How much is Inheritance Tax in Spain?
By John Hayward
This article is published on: 23rd October 2014
There are two sets of rules that could apply; 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 or your estate is treated. These include;
- Your relationship to the deceased or the beneficiaries.
- Country and/or region the different parties are resident.
- 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.
- Basic allowance of €15,956.87 for those who qualify.
- 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.
- 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.
- €100,000 allowance for each qualifying individual. The allowance is more for younger children.
- 75% reduction on the final tax bill.
Example (Husband (deceased) and wife resident in Valencia)
Main residence value €350,000
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 75% (as she is resident) giving a net tax bill of just over €2,000.
For a non-resident, the tax bill would be around €23,000.
This is a simplified example but it illustrates the enormous difference in tax treatment for residents and non-residents. For a resident couple, there is not likely to be a huge potential tax bill. The problem comes after this when the non-resident children and grandchildren inherit. Spain is under pressure to equalise the rates charged for residents and non-residents and there could be changes in 2015.
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, contact your local adviser.
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