Spain’s inheritance or succession tax, known as ‘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. 

The succession tax rates will differ depending on how much is inherited, ranging from 7.65 percent on the first €7,933 up to 34 percent on €797,555+. 

There are 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.

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, the inheritance tax rate varies between 7 percent and 36 percent, depending on the value of the inheritance. However, recently the Andalusian government approved, through a Royal Decree, a reduction of 99 percent, both for inheritance and gift tax for those who are included in groups 1 and 2.

Aragón

In Aragón there is 100 percent discount on the tax base, with a limit of €3,000,000 for descendants under the age of 21 or for those that have a disability. In addition, the spouse, parents or descendants of the deceased may also benefit from a reduction of 100 percent of the tax base.

Asturias

In Asturias there is an allowance of €300,000 for those groups 1 and 2. For all other groups, it establishes various reductions included in the state regulations. In addition, in case of inheriting a home, the bonus will be between 95 and 99 percent, depending on its value.

Balearic Islands

In the Balearic Islands, for those in groups 1 and 2, deductions of €25,000 are applied, plus €6,250 per year that the taxpayer is under the age of 21, up to a maximum of €50,000. For those in group 3, a deduction of €8,000 is applied and for those in group 4, it’s €1,000. An allowance of €48,000 will also be made for those with disabilities.

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
Those in group 1 get an allowance of €47,859, while those in group 2 get an allowance of €15,957. Those in group 3 will get €7,993, while those in group 4 get no allowance at all. After the deduction, inheritance tax rates are calculated on the remaining balance which range between 7.65 percent and 34 percent on anything above €797,555.

Cantabria

For those in group 1, there is a reduction of €50,000 plus €5,000 for each year the taxpayer is under 21. For those in group 2, it’s also €50,000 and for those in group 3, it’s €25,000.

Castilla La-Mancha

In Castilla La-Mancha those in groups 1 and 2 will benefit from discounts ranging from 80 percent to 100 percent, depending on the amount of the payable base.

Castilla y León

Castilla y León allows reductions for children spouses and parents. Those in groups 1 and 2 will benefit from an allowance of €60,000. An additional reduction of €6,000 will be applied for each year the taxpayer is under the age of 21. A variable reduction will also be applied, which is calculated as the difference between €400,000, plus the sum of the previous amounts and the state deductions.

Catalonia

In Catalonia, spouses will receive a bonus of 99 percent and the rest of the heirs in groups 1 and 2 may apply a bonus that varies between 57 percent and 99 percent, depending on the tax base.

Extremadura

A bonus of 99 percent is applied for amounts of up to €300,000 euros between parents, children and spouses.  

Galicia

In Galicia, heirs in group 1 have an allowance on amounts up to €1,000,000, plus there is a reduction of €100,000 for each year the beneficiary is younger than 21, with a limit of €1,500,000. For those in group 2, the reduction varies between €900,000 and €400,000, depending on the taxpayer’s age. In the cases of groups 3 and 4, the bonus will be €16,000 or €8,000. The applicable rate in Galicia stands at between 5 and 18 percent, which is well below the rest of the regions. 

La Rioja

Those who inherit in La Rioja benefit from a deduction of 99 percent of the tax quota if the tax base is less than or equal to €500,000. The deduction will be 98 percent for amounts that exceed €500,000.

Madrid

Madrid applies 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

In the region of Murcia, the law includes a deduction of 99 percent for those in groups 1 and 2. Likewise, for the rest of the heirs, it also recognises different reductions depending when the money is inherited and the amount to be received.

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 descents and parents, the applicable rate varies between 2 percent and 16 percent.

Valencia

In Valencia discounts of 75 percent are applied for those in group 1 or 50 percent for those in group 2. In case the of those with disabilities, the taxpayer will also receive a bonus of 75 percent.

Case study example

For example, in the case of a 30-year-old son who inherits assets worth €800,000 euros, the most amount of tax would be paid in Asturias, with at €103,135.48; followed by Castilla y León €81,018.76; Valencian €63,193.76; Aragon €55,466.81; La Rioja €32,342.86; Castilla-La Mancha €31,759.23 and the Canary Islands €31,748.63. 

These regions would be followed by Navarre €17,000; Catalonia €9,796.89; the Balearic Islands €5,950; the Basque Country €3,150; Murcia €1,640.49; Extremadura €1,587.96 and Madrid €1,586.04). Andalusia, Cantabria and Galicia have a net quota of 0.