.
Since 2015, Spain has aligned its gift tax rules with EU regulations, offering the same fiscal advantages as other EU countries. This is particularly relevant for British nationals following Brexit, as non-EU members typically face higher tax rates with no applicable allowances or reductions. It is advisable to seek legal help for specific advice regarding your situation.
Paying inheritance and gift taxes in Spain
Spanish inheritance and gift taxes can be paid directly to the Agencia Tributaria. This can be done by completing out Form 650, a self-assessment inheritance tax return, on the authority’s website. For gifts made within the lifetime of the donor (inter vivos) gifts, it’s Form 651 that you need instead.
This tax ranges from 7.65% to 34%, but some autonomous communities have modified the values and, in some cases, the brackets have been reduced, as is the case in Catalonia. Likewise, there are other autonomous communities whose brackets are wider, for example, in Asturias they are between 7.65% and 36.50%. The amount to be paid depends on the valuation of the inherited assets, so it is a progressive tax: the more you inherit, the more you will pay. However, with the different regulations in place, it is difficult to determine the exact amount to be paid. It is highly advisable to seek the advice of a lawyer.
The tax system in some regions is quite significant nowadays compared to others. The Canary Islands, Madrid and Andalusia have the best tax system. Asturias, Catalonia and even Galicia, despite having high reductions, are among the most penalised, so the aim is to harmonise the system and tax everyone in a similar way.
Given the intricate rules governing gift and inheritance tax in Spain, it is highly advisable to consult with a specialised lawyer to act on your behalf. This can be especially useful for people residing outside of Spain.
Documentation required to pay the tax
The documentation required to present the inheritance and gift tax return to the Tax Agency is as follows:
- Death certificate. Certificate from the register of last wills and testaments, provided by the Ministry of Justice.
- Declaration of heirs or private document stating the assets of the deceased.
- Copy of the Spanish Tax Identification Number for Foreigners (NIE) of both parties.
- Certificate from the banks reflecting the current account balance and deposits at the date of death.
Deadline and Penalties for Spanish Inheritance Tax
Spanish authorities will not release an estate until all due inheritance tax has been paid. Beneficiaries have six months from the date of death to pay these taxes. However, it is possible to request a one-time extension of an additional six months or to arrange payment in installments. Taxes that remain unpaid after this deadline incur an additional 5% surcharge every three months, up to a maximum of 20%.
Failure to pay the tax or any associated penalties may result in the state seizing and selling the inherited assets.
Guidance on Inheritance Tax in Spain
As you will have gathered, Spanish inheritance laws are complex and include various potential exemptions. Therefore, whether you are planning your estate or need to claim an inheritance, it is highly recommended to consult with a lawyer.
Legal references:
Ley 29/1987, de 18 de diciembre, del Impuesto sobre Sucesiones y Donaciones
Useful Resources
You may find the following links helpful regarding tax and inheritance tax in Spain:
- Agencia Tributaria
- Spanish Tax Identification Number for Foreigners
- Spanish wills and estate planning
- El Registro de Actos de Última Voluntad
- Spain real estate: buying a property in Spain