National law requires that Spanish inheritance tax be paid within six months of the testator’s deceased date, and inheritances are withheld from beneficiaries until all obligations are met. Small errors in paperwork while executing a person’s will can set the entire process back several months, which is why it pays to have a legal team specializing in expat tax planning on your side to help you plan your estate and understand the Spanish inheritance tax on property that will need to be paid.
Who has to pay Spanish inheritance tax on property?
First, it is important to make a distinction between Spanish inheritance tax and inheritance law. As a foreign resident or non-resident, you have the right to make a declaration that your estate should be handled according to the inheritance laws in your home country (with a few specific exceptions, such as foreign inheritance laws that discriminate based on gender). This can be stated in a Spanish will or a foreign will, which will be recognized in Spain for Spanish property.
However, this does not remove your obligations to pay Spanish inheritance tax on property you pass on to your survivors. Following your home country’s inheritance law can help you avoid Spanish requirements on how your estate is divided among your survivors, but it does not mean you will not have to pay inheritance tax.
If the property is located in Spain, both residents and non-residents will have Spanish tax liability. If the testator is resident in Spain, they will have Spanish tax liability regardless of where the property is located. Rates of Spanish inheritance tax, exemptions, deductions, etc. may vary among Spain’s Autonomous Communities. For residents, you will generally be held to the tax code of the Autonomous Community in which you resided most often in the past five years. For non-residents, the rate of Spanish inheritance tax of the community in which the highest-value property is located will usually apply.
Rates of Spanish inheritance tax
As stated previously, rates of Spanish inheritance tax may not be exactly the same depending on the region in which you live. The national tax rates follow a progressive system according to the value of the inheritance after any applicable tax-free allowances.
- €0.01 - €7993 7.65%
- €7993 - €31,956 10.2%
- €31,956 - €79,881 15.3%
- €79,881 - €239,389 21.25%
- €239,389 - €398,778 25.5%
- €398,77 - €797,555 29.75%
- €797,555 + 34%
Spanish inheritance tax rates may be reduced depending on the beneficiary’s relationship to the testator. Beneficiaries are divided into four groups based on the amount of tax-free allowance they are eligible for before paying any taxes on the inherited property.
- Biological and adopted children under age 21 get a base allowance of €15,957 plus an additional €3990 for each year under the age of 2
- Children over age 21, grandchildren, spouses, parents and grandparents get a tax-free allowance of €15,957. Depending on the Autonomous Community, unmarried partners that have been registered as “pareja de hecho” may also fall into this group.
- Brothers & sisters, uncles & aunts, nephews & nieces, and in-laws are given an allowance of €799
- No allowance is given to all other relatives, including cousins, or unmarried partners unless their Autonomous Community allows it for “parejas de hecho”.
Also note that beneficiaries with disabilities may be given a tax-free allowance of €47,859 to €50,253.
The safest route is to plan all of this well in advance with qualified lawyers who can ensure your will complies with national and regional norms and help reduce the Spanish inheritance tax burden on your survivors.