Spanish Inheritance Tax
This information has been prepared by Sykes Anderson Perry Limited as a general guide only and does not constitute advice on any specific matter. We strongly recommend that you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of any information or advice given or omitted
In Spain IHT is paid by the beneficiaries on the share of the estate passed to them. The regional governments legislate on the rate of tax, exemptions, credits, etc. Therefore, the amount of tax due varies from one region to another, the inheritance tax paid in Andalucia and Madrid can vary dramatically
The Spanish IHT is a progressive tax; the more you inherit the higher rate applies. Other relevant factors that the Revenue will take in consideration will be the relationship between the deceased and the beneficiary and the beneficiary’s wealth at the time of inheriting the assets.
Who is liable to pay Spanish IHT?
Personal obligation: when the beneficiary of an estate is a Spanish tax resident (183 days or more) is liable to pay Spanish IHT on the assets that are passed to him irrespectively of their location. For example, a British national who is a Spanish tax resident and has received £50,000 from his father’s UK estate is liable to pay Spanish IHT over that amount. It will be possible to mitigate any UK IHT already paid against his Spanish IHT bill
Real obligation: the asset inherited is in Spain, then Spanish IHT must be paid on that asset irrespective of the beneficiary’s tax residency. For example, a UK tax resident inherits a bank account and a property in Spain, he must pay IHT on these two assets, although he could potentially claim unilateral tax relief in the UK.
How it is calculated?
The following will be necessary:
Ascertaining the value of the assets. If there is immoveable property the Revenue will determine by default that the value of the chattels is 3% of the value of the estate. Unless the property is empty and evidence is submitted to the Revenue the 3% will be applicable by default. If there are expensive works of art or valuable items they will have be declared separately. Once all is added up we shall obtain the gross value of the estate.
Calculating the net value of the estate, deducting the liabilities from the gross estate.
The net estate is divided amongst beneficiaries according to the testamentary dispositions or intestacy provisions.
The assessment base is calculated when life insurance policies are added (if any).
Once the assessment base is calculated the exemptions or nil rate band are deducted this will result in the assessment amount
The taxable rate will be applied to the assessment amount.
The resulting amount will be multiplied by a coffiecient. The coefficient will vary depending on the relationship between the deceased and the beneficiary as well as the beneficiaries existing wealth at the time of inheriting. Depending on the region further deductions will be applied. In some cases, it can be as high as 99%. The result is the amount to be paid to the Spanish Revenue
Spanish IHT is payable within 6 months from the date of death, however, an extension for further 6 months can be requested no later than 5 months from the date of death. The surcharges for late payment can be high ranging from 5% to 20%. Due to the complexity of the calculations and the short time frames to wind up the estate it is advisable to instruct a professional to guide you through the entire process of winding up a Spanish estate.
Álvaro Aznar Azcárate
Solicitor and Spanish Abogado