Inheritance tax rebates for non-residents in Spain by regions

Inheritance tax is a tax directly related to inheritance and donations and is payable by both residents and non-residents of Spain.

When is it compulsory to file Inheritance Tax for non-residents?

When a non-resident individual receives an inheritance or donation in Spain, he/she is obliged to self-assess the Inheritance and Gift Tax at the Tax Agency.

It is also applicable to individuals residing in Spain if the deceased was a non-resident or receives a property located abroad.

The national administration of this tax is carried out by the National Tax Management Office, a body of the Tax Agency.

In the case of the tax pertaining to Ceuta and Melilla, the management will correspond to the respective Delegation of the Tax Agency.

Application of regional or state inheritance tax rules for non-residents

Inheritance and Gift Tax in Spain is a state tax but the collection and management are autonomous. Therefore, each one of them has its own laws to regulate bonuses and reductions additional to the state ones.

Until recently, non-residents were not allowed to apply the regional regulations but, following some court rulings, this has changed.

In order to know which regional regulations are applicable, it is necessary to differentiate between the different cases that give rise to this tax:

1. Inheritance. In this case, the legislation where the deceased had his or her habitual residence on the date of accrual will be applicable.
2. Donation. Two cases must be distinguished:
   1. Donation of real estate. The regional legislation of the place where it is located applies.
   2. Donation of any asset except real estate. The regulations of the Autonomous Community where the recipient of the donation had his/her habitual residence on the date on which the donation is made apply.

However, there is one major exception to the application of a specific Autonomous Community regulation. This is the case when neither the testator nor the donee resides in any Autonomous Community and there is no other point of connection.

In this case, the body responsible for administering the tax is the Central State Administration, i.e. the State Tax Administration Agency, specifically the National Tax Administration Office.

Inheritance tax rebates for non-residents in the Autonomous Community

Most of the Autonomous Communities have approved important reductions for their residents, in particular for inheritances or donations in favour of direct relatives, and in some the amount paid is very low, so it is very interesting to know the Inheritance Tax rebates in the different communities.

Andalusia

In Andalusia there is an autonomous reduction for spouses and direct relatives up to 1 million euros. In addition, donations between parents and children are subsidised at 99%.

Other reductions for related taxpayers go up to 10,000 euros.

People with disabilities between 33% and 65% have a reduction of 250,000 euros for mortis causa acquisitions, which goes up to 500,000 euros for those with a degree equal to or greater than 65%.

Balearic Islands

A reduction of 57% will be applied to donations of real estate that will constitute the habitual residence of the person receiving it.

In the case of inheritances with descendants under 21 years of age, they will be entitled to a 99% rebate on the full tax liability.

Cantabria

All kinship groups may apply a reduction of 95% for the purchase of the principal residence of the deceased.

Catalonia

In Catalonia, the spouse or stable partner who inherits can apply a rebate of 99% of the tax liability. In addition, tax reductions may be applied depending on the relationship between the deceased and the heir or legatee.

For people with disabilities the reductions will be 275,000 euros for degrees of 33% and also for people over 75 years of age without disability, and 650,000 euros if it equals or exceeds 65%.

Reduction of 95% of the value of the deceased’s habitual residence, up to a maximum of 500,000 euros.

Madrid

Similarly to Murcia, donations between parents and children will be subject to a 99% rebate on the tax liability.

As in the case of Catalonia, reductions will also be applied according to the degree of kinship between the heir and the deceased and also according to the handicap of the heir or legatee.

If the deceased had a life insurance policy whose beneficiary is the spouse, ascendant or descendant, a 100% reduction applies, with a maximum of 9,200 euros.

The net value of the inherited main residence will be reduced by 95%, with a limit of 123,000 euros.

The same reduction shall apply to the company, business or holdings and to assets considered as historical heritage.

When a non-resident individual receives an inheritance or donation in Spain, he or she is obliged to pay Inheritance Tax. In many cases, they will be able to apply the regional regulations and benefit from the regional reliefs on Inheritance Tax for non-residents.

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