How inheritance is taxed in Spain

Inheritance in Spain

Inheritance in Spain is regulated by the Civil Code and by the tax regulations applied in each autonomous community. When a person passes away, their assets and rights are transferred to their heirs, who must carry out certain procedures and comply with the corresponding tax obligations.

Firstly, it is necessary to carry out the process of acceptance and partition of the inheritance. This process consists of determining who the heirs are and what part of the inheritance corresponds to them, as well as settling and distributing the assets among the heirs in accordance with the testamentary provisions of the deceased or, failing that, with the rules established by law.

Once the inheritance has been accepted and distributed, the heirs must comply with the corresponding tax obligations. In Spain, inheritances are subject to the Impuesto sobre Sucesiones y Donaciones (ISD) (Inheritance and Gift Tax), a tax that applies to the gratuitous transfer of assets and rights. This tax is calculated based on the value of the inherited assets and the degree of kinship between the deceased and the heir.

It is important to note that regional regulations establish the rates and exemptions of the ISD, which may therefore vary between the different autonomous communities. In some autonomous communities, such as Madrid, the exemptions are broader than in others.

Inheritance and Gift Tax - ISD

The Impuesto sobre Sucesiones y Donaciones (ISD) is a tax that applies to the gratuitous transfer of assets and rights, that is, without receiving anything in return, such as an inheritance or a donation. This tax applies in Spain and is regulated by regional regulations, which means that the rates and exemptions may vary between the different autonomous communities.

The ISD is calculated based on the value of the transferred assets and the degree of kinship between the deceased or donor and the recipient. For example, spouses and direct descendants have a reduction in the tax base, while siblings and other relatives have a smaller reduction or none at all.

In addition, some autonomous communities offer additional reductions depending on the age of the recipient, the value of the inherited or donated home, or the type of asset transferred (for example, cultural assets or assets of heritage interest).

It is important to note that, although the ISD is a regional competence, there is basic state regulation that establishes the general criteria for the application of the tax. Likewise, EU citizens not resident in Spain may be exempt from the ISD if they have their tax residence in another country of the European Union, Iceland or Norway, as established by EU regulations.

How the inheritance of a resident in Spain is taxed

There can be different scenarios   

If the deceased family member is resident in Spain and leaves an inheritance 

IF THEY HAVE ASSETS IN SPAIN:

• HEIR NOT RESIDENT IN SPAIN: must pay the Spanish state taxes only on the value of the assets located in Spain, and depending on the case, the regulations of the autonomous community where most of the value of the assets is located may apply.
  Heirs not resident in Spain may apply the regulations of the Autonomous Community (CCAA) where the deceased resided. Only in the case where residence cannot be determined does the regulation of the Autonomous Community (CCAA) where the assets of greatest value are located apply.
• HEIR RESIDENT IN THE EU: may apply the regulations of the Autonomous Community where the deceased resided.
• HEIR RESIDENT IN SPAIN: must pay the Spanish state taxes on the value of the assets located worldwide and may apply the regulations of the autonomous community where the deceased resided, being able to deduct what has been paid abroad.

IF THEY HAVE ASSETS BUT ONLY OUTSIDE SPAIN:

• HEIR NOT RESIDENT IN SPAIN: pays no tax in Spain
• HEIR RESIDENT IN SPAIN: must pay the Spanish state taxes on the value of the assets located worldwide and may apply the regulations of the autonomous community where the deceased resided, being able to deduct what has been paid abroad.

How the inheritance of a non-resident in Spain is taxed

The taxation of an inheritance of an EU citizen not resident in Spain will depend on the country of residence of the deceased and on the type of inherited assets. In general, there are two taxes that may apply in Spain: the Impuesto sobre Sucesiones y Donaciones (ISD) and the Impuesto sobre la Renta de no Residentes (IRNR) (Non-Resident Income Tax).

In the case of the ISD, it applies to inheritances received by individuals and is calculated based on the value of the inherited assets and the degree of kinship between the deceased and the heir. However, EU citizens not resident in Spain may be exempt from this tax if they have their tax residence in another country of the European Union, Iceland or Norway, as established by EU regulations.

On the other hand, if the deceased owned real estate in Spain, the heir must pay the IRNR on the income obtained from the property during the period in which it was held by the deceased and during the period in which the heir is the owner. The IRNR is calculated on the tax base of the cadastral value of the property, and its tax rate varies depending on the country of residence of the heir and the type of real estate.

If the deceased family member is not resident in Spain but  has assets in Spain, this will depend on the status of the heir.

• HEIR NOT RESIDENT IN SPAIN: must pay the Spanish state taxes only on the value of the assets located in Spain, and depending on the case, the regulations of the autonomous community where most of the value of the assets is located may apply.
• HEIR RESIDENT IN SPAIN: must pay the Spanish state taxes on the value of the assets located worldwide, and depending on the case, the regulations of the autonomous community where most of the value of the assets located in Spain is located may apply 

In any case, it is advisable to seek professional legal and tax advice to properly carry out the process of acceptance and partition of the inheritance and to comply with all the corresponding tax obligations.

In any case, it is advisable to seek professional tax advice to determine the specific tax obligations in each case.

Inheritance taxes for non-residents in the Autonomous Community of the Balearic Islands

In the Balearic Islands, the taxation of the inheritance of a non-resident will depend on several factors, such as the degree of kinship between the deceased and the heir, the value of the inherited assets, the location of the assets and the country of residence of the deceased and of the heir.

In general, in the Balearic Islands the Impuesto sobre Sucesiones y Donaciones (ISD) applies to inheritances and donations received by individuals, and the rates and exemptions may vary according to regional regulations. In the Balearic Islands, there is a regional rate that applies to the taxable base of the tax, which is the part of the tax base that is not exempt and has no reductions.

In the case of non-residents, the same rate applies as for residents, although the tax rate may be higher. In addition, non-residents may be subject to withholding of the tax before receiving the inheritance or the donation.

It is important to bear in mind that, although state regulations establish the general criteria for the application of the tax, the autonomous communities have the authority to establish their own rates and exemptions in the ISD.

In any case, it is recommended to seek professional tax advice with Tramite Italia to determine the obligations