Inheritance tax in Spain is charged differently in the regions of Spain if you are an EU resident. There have been some very beneficial inheritance tax changes this year in Andalucia. They apply when both deceased and the beneficiaries are resident in a European Union country*.
Main home relief
If certain criteria are met, there can be a reduction in the value of the deceased’s main home which depends on the ‘real net value’ of the property. The reduction depends on the value of the share of the property received by each beneficiary. The reduction is applied to the value of the property before the tax is calculated.
Up to €123,000 (value of share received by each beneficiary): 100% reduction
Between €123,000 and €152,000: 99% reduction
Between €152,000 and €182,000: 98% reduction
Between €182,000 and €212,000: 97% reduction
Between €212,000 and €242,000: 96% reduction
More than €242,000: 95% reduction
This reduction only applies if the following conditions are met:
The beneficiary inheriting the property is a spouse, ascendant or descendant, or if a more distant relative, they must be aged over 65 and who lived with the deceased for two years prior to the death.
The property has to be kept for three years after the inheritance, although it does not have to be the main home of the recipient(s).
So for example if one beneficiary receives his mother’s property worth €500,000 the value is reduced by 95% to €25,000 before you calculate the tax. Or if two children receive a property worth €240,000, each receives a reduction of €123,000 on their share so there is no taxable value at all.
Tax free allowance on inheritance
Taxable beneficiaries are divided into four distinct groups which are taxed in different ways.
- Group I. descendants and adopted children under twenty-one years.
- Group II. children and adopted children of twenty one years or more, spouses, parents and adoptive parents.
- Group III. Relatives of the second degree (brothers/sisters) and third-degree (uncles/aunts, nephews/nieces), and their ascendants and descendants
- Group IV. Relatives of the fourth degree (Cousins) and more distant relatives, and strangers (including non adopted stepchildren).
Following the changes in January 2017, Group I and II beneficiaries can receive a legacy worth €250,000 completely free of inheritance tax.
If a beneficiary receives between €250,000 and €350,000: there will be a reduction of the taxable sum by €200,000, with anything over this amount taxable at the progressive succession tax rates (from the published table). For an inheritance of €270,000, for example, only €70,000 would be taxable according to the table.
If the amount received by a single beneficiary exceeds €350,000, or if the beneficiary themselves have their own pre-existing wealth over €402,678.11 , there will be no such reduction or allowance, and the whole amount would be subject to succession tax, but the existing modest reductions from the taxable sum will continue to apply, for example, €15,956 for Group I and II beneficiaries and €7,993 for Group III beneficiaries. The reduction in the value of the family home as detailed above would also continue to apply.
This allowance is separate from the main home allowance which only applies to the family home and also applies to other assets such as bank funds and shares.
Assets outside of Spain inherited by a Spanish tax resident have to be included in the tax calculation. Indeed, any inheritance received by a Spanish tax resident can be subject to Spanish succession tax even if the assets are not in Spain and the deceased was not a Spanish resident.
*Following a European Court of Justice decision in September 2014 this allowance is now available to inheritances where the deceased and beneficiaries were resident in any EU country. If there are assets in more than one region, it is the allowances of the region where the majority of the assets were located which applies. We are not yet sure what will happen to inheritances where the deceased and/or beneficiaries are resident in the United Kingdom after it leaves the EU.
For more information contact us on [email protected] or telephone 951 315 161 and speak to our specialist in international Probate, Inheritance tax and Wills