Inheritance tax reductions Andalucia

Filed under : Conveyancing & Property Law, Tax Planning - Inheritance, Wills, Probate & Inheritance

As a result of recent inheritance tax changes Andalucia is now one of the most attractive places in Europe to buy property. Not only due to its wonderful climate, culture and beaches but also to a very favourable inheritance tax regime.

Until relatively recently one of the main disadvantages of buying a property or holiday home in Spain was the high level of inheritance tax in Spain and the lack of an exemption for spouses and low exemptions.

There have been several beneficial changes in the last few years, the latest of which is the recent judgment of Spain’s supreme court in February 2018 – Supreme Court decision 242/2018.

Spain has many autonomous regions all of which have different inheritance tax allowances, some more generous than others. Previously these allowances were only applied when both the deceased and the beneficiaries are officially resident in Spain.

In the case of residents, the tax rules of that particular region applied. If either the deceased or the beneficiary is non-resident then the State inheritance tax rules applied. This includes cases where Spanish residents receive an inheritance from outside of Spain. This meant that non-resident beneficiaries often paid much more inheritance tax than residents would. This was changed in 2014 by a European Court of Justice ruling (C-127/12) which held that the regional allowance where the deceased had the majority of their assets in Spain will apply as long as the beneficiary was resident in the European Union.

This was good news for people resident in Spain or who owned properties in Spain as their beneficiaries now received the regional allowances as long as they resided anywhere in the European Union. It wasn’t so good for beneficiaries who resided in countries outside of the EU such as the United States, Australia etc. And we had thought it would adversely affect beneficiaries living in a post-Brexit United Kingdom.

However, the Supreme Court of Spain has now declared that the allowances will apply to any beneficiary wherever they may reside. This will include British citizens after Brexit.

Added to this, Andalucia at the start of 2018 has massively increased the inheritance tax allowance for a spouse, child, parent or grandchild of a deceased person to €1,000,000 per beneficiary. Which means someone with a spouse and 3 children could leave an estate of up to four million to them completely free of inheritance tax.

Jon Sutton is a practising English solicitor and is registered with the College of Lawyers in Malaga and specialises in English & Spanish wills & Probate. Contact us by telephone on 952 527014 or by email        [email protected] or [email protected]