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When you receive an inheritance in Spain, it is mandatory to face the tax obligations that arise.
Knowing the deadline for paying taxes derived from the inheritance is essential to avoid facing penalties and surcharges.
What taxes are paid when inheriting
In Spain it is necessary to pay taxes when receiving an inheritance. And the best thing, before making a decision about whether to accept or reject the inheritance, is to know them.
The main taxes when inheriting are the Inheritance and Gift Tax and the Tax on the Increase in Value of Urban Land, better known as municipal capital gains tax.
Inheritance Tax
The Inheritance and Gift Tax applies both in the case of inheritances and donations during life.
It is a tax assigned the Autonomous Communities, which have the authority over this levy, and it taxes the capital gains obtained by natural persons.
Although there is a state law that establishes the general rules of the tax, each Autonomous Community has its own regulations and there are important differences in the payments between different regions of Spain.
The taxable base for this tax in the case of inheritances is the net value of the individual acquisition by each heir. This value will be that of the received assets and rights minus the deductible charges and debts.
Once the amount to be paid has been calculated, the different reductions approved by the State and each Autonomous Community can be applied.
Capital Gains Tax
Although the most important tax on inheritances in Spain is the Inheritance Tax, there is also another tax that is usually paid in nearly all cases.
The Tax on the Increase in Value of Urban Land (IIVTNU), commonly known as Capital Gains Tax, is a municipal tax that is applied in the event that any of the inherited assets is real estate.
This tax also applies in the case of the sale of an apartment or house.
In accordance with the regulations, the taxable base of this local tax is calculated by multiplying the cadastral value of the land at the time of accrual by the coefficient approved by the Municipality where the specific property is located.
This tax will be applied, at most, based on the increase registered in the last 20 years.
Regarding the coefficient set by the Municipalities, there are also certain limitations. Additionally, they can correct the cadastral values of the land downwards by up to 15% to adapt to the reality of each municipality.
What is the deadline to pay inheritance taxes?
We will now examine when inheritance taxes need to be paid in Spain.
In the case of Inheritance Tax, the deadline to settle it is 6 months. However, there is the possibility of extending this period upon request and by paying the corresponding surcharges and interest.
For the capital gains tax, in the case of inheritance transmissions, the deadline is also 6 months from the date of death. This time period may be extended up to one year as long as the application is submitted within the first 6 months.
What happens if I do not pay the taxes on time?
The Tax Agency establishes deadlines for the payment of each tax. If these are not met, it usually imposes surcharges and penalties.
If you inherit and do not pay the Inheritance Tax, interest and penalties will accrue, even if you file it later. Failure to comply with the submission deadline will result in a financial penalty that you will have to face, ranging from 50% to 150% of the unpaid amount. Additionally, surcharges of between 5% and 20% may apply.
As for the other main tax, the capital gains tax, if it is not submitted on time, the Municipality may initiate an inspection procedure. This procedure verifies whether tax obligations have been met. If the tax has not been submitted, a non-compliance will have occurred and it will be associated with a sanctioning procedure, which is very common.
If the Capital Gains Tax has been declared but not paid, the total amount will be increased with surcharges of between 5% and 20% and possibly late payment interest.
In the event of non-declaration of the Capital Gains Tax, the municipality will request:
- Payment of the tax amount;
- The corresponding late payment interest;
- A penalty ranging from 50% to 150% of the adjusted tax amount.
Therefore, in both cases, it is highly advisable to comply with the deadlines for filing and paying taxes.
The main taxes to pay in Spain when receiving an inheritance are the Inheritance Tax and Capital Gains Tax. In both cases, the deadline for submission and payment is 6 months from the date of death, and failure to do so on time results in surcharges, interest and penalties.
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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