Spanish Inheritance Tax on Death

DIYhelp76

Hello

Not sure if this is the correct board or if anyone can help/advise?

We are trying to find out how to calculate what Inheritance Tax (and any other associated fees/expenses) will be when someone dies in Spain and also when this becomes payable and logistics, as we think the system differs to that of the UK.

Does anyone have any knowledge of the Spanish system/law on this please?

Situation is an elderly parent who moved to Spain 20+ years ago and is a Spanish resident.

He has made Spanish Will leaving all property/assets on his death to his 3 adult children who are all UK citizens and residents with no connection to Spain. 

Not sure of assets but let's say maybe £500,000 - this may fluctuate as assets are spent/sold.

On death, when and how much Inheritance Tax would be payable to the Spanish Government and how is this calculated as between the 3 children?  

Are there any "threshold" and/or allowances under Spanish law, similar to those under UK law?

Many thanks in advance for any help on this.

Nomunnofun1

Spanish tax on death works entirely differently from U.K. in that it is the beneficiary who is liable, not the estate of the deceased relative. It is known as ‘succession tax’. A similar regime operates in many European countries - Ireland for example. 

Does this help?

https://wise.com/gb/blog/spanish-inheritance-tax

DIYhelp76

Hi Nomunnofun1

Many thanks, your link is very helpful.  Having read that I have some other questions and wonder if anyone can help with these?

I've tried a calculation below but not sure if I've correctly understood the link information.  Things I'm unclear on in particular re:

• Whether each beneficiary's (inheritor's) personal allowance is in addition to or included in the "95% allowance against the value of the main family home".

• Whether this "95% allowance against the value of the main family home" applies even though the 3 inheriting UK children do not (and have never) lived in this "family home"?

PRACTICAL APPLICATION/CALCULATION:

Value of main family home:  €500,000 (lived in alone by deceased relative)

He leaves house to his 3 UK children in equal shares =  approx. €166,000 each

Each child has an allowance of either €122,000 or €122,000 plus(?) personal allowance of €15,957

Is the "PERSONAL ALLOWANCE" in ADDITION TO the following "MAIN HOME" allowance: "There are also reliefs on Spanish property. The inherited value of the main home of the deceased attracts a 95% allowance against its value, up to €122,000 per inheritor"

€500,000 divided by 3 for each child = approx. €166,000 inheritance for each child

So each child pays up to 21.25% inheritance tax on their share of either €44,000 (€166,000 - €122,000 main home allowance) - or €28,043 (€166,000 - €122,000 (main home allowance) plus €15,957 (personal allowance)

SEPARATELY, would there be additional UK taxes to pay when inheriting this money from Spain?

Many thanks in advance for any further help with this.

mybestattempt

DIYhelp76 said:

Hi Nomunnofun1

Many thanks, your link is very helpful.  Having read that I have some other questions and wonder if anyone can help with these?

I've tried a calculation below but not sure if I've correctly understood the link information.  Things I'm unclear on in particular re:

• Whether each beneficiary's (inheritor's) personal allowance is in addition to or included in the "95% allowance against the value of the main family home".

• Whether this "95% allowance against the value of the main family home" applies even though the 3 inheriting UK children do not (and have never) lived in this "family home"?

PRACTICAL APPLICATION/CALCULATION:

Value of main family home:  €500,000 (lived in alone by deceased relative)

He leaves house to his 3 UK children in equal shares =  approx. €166,000 each

Each child has an allowance of either €122,000 or €122,000 plus(?) personal allowance of €15,957

Is the "PERSONAL ALLOWANCE" in ADDITION TO the following "MAIN HOME" allowance: "There are also reliefs on Spanish property. The inherited value of the main home of the deceased attracts a 95% allowance against its value, up to €122,000 per inheritor"

€500,000 divided by 3 for each child = approx. €166,000 inheritance for each child

So each child pays up to 21.25% inheritance tax on their share of either €44,000 (€166,000 - €122,000 main home allowance) - or €28,043 (€166,000 - €122,000 (main home allowance) plus €15,957 (personal allowance)

SEPARATELY, would there be additional UK taxes to pay when inheriting this money from Spain?

Many thanks in advance for any further help with this.

Hopefully, other posters may be more knowledgeable on the subject as I've only read a couple of articles  (I googled "succession tax spain")

However, both indicated that the 95%/€122000 main home allowance may only apply if the inherited property is retained by the beneficiaries for a number of years:

https://www.angloinfo.com/how-to/spain/money/general-taxes/inheritance-tax


https://advocateabroad.com/spain/succession-tax-spain/


You may be well advised to take some proper professional advice.

DIYhelp76

Thank you mybestattempt, I will take a look at your link and try to google more.  Oh dear, that's not the news we were hoping for!

I can see it's potentially going to be quite difficult to deal with if and when the time comes. 

Bnybird71

I see this post is quite old but hopefully you'll still see this! I'm  no expert but I have lived in Spain for years! So, I would definitely advise that you consult and pay a professional in Spain, or someone in UK who is familiar with both countries' systems. As others have mentioned here, Spanish inheritance tax must be paid by the person who inherits, rather than the estate of the deceased. I believe it must also be paid up front before you receive the inheritance! This can be quite expensive if there's a plusvalua tax on property (I think that's stamp duty in UK but not sure). I understand that you have 6 months after a person dies, to submit paperwork in Spain (so the first thing a professional may advise is that you apply for a time extension, or you can have problems with the Spanish tax office).
There are calculators on the web that can give you a rough guide, but there are so many variables that you will really need the help of a professional. 
For a start, if you hold on to and do not sell a property for 5 years, then I believe you can practically avoid paying inheritance tax.
Inheritance tax in Spain is also extremely unfair, as it depends on the autonomous community where the inheritance is located. Different areas of Spain have totally different inheritance tax rules. So in Andalusia or Madrid I think you can practically avoid inheritance tax, whereas it is high in Catalunya. However, I have read that foreigners may have the right to choose a central Spanish tax tariff (though I have no idea if this is true).
To complicate matters further, inheritance tax is also calculated based on your relationship with the deceased, so sons and daughters under 18 pay the least while adult children pay more, grandchildren would pay more still and if you're a distant family member you'll probably pay through the nose. So if you are a child of the deceased you are subject to a substantial percentage decrease (as you have said in your post). 
However, I cannot stress enough the need for a professional, because the Spanish inheritance tax system is a minefield! The UK inheritance tax system is far more transparent and I understand you can still inherit a much larger sum before being subject to the tax. However, in Spain the threshold tends to be much lower, so this is where professional advice is helpful. (Maybe at first glance, the best thing could well be to hang onto the property and let it out or use during holidays for 5 years, in order to avoid inheritance tax!). 
The citizens advice bureau Spain have a useful web in English and may be able to put you in contact with an accountant or lawyer to advise you better.