Key aspects of inheritances involving non-residents

If you are going to receive an inheritance, you may have questions about the taxes you must pay for the assets you are going to receive.

Furthermore, inheritances involving non-residents have more particularities, since different regulations may apply depending on the country of nationality and according to the legislation of the Autonomous Communities.

Which country’s taxation rules apply?

European legislation makes it possible to choose the country whose inheritance laws will apply if the deceased specified it in their will. This is because it gives priority to the will of the testator.

Thus, any person may decide before they die the legislation of the state whose nationality they hold at the time of the choice or at the time of death.

When the deceased person has several nationalities, they may choose the law of any of the states whose nationality they hold at the time of making the choice or at the time of death. If the country whose legislation will apply to the succession is not specified, the law of the country of the deceased’s last usual residence will generally apply to their succession if they died in Spain or any other European Union state.

Applicable taxes

The tax applicable to inheritances is the Inheritance and Gift Tax (ISD).

The Inheritance and Gift Tax has the following characteristics:

Direct.
Personal.
Subjective.
Progressive.
Self-assessable, according to the regime established in some communities

Obligations to pay the tax

The individuals who have the obligation to pay the Inheritance Tax are:

Heirs, legatees and beneficiaries of testamentary titles.
Donees or beneficiaries of any other legal transfer between living persons.
Life insurance beneficiaries.

Inheritance Tax calculation

Although the Inheritance and Gift Tax is a national tax, it is managed by the Autonomous Communities. This means that each of them has its own regulation and peculiarities.

This is why the calculation may be different in each region of Spain, taking into account both state and regional regulations.

However, the calculations in all cases take into account the following concepts:

Gross hereditary mass. It is made up of the real value of the assets and rights of the inheritance.
Net hereditary mass. It is the result of subtracting charges, debts and deductible expenses from the gross estate.
Individual hereditary share. It is calculated by dividing the net mass by the number of heirs and what corresponds to each one according to the will or inheritance law.
Taxable base. It is made up of the hereditary share plus the life insurance, if any.
Taxable base after deductions. It is the tax base minus the applicable reductions based on the Autonomous Community where the tax is paid. Common reductions include kinship, disability or type of assets.
Total tax liability. The corresponding tax rate or percentage is applied to the taxable base. The more inherited, the more paid, ranging from 7.65% to 34% of the taxable base after deductions, according to state regulations.
Tax amount. It is the result of applying the multiplier coefficient to the total tax liability. It varies depending on the patrimonial increase and the kinship group.
Total amount to pay. The deductions and bonuses determined in the regulations of each Autonomous Community are applied to the tax amount.

Deadlines to pay the tax

The deadline for submitting the Inheritance Tax is 6 months from the date of death or declaration of death of the owner.

A 6-month extension can be requested within 5 months of death. The request must include an approximate valuation of the assets to be taxed and an explanation of why it is requested.

If granted, the payment will include a late-payment fee in addition to the amount due.

If the requested extension is not granted, the deadline to pay the tax is extended by a number of days equal to those elapsed from the submission of the request until the notification of the denial. If the deadlines expire and the submission has not been made, a provisional settlement can be carried out. As we have seen, it is important to know some fundamental aspects in relation to inheritances involving non-residents. The country whose laws will be applicable to the succession can be decided by the testator in their will before death. The main tax that must be paid is the Inheritance and Gift Tax, which is a national tax but managed regionally, so there may be differences in payments across different regions of Spain. Those obliged to pay are mainly the heirs and must do so within 6 months after death.

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, including a complete guide on Inheritance in Spain with a non-resident, expat or foreigner.

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