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Inheritance tax in Spain

Below is a brief outline on taxes for inheritance in Spain.

If you are based in Spain as a Resident or Non Resident, your family and beneficiaries are liable for inheritance tax.

When the beneficiaries are close relatives such as children then 95% of the estate value, up to a maximum of 122,606.47€, can be exempt from inheritance tax. However, the inheritor has to make a commitment not to sell the inherited Spanish property for at least 10 years. If they do sell within that time they must pay the non-resident fee plus interest. This is worked out based on various aspects. However, straight away 3% of the sale value of the property is kept to cover this tax.

Each region in Spain has its own tax rates. For example, there is a rate of 0% inheritance tax in Pais Vasco in the north of Spain. In Andalucía the tax is 0% if the beneficiaries have residence in Spain and the inheritance is no more than 175,000 euros, and the wealth of the recipient does not exceed €402,678.

According to the Junta de Andalucía, the inheritance tax rate applicable can be up to 35%, and near this figure if the beneficiary is nonresident.

Capital gains tax is also an issue as this is 21%. This is applied to the difference between the purchase price and the sale price of the property.

HOW A WILL IS MADE FOR RESIDENTS

In Spain, non-residents can specify who gains benefits from their inheritance. However, if you are resident, the Will must be made under Spanish law and this means the following:

The Will must be split by one third, three ways

1. ILIGITIMA = 1/3 split equally between “legales”, i.e. children and parents

2. DE MEJORA = 1/3 split any way you choose between “legales”

3. LIBRE DISPOCICION = 1/3 split as you choose, usually to your wife or husband

HOW CAN NON RESIDENTS GET AROUND PAYING UP TO 35% TAX ON INHERITANCE? Non residents can pay the lower rate of tax as residents if they live with the deceased 2 years prior to them dying and do not sell the property or cash in the assets for 5 years after death.
WHAT IS USO FRUCTO?

Uso fructo is when your spouse can use usually the property, even if the children own part of it, until she or he dies. A “temporal” clause can also be inserted into the Will for a certain number of years use, e.g., say 10 years and then the other beneficiaries have to gain from the property. During this time of “uso fructo” the spouse can also benefit from, for example, rental of the property, i.e. the profit which can be made from the property.

In case of the “uso fructo” being applied to money, this is usually done so as the spouse can gain from the interest of the funds and then after they die or after the “temporal clause”, part of the funds would go to the children.

There are ways to cover your loved ones and family against not being able to afford paying these taxes. Please contact us for more information if this sounds of interest to you.

 

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