Spanish Inheritance Tax Advice

Inheritance Tax | A Solution To Paying Inheritance Tax On Your Property

Generally residents of Spain are subject to taxation on their worldwide income, wealth and realized gains.

Non-residents are subjected to taxation on income, wealth and realized gains arising in Spain.

Assets located in Spain will be taxed upon inheritance, by the Spanish State and according to Spanish tariffs, whether one is resident in Spain or NOT, and whether the deceased leaves a will or not.

Transfers between spouses are NOT exempt from inheritance tax in Spain. This can come as a very nasty shock to individuals coming from other countries where this situation does not arise.

Where a property is held in joint names, a substantial inheritance tax liability can arise on the death of ones beloved partner. Not only will the surviving partner have to cope with the loss and the trauma that result, but will also have to find the cash resources to meet a most unwelcome and penal tax bill.

The tax assessed is payable within six months of death.

The inheritance tax payable is the liability of the inheritor and cannot be taken from the deceased estate.

Therefore, where a property is inherited, the property itself cannot be used as collateral security to provide a loan, nor can it be sold until the tax is paid.

If the tax remains unpaid after six months, additional interest and fees become payable.

The initial calculation of inheritance tax is based on the net value of the estate. The rate bands range from 7.65% through to a top rate of 34%.

For non Spanish residents it is calculated on Spanish sited assets only, but for residents, subject to the question of domicile, it could be their wealth worldwide.

The inheritance tax liability increases according to the degree of kinship between the deceased and the people who inherit.

Direct relatives become liable to inheritance taxation where their inheritance amounts to more than €15,957. A direct relative is restricted to spouse, children and parents.

Class two relatives become liable to inheritance taxation where their inheritance amounts to more than €7,993. Class two relatives are uncles, aunts, nephews and cousins etc.

If a relative is further removed than in Class Two, or is un-related to the deceased, no allowances are given. This is a Class Three beneficiary. Common law spouses, and same sex partners, fall into this category, as unfortunately do step-children.

After the tax has been calculated, the pre-existing wealth of the heir and their relationship to the deceased must be considered.

A Class Two inheritor will automatically have the tax assessed increased by between 59% and 90%.

A Class Three inheritor will automatically have the tax assessed increased by between 100% and 140%.

Someone already wealthy, and not related to the deceased, could see the amount payable increase to 240% of the amount assessed. Unrelated wealthy beneficiaries have been known to pay a rate in excess of 80%.

Examples, showing the amount of inheritance tax payable, by each Class of beneficiary, are given below:

If an inheritor already has assets in Spain amounting to more than €400,000, the amount payable will be greater than that shown above.

The very sharp rises that we have seen in property values over the last few years can bring mixed blessings for expatriates owning Spanish properties and in particular highlights the need to plan ahead for Spanish inheritance tax liabilities.

Inheritance tax can be a very serious problem, and a very costly one at that, even if funds are available to settle the tax.

However, with advice and careful planning the potential inheritance tax liability can be reduced substantially.

Do not make the mistake of leaving any action until the last minute, because you never know when this will be.

A Solution to Paying Spanish Inheritance Tax on Your Property

Working in collaboration with a leading international offshore bank we have developed a scheme that will totally remove any potential liability to inheritance taxation on property located in Spain.

The scheme is easy to understand, but totally effective. For further information contact our Sally-Anne Doyle, and she will be happy to answer your questions, and can arrange a private and confidential appointment with one of our senior advisors if you should wish.