State discounts on Inheritance Tax for non-residents in Spain

When the state regulations on Inheritance Tax are applied, allowances and reductions must be taken into account when certain requirements are met.

Who does the Inheritance Tax apply to?

The Inheritance Tax is applicable to non-resident individuals in Spain who receive an inheritance or a donation, who must self-assess this Tax at the Tax Agency.

must also self-assess at the Tax Agency, when the deceased was a non-resident, or when real estate located abroad is received as a donation.

How the Inheritance Tax works in Spain

The Inheritance and Donations Tax (ISD) in Spain taxes the transfer of goods and rights between natural persons.

When it comes to inheritance, the increase in wealth by natural persons is taxed free of charge.

The ISD is ceded to the Autonomous Communities, which have powers in collection and verification, and can also apply their own rules in relation to aspects such as tax rates or reductions in the tax base.

The Inheritance Tax is a progressive tax, in which there is no fixed percentage of tax, but the more you inherit, the more you pay. The general tax ranges from 7.65% to 34%, after which the discounts are applied, if applicable.

State allowances for Inheritance Tax

After the latest Supreme Court rulings, non-residents in Spain can apply the regional regulations, something that was not possible before.

However, there is an exception to the application of regional regulations and that is when the deceased or the donee reside in any Autonomous Community and there is no other connection point.

In this case, the competent body for tax management is the Central State Administration, that is, the State Tax Administration Agency, specifically, the National Tax Management Office.

Therefore, as a general rule, the discounts that apply are those of the Autonomous Community where the tax is filed.

In the case of the exception of the application of regional regulations or that this does not have any improvement, there are some state discounts.

Inheritance tax reductions due to the relationship of the taxpayer with the deceased or deceased person

The reductions depend on the relationship of kinship and are the following:

• Descendants under 21 years of age: from €15,956.87 to €47,858.59.
• Descendants over 21 years of age, spouses and ascendants: €15,956.87.
• Siblings, nephews and ascendants or descendants by affinity: €7,993.46.
• Children of nephews and first cousins, in addition to other degrees of kinship and strangers, there is no reduction.

Inheritance tax reductions for disability

Taxpayers who are legally considered disabled will have a reduction of €47,858.59. For this, the degree of disability will have to be equal to or greater than 33%.

For those with a degree of disability equal to or greater than 65%, the reduction will be €150,253.03.

Inheritance tax reductions for life insurance

100% reduction will be applied to the amounts received by the beneficiaries of life insurance contracts when the relationship with the deceased contracting party is spouse, ascendant, descendant, adopter or adopted.

Inheritance tax reductions for the transfer of an individual company, a professional business or shares in entities

It is applied when the acquirer is the spouse of the deceased, their descendants or their adoptees.

The reduction corresponds to 95% of the value of the company, business or shares.

It will be necessary to maintain said acquisition for the ten years following the death of the deceased.

Inheritance tax reductions for habitual residence of the deceased

On the inheritance of the habitual residence, a reduction of 95% is applied to the value of the property provided that the recipient is the spouse, ascendants or descendants or another relative over 65 years of age who has lived with the deceased during the two years prior to death. In both cases, the acquisition must be maintained for ten years.

Inheritance tax reductions for assets that are part of the Historical Heritage

reduction of 95% of their value will be applied as long as the heirs are the spouse or descendants and maintain the acquisition for ten years.

Inheritance tax reductions for transmission mortis causa of the same assets in a maximum period of ten years

When the same assets are inherited by transmission mortis causa in a period of ten years in favor of the descendants in the second and subsequent transmissions, the amount paid in this tax for previous transmissions will be deducted.

State Inheritance Tax rebates will be applicable to those non-residents who cannot apply the regional regulations. The most common reductions are for kinship, disability and those that depend on the asset transferred.

Further information

This article is part of our service Inheritance in Spain. Visit this section where you will find all the useful information on this topic.

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