Inheritance Tax In Spain – What You Need To Know

Inheritance or succession tax in Spain is known as the “Impuesto sobre Sucesiones y Donaciones” (ISD) and it is the tax which is to be paid on any assets you inherit. This tax is payable if you are a resident in Spain or if you inherit an asset located in Spain.

This state tax is calculated depending on your relationship with the deceased person, and also on an individual’s age and various other circumstances. The rules do vary within autonomous communities, so it is important you contact a professional in your local area should you inherit an asset in Spain.

Currently, if a spouse dies and both partners live in Spain, the surviving spouse will be liable to pay for assets received; however, depending on your location and circumstances you are likely to receive concessions and relief.

If you live with a partner in a long-term relationship and have shared assets, you are advised to become a “pareja de hecho” as this will afford you the same benefits in some Autonomous Communities as a married couple in the event one partner should die.

Under the rather complicated laws regarding Spanish inheritance tax, individuals are divided into groups which have different tax-free allowances:

Group 1: This group includes adopted children, natural children, and other direct descendant such as grandchildren and great-grandchildren under the age of 21.

Group 2: This group is as above, but over the age of 21 years and also includes parents, grandparents, and spouses.

Group 3: the first group comprises in-laws, along with their ascendents or descendants, stepchildren, siblings, children of siblings, aunts, uncles and cousins.

Group 4: Group 4 includes any other beneficiary not previously mentioned and married partners, but this varies from region to region.
The tax-free allowances on inherited assets for each group is as follows:

Groups 1 and 2: 15,956.87€
Group 3: 7, 993.46€
Group 4: 0€

Those who are aged under 21 and therefore a member of group 1 can receive an additional tax-free allowance of almost €4000 for each year they remain under the age of 21, up to a total of €48,000.

There may be further reductions if the recipient has any degree of mental or physical disablement.

The amount of tax you will eventually pay will also depend on a number of factors which include the relationship of the beneficiary to the deceased and the wealth of the recipient before inheriting. The highest level of tax payable on inherited assets is 82%, although generally before any multipliers are put in place the highest payable rate stands at around 35%.

If you inherit a property in Spain the amount of tax you will pay will also depend on whether you live in the property as a main home, if you lived in the property prior to the passing of the deceased, and also how many years you retain the property after the donor’s death.

Autonomous communities have very different laws on tax inheritance, and to qualify for local allowances you must be resident in the community for at least five consecutive tax years.

Because tax laws and allowances in Spain are continually subject to change, we definitely recommend you take personalized professional advice with regards to inheritance tax, and only use the information within this article as a guideline.

To read up more on the very important issue of inheritance tax in Spain, see: http://belegal.com/spanish-inheritance

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