Spain’s inheritance or succession tax, known as el impuesto de sucesiones is both complex and controversial, but it’s important to understand how it works in order to avoid any unfortunate financial surprises when a loved one with a connection to Spain passes away.
Spanish inheritance tax is decided by the Spanish State but all of the country’s 17 regions have the right to change these rules to make them more beneficial or detrimental to heirs. Luckily, the general trend is towards the former. A word you'll come across frequently when reviewing inheritance tax in Spain is bonificación, which means tax reduction.
Generally, the regions that went from socialist to PP or right-wing governments in the May 2023 elections, made the conditions more favourable. This includes Valencia, Aragón, La Rioja and the Balearic Islands. While Madrid, Galicia and Andalusia had already implemented better conditions earlier.
This means the regions with the highest inheritance tax rates currently are Asturias, Catalonia and Castilla-La Mancha.
The succession tax rates will differ depending on how much is inherited, but it is progressive ranging from 7.65 percent on the first €7,933 up to 34 percent on €797,555+, but several bonuses can be applied to these rates.
There are also many factors to consider, such as which category heirs and other beneficiaries fall into, or the fact that in Spain the spouse of the deceased is also subject to inheritance tax, which is not the case in the UK and many other countries.
Keep in mind that regional governments can and do change their inheritance tax conditions relatively often, so make sure you double-check with an official source, preferably the website of your regional government.
What are the different groups of heirs in Spain?
As mentioned above, there are several categories or groups that heirs can fall into and this will depend on how much allowance they can benefit from. The groups are the following:
Group 1: Children under 21 years of age
Group 2: Children over 21 years of age, spouses and parents
Group 3: Siblings, nieces, nephews, as well as aunts and uncles
Group 4: Cousins or more distant relations
EXPLAINED: How choosing the right region in Spain can save you thousands in inheritance tax
What are the inheritance rates in my region?
Andalusia
In Andalusia groups 1 and 2 are exempt from payment if the amount of the inheritance does not exceed €1 million, and groups 3 and 4 for inheritances up to €250,000.
Aragón
A 100 percent exemption applies for inheritances of up to €3 million for group 1. 65 percent tax relief on donations made to spouses, ascendants and descendants, as long as the tax base is equal to or less than €500,000.
Asturias
Groups 1 and 2 do not pay any taxes on inheritances of less than €300,000.
Balearic Islands
In the Balearic Islands, since July 2023 inheritances between ascendants, descendants and spouses do not pay any tax thanks to the 100 percent tax bonus. In addition, a general bonus of 25 percent of the quota is applied to inheritances between siblings, aunts and uncles and nephews and nieces, which rises to 50 percent if the deceased had no descendants.
Basque Country
For those in groups 1 and 2 in the Basque Country, inheritances with an amount less than €400,000 are not required to pay taxes. When the amount is greater than €400,000, a tax rate of 1.5 percent will be applied.
READ ALSO: Why you should move to this region in Spain if you want to pay less tax
Canary Islands
Since September 2023, inheritances between ascendants, descendants, spouses, siblings, aunts, uncles, nephews and nieces are practically exempt with a 99.9 percent bonus applied to the quota. The taxation of donations between spouses, ascendants and descendants has also been improved, which is now reduced by 99.9 percent.
Cantabria
Children, parents and spouses are entitled to a rebate that varies between 90-99 percent. This discount can reach 100 percent if the taxable base is less than €100,000.
Castilla La-Mancha
In Castilla La-Mancha the bonus for groups 1 and 2 will be 100 percent up to an amount of €300,000. For amounts after this, it will be 80 percent.
Castilla y León
In Castilla y León the inheritance tax deduction stands at 99% for direct family members (spouse, descendant or adoptee, ascendant or adopter of the deceased).
Catalonia
In Catalonia, tax is not paid if the amount to be inherited is less than €100,000 in the case of spouses or descendants in group 1 (under 21 years of age), €50,000 for nephews and nieces or €30,000 for ascendants (parents or grandparents).
In inheritances due to death, a reduction in the taxable base is applied on the basis of the degree of kinship: children under 21 years of age can receive €100,000, plus an extra €12,000 for each year under 21 years of age, up to a limit of €196,000.
Extremadura
Descendants (including adopted children) under the age of 21 are entitled to a rebate of 99 percent of the adjusted tax liability. Descendants aged 21 over, spouses, ascendants and adoptive parents may apply the following percentages:
99 percent when the taxable base does not exceed €175,000.
95 percent when the taxable base does not exceed €325,000.
90 percent when the taxable base does not exceed €600,000.
Galicia
In Galicia, for those in group 2, the exemption limit is €400,000.
La Rioja
Those who inherit in La Rioja will benefit from a deduction of 99 percent of the tax quota for inheritances between ascendants, descendants and spouses.
From the beginning of the year 2024, tax on inheritances exceeding €400,000 between direct relatives has been removed.
Madrid
Madrid has applied a discount of 99 percent of the tax quota for taxpayers included in groups 1 and 2. In addition, for the heirs included in group 3, it establishes a discount of 15 percent or 10 percent, depending on what relation they are to the deceased.
Murcia
Those in groups 1 and 2 will only pay 1 percent.
Navarre
In Navarre no discounts are applied, but how much tax varies according to what group you fall under. Spouses for example have a rate of 0 percent up to €250,000, and 0.80 percent from there upwards. In the case of descendants and parents, the applicable rate varies between 2 percent and 16 percent.
Valencia region
In Valencia with retroactive effect from May 28th, 2023, the bonus on inheritances between spouses, ascendants and descendants is now 99 percent. If tax was paid for an inheritance or donation after that date, a rectification may be requested in your annual income tax return.
Case study example
For example, in the case of a 30-year-old who inherits assets worth €800,000, it would vary greatly depending on where they lived
In the Balearic Islands now for example, they wouldn't pay anything on this amount, whereas before they would have paid €5,950. In Galicia, Cantabria and Andalusia they would also not pay anything as these regions have subsided 100 percent of the tax.
In the Canary Islands, they would go from paying €31,749 to only €134; in Valencia from €63,194 to €1,264; and in La Rioja, from €32,343 to €1,588.
The rest of the communities have not announced changes so far, so this is what you would pay in each ranging from highest to lowest. Castilla y León, €810; Madrid, €1,586; Extremadura, €1588; Murcia, €1640; the Basque Country, €3,150; Navarre, €17,000; Castilla-La Mancha, €31,759; Catalonia, €44,569; and Asturias, €103,135 .
In the case of Aragón, you would pay €55,467, but the government has announced bonuses, which will reach up to 99 percent for direct descendants under 21 years of age.
Comments