Inheritance and gift tax in Spain
It’s always best to be prepared for most circumstances in life, this includes protecting your family when it comes to inheritance. So if you own a property in Spain and wish to pass these on to your family, it’s worth having a plan in place to prevent any unwelcome inheritance or gift tax liabilities that lie in wait down the road.
Gift and inheritance tax are jointly regulated. Inheritance tax is tax paid on on any increase of wealth, obtained by reason of death of a third person, while gift tax is levied on the increase of wealth, caused by reason of gift while the transferor is still alive.
Currently, the rules regarding inheritance and gift tax in Spain allow for non-residents from within the European Union to be treated the same as residents of Spain. The rate for this tax, also known as the succession tax, is from 1-7% depending on the region of Spain the property is located. It is a great idea to ask your local Town Hall for your specific region’s laws on inheritance.
EL IMPUESTO SOBRE SUCESIONES Y DONACIONES (ISD) / GIFT TAX?
The gift & inheritance tax (ISD) is taxation for an acquired property or multiple properties in Spain. All family members, children & spouses, are treated equally in Spain, meanwhile in the United Kingdom, inheritance tax law stipulates that only the children are beneficiaries and a spouse is generally an exempt beneficiary (except in some cases of mixed domicile). Furthermore, it is the estate of the deceased which is subject to tax, whereas in Spain, the recipient of inheritance is the taxpayer.
If there are no offspring, then a jointly owned property in Spain by a resident or non-resident married couple will mean that the surviving partner will be liable to the gift & inheritance tax on the deceased spouse’s share of the property. Further inherited assets would be taxed.
Quick notes:
An individual resident or non-resident will be liable for gift tax.
Nationality has no effect on the tax payable.
You need to indicate your primary residence.
Prove where the assets are located.
THE AMOUNT OF TAX PAYABLE?
Rates & percentages of the gift & inheritance tax are calculated through three stages:
Value of the asset(s).
The relationship status.
Personal tax allowance (Inheritance tax only).
There are four categories that defines the relationship between the beneficiary (the taxpayer) and the benefactor, this includes:
Relatives in direct line of descent who are under the age of 21 - natural or adopted children, grandchildren.
Descendants listed above the age of 21 including ascendants in direct line and spouses.
Extended kinship - first cousins and so on.
Rest of the family and unrelated persons - unadopted stepchildren & common law spouse, and trustees
HOW AND WHEN TO PAY THE TAX?
It is an obligation of the taxpayer (beneficiary) to present all necessary documents in order to calculate the tax due. You can opt to perform this task yourself or hire a professional to mediate this required process. Either way, the calculated tax due must be presented together with the monies to the tax authorities. The process involves:
Liability to pay tax on:
The date of death of the benefactor, or the date on which the death is declared and duly signed in accordance with the Civil Code Article 196.
The date on which the gift is made.
Tax to be declared when:
Six months of the date of death of the benefactor.
In 30 calendar days from the day following the conveyance of the gift.
UK-SPAIN TAX RELIEF
Currently, there is no treaty between Spain & the UK concerning gift & inheritance tax. Sums may be deducted from Spanish tax by:
The amount of foreign tax paid.
The result of applying the average rate of ISD on the Gift / Inheritance to the foreign asset(s) on which foreign tax has been paid.
Subsequently, there is no relief available where no foreign tax has been paid.
OUR SERVICES
At PSI Consultants, our experienced legal, fiscal & visa experts can help you acquire residency & nationality in Spain through property investment in Spain. We will guide you through the whole process of gaining Golden Visa residency in Spain and we offer a wide range of services related to the management and transmission of property ownership in our department dedicated to conveyancing, donations & inheritances. Also in our legal department we manage the obtaining of NIEs, Residences, Wills, private contracts, representation and personalized legal consultation on all related matters.
If you would like to learn more about our Spanish services in the Costa Blanca area, please feel free to contact us at any time when our office is open between 9am - 2:30-pm, Mondays to Fridays.
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