Spanish Inheritance Tax – 5 Things You Need to Know

Authored by E&G Solicitors in Spain

Inheritance tax in Spain can be relatively complex compared to inheritance tax in the UK.  There are some fundamental differences that are set out below.  In addition, the nil-rate band and various other deductions vary depending upon the location of the assets in Spain. 

Hence if you are inheriting assets in Spain it is recommended that you seek expert Spanish legal advice at an early stage in order to avoid problems in the future. 

1. Current Spanish Inheritance tax rates

Depending upon where in Spain the property of the deceased is located, Spanish inheritance tax rates will vary and the total amount of inheritance tax payable will depend upon the reductions available and the relationship of the beneficiary to the deceased.

2. Inheritance Tax in Spain – How does it work?

Beneficiaries closely related to the deceased may benefit from a nil rate band.  That means that if the share of the estate they inherit is below the nil rate band, they will pay no inheritance tax in Spain. 

If inheritance tax is payable, the rate of tax depends upon the value of the assets to be inherited.  The higher the value of the assets, the higher the rate of taxation. 

In addition, each of the 17 autonomous communities in Spain are entitled to offer further reductions to the inheritance tax payable.   Many do. 

3. Inheritance Tax in Spain – Jointly Owned Property

When a property is jointly owned by two people in equal shares, a 50% share of the property will not pass automatically to the surviving owner under any circumstances.  Instead it will always pass according to the will of the deceased, or failing that according to the applicable intestacy rules.

Upon the death of one owner the administration of the estate of the deceased must be completed before the surviving owner can sell, transfer or mortgage the property. 

When the acceptance of inheritance is completed it may be that there is some inheritance tax to pay in Spain.  In the vast majority of cases a surviving spouse or a child will pay no Spanish inheritance tax, or a very small amount, as a result of the available nil rate band.

Because of this situation a number of companies exist purporting to solve this problem by advising you to form a company.  Please read our article on the subject to find out why this approach is not recommended.

4. Inheritance Tax in Spain – Brexit

Notwithstanding that the UK has left the EU, the rules regarding the imposition of inheritance tax have changed in Spain to such an extent that Brexit does not affect at all the amount of inheritance tax payable by those resident in the UK, as everyone inheriting in Spain, no matter their nationality or country of residence, is now subject to to the same rules as those resident in Spain.

5. How can Spanish inheritance tax be minimised?

When it comes to calculating the inheritance tax payable in Spain each beneficiary benefits from a nil rate band.  That means that if the share of the estate they inherit is below the nil rate band, they will pay no inheritance tax in Spain.