How Much Can You Inherit Without Paying Tax in Spain?

Understanding inheritance tax rules in Spain is crucial for estate planning, especially for British expatriates residing in Spain. The amount you can inherit without paying tax in Spain depends on various factors, such as the relationship between the deceased and the beneficiary, the autonomous region in which the deceased resided, and the pre-existing wealth of the beneficiary.
Spanish Inheritance tax (IHT) is a primary levy both residents and non-residents encounter in Spain. A progressive tax, it is paid by those inheriting assets, such as property or money, from a relative or friend. Besides inheritances, the tax also applies to accepting gifts and receiving funds from any life insurance. Before receiving the inherited assets, the tax must be fully paid.

A six-month timeframe is provided to pay this tax, extendable by another 183 days or payable in installments. The complexity of this tax lies in its differences with other European countries’ laws, including the UK, and the varying regulations across Spanish regions.
UK expats need to note differences in the Spanish IHT law. Unlike in the UK, where spousal inheritances are exempt from IHT, in Spain, the surviving spouse must pay IHT on the worldwide assets they inherit after the death of their partner.

Who Pays Inheritance Tax in Spain?

Heirs resident in Spain who receive an asset from abroad or any assets transferred within Spanish territory are liable for IHT. This tax applies to both residents and non-residents, with the same rates and allowances applicable.

Previously, non-residents paid up to 80% more IHT on received assets. However, a 2015 law introduced parity, eliminating discriminatory practices between residents and non-residents.

Non-Resident and Resident Inheritance Tax Assets

Non-residents who inherit assets in Spain are liable for IHT. However, only assets within Spain are taxed, excluding foreign assets. For residents inheriting assets in Spain or abroad, they must pay IHT on all these assets within the Spanish State. However, taxes already paid on foreign assets can be deducted from the Spanish Inheritance Tax.

Determining the Inheritance Tax Rates and Allowances

IHT calculation in Spain considers various factors, including your age, residence, and relationship with the deceased. It’s recommended to seek professional advice for accurate estimations. The closer your relationship with the deceased, the less tax you’re liable to pay. This applies to both the tax percentage and allowances.

National law determines the tax rates as follows:

• Up to €7,993 inheritance: 7.65% tax.
• €7,993 to €31,956 inheritance: 7.65-10.2% tax.
• €31,956 to €79,881 inheritance: 10.2-15.3% tax.
• €79,881 to €239,389 inheritance: 15.3-21.25% tax.
• €239,389 to €398,778 inheritance: 25.5% tax.
• €398,778 to €797,555 inheritance: 29.75% tax.
• Over €797,555 inheritance: 34% tax.

These figures can be reduced through various allowances.

Avoiding Inheritance Tax in Spain

The latest succession law changes reduced the potential tax breaks from almost 100% to a maximum of 50% in some cases. The actual tax relief depends on the relationship with the deceased. To determine this, heirs are classified into four groups:

• TAX GROUP 1: Comprising deceased’s children under 21 years (including adopted), with a total allowance of 47,859 euros.
• TAX GROUP 2: Includes children over 21 years, the deceased’s grandchildren, parents, grandparents, and spouse, with an allowance of 15,957 euros.
• TAX GROUP 3: Includes siblings, nieces, nephews, aunts, uncles, descendants and ascendants, as well as in-laws, with an allowance of 7,993 euros.
• TAX GROUP 4: Includes cousins, unmarried couples, and other unrelated individuals, who unfortunately do not receive any allowance.

Additional allowances apply in certain situations, such as for those with disabilities or for the child or spouse of the deceased.

The team at Chorus Financial can advise you on how the latest changes to the succession law affect your potential tax breaks. They will classify heirs into groups to determine the allowances each group can obtain, and guide you on additional allowances in specific situations. With Chorus Financial, you can efficiently navigate the Spanish inheritance tax system, ensuring you’re well-equipped to handle your financial obligations in Spain.