How much tax do you pay when receiving an inheritance in Spain?

One of the most feared aspects of any transaction is the potential tax implications. When you receive an inheritance in Spain, you’ll also have to pay various taxes.

Inheritance tax

This tax is primarily applied when an inheritance is received after death.

It is paid for the transfer of the deceased’s assets to another natural person.

Payment is mandatory for the heir throughout the Spanish territory, although its management is assigned to the Autonomous Communities.

Who is required to pay inheritance tax?

Those required to pay this tax are the heirs. The following may also be required to pay it:

The beneficiaries, in cases of acquisitions mortis causa.
The donee, when inter vivos donations are made.
The beneficiaries, in the case of life insurance.

How much inheritance tax do you have to pay?

There is no fixed amount payable for inheritance tax. It varies depending on the following factors:

Relationship to the deceased. The closer the relationship to the deceased, the less the payment will be.
Value of the assets. The tax is paid based on the value of the assets received by the heir, so if the value received is high, more will have to be paid.
heir’s assets. The heir’s assets influence the tax calculation, taking into account the most recent Wealth Tax Return, which must be filed.

In addition to these factors we’ve discussed, inheritance tax also varies depending on the Autonomous Community in which the deceased or heir lived. Therefore, the percentage established in each region must be taken into account for this case.

The Autonomous Communities each apply bonuses and reductions depending on the degree of kinship or the value of the inheritance.

When and where should I pay the Inheritance Tax?

Once it is clear that there is an obligation to pay this tax, it must be done within the deadline to avoid problems.

Inheritance tax must be paid within six months of the date of the deceased’s death. The heir can request an extension before the end of the first five months, but this will incur late payment interest.

Failure to pay the Inheritance Tax within the established deadline may result in the risk of having to pay various financial penalties, which are set out in the Inheritance and Gift Tax Law.

Inheritance tax must be paid in the Autonomous Community where the deceased resided, regardless of where the assets that form part of the estate are located.

Other taxes

Although, as we’ve already seen, inheritance tax is the most important tax in the transfer of an inheritance, other taxes may also be payable. This will depend on the type of assets in the inheritance.

The two taxes we are going to look at are directly related to real estate.

Capital gain

Capital gains tax is the name given to the Tax on the Increase in the Value of Urban Land. This means that if the property is classified as rural, this tax is not applicable; it applies only to urban properties.

It is of a municipal nature, that is, it depends on the City Councils and taxes the increase in the value of a real estate property during the time in which the property was in the deceased’s estate.

If, for example, the deceased purchased a home worth €60,000 at the time of purchase, and when the property is transferred, its valuation rises to €200,000, a capital gains tax will have to be paid for this increase in the property’s value.

What we mean by this is that capital gains tax is only payable in cases where the property has increased in value, which, incidentally, is the most common. However, if it has lost value, for example due to a devaluation of the area due to a negative situation, this tax will not be payable.

IBI

The Real Estate Tax (IBI) is a municipal tax, of a periodic nature, that taxes the value of real estate in a municipality, whether urban, rural or with special characteristics.

It is a mandatory tax in all municipalities in Spain, and the obligation to pay it falls on the holders of rights to the property, whether ownership, usufruct, or any other. As we’ve seen, upon receiving a property, the principal inheritance tax must be paid, which varies depending on the relationship with the deceased, the value of the inheritance, and the Autonomous Community in which the deceased resided. However, there are also other taxes, such as property tax and capital gains tax, that must be paid if real estate is inherited.

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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