Inheritance tax in Spain: A full guide on the inheritance process

Spanish Inheritance Tax: Regulations for Estates

Inheritance tax applies to both, those who reside in the country and non-residents. This tax, also known as succession tax (impuesto de sucesiones y donaciones or ISD), is a progressive tax that becomes due when an individual receives inherited assets – whether property, money, or any other form of asset – from a relative or friend.

Spanish law outlines how your estate can be distributed. However, these regulations are not uniform across the country and depend on your place of residence. Although Spanish inheritance law originates from the national civil code, regional laws enacted by the autonomous communities lead to considerable differences in how similar estates are treated regarding inheritance tax. Catalonia, Aragon, Galicia, the Balearic Islands, the Basque Country, and Navarre have their own specific succession rules.

In the absence of regional regulations, the Spanish Civil Code is applied.

Mandatory Heirship Regulations in Spain

Several regulations govern how your estate is distributed in Spain. If Spanish inheritance law applies to your estate, mandatory heirship rules (known as the Law of Obligatory Heirs in Spain) come into effect. This means there are limitations on how you can distribute your assets, as a certain portion must be reserved for close relatives.

The first and fundamental legitimate portion is for children and descendants. The surviving spouse also has a right, although with particular characteristics.

Compulsory succession is defined in articles 806 to 822 of the Civil Code, although regional provisions must be taken into account.

Article 806 applies in any situation where a person dies and leaves a will. This article protects the right of compulsory heirs to receive a portion of the inheritance, even if the testator wishes to dispose of all their assets in favour of other persons.

This article is particularly important in cases where the testator attempts to disinherit or drastically reduce the inheritance of their descendants, spouse or parents, as they cannot affect the portion corresponding to the compulsory portion without a legally justified cause.

Regimes and rights of the spouse

Article 808 on the spouse, free distribution of one third: a testator has three children but decides to allocate the free third of his estate to his spouse or a close friend. The children are entitled to two thirds of the legitimate portion, but cannot claim the third that the testator can dispose of freely.

• Right to usufruct: If there are heirs (such as children), the wife is entitled to usufruct of a portion of the inheritance. The percentage of usufruct varies depending on the presence of other heirs:
• • With children or descendants: 33.33% (one-third) of the inheritance in usufruct.
  • Without children but with parents: 50% of the inheritance in usufruct.
  • Without children or parents: 66.66% (two-thirds) of the inheritance in usufruct.

Spousal regimes and rights

• The community of property regime is a matrimonial property regime in which the assets acquired by both spouses during the marriage are considered common and are divided equally upon dissolution of the partnership. This regime applies by default if nothing else is agreed, creates a common estate together with the separate estates of each spouse, and can be established through a marriage contract or applied automatically in some regions.

Upon the death of the husband, the wife receives 50% of the community property as her share of the property, without the need for inheritance. The other 50% of the community property, plus the deceased's private property, constitutes the estate, to which the wife also has rights as an heir (and which may increase if there is no will).

• Separation of property is a matrimonial property regime in which each spouse maintains independent ownership and administration of their assets, both those they had before and those they acquire during the marriage. This means that, in the event of divorce, their assets are not divided, unlike in the community property regime.

In this case, the property belonging to each spouse is individual. Therefore, upon the death of the husband, the wife does not inherit 50% of his property. All of the deceased's property is distributed among his heirs, and the wife, unless otherwise specified in the will, does not receive 50% in her own right.

Therefore, if Spanish inheritance law applies, foreign residents in Spain can only freely dispose of one third of their assets, as the remaining portion is reserved for compulsory heirs. However, if an international or Spanish will stipulates that the laws of the deceased's country of origin should apply, Spanish inheritance law will not govern either Spanish or international assets.

What happens if a foreign resident dies without a will in Spain?

If a foreign resident dies intestate (without a will) and owns any kind of property or assets, a potentially lengthy and complicated process will ensue. Spanish law mandates that the inheritance process must be completed within six months, making it crucial to contact a lawyer promptly.

If the death occurred outside of Spain, the beneficiaries of the estate will need multiple original death certificates for official purposes. If these certificates are not in Spanish, they must be officially translated and either legalized or apostilled.

To claim or manage a Spanish estate when the owner died without a will, you must apply for a grant of probate. EU citizens can typically apply for this in their own country. Again, these documents must be translated and then legalized or apostilled before they can be presented to a Spanish public notary to claim the inheritance.

Your lawyer can also request confirmation from the Central Registry of Spanish Wills El Registro de Actos de Última Voluntad  that the deceased did not have a will in Spain.

Generally, the key documents required include:

• Death certificate (translated and legalized)
• Legalized copy of the deceased's passport
• Spanish Tax Identification Number for Foreigners (NIE)
• Power of attorney from the heirs
• Copies of the heirs’ passports
• Birth and marriage certificates, if applicable (to prove relationships)
• NIE numbers of the beneficiaries, if applicable
• A list of the deceased's assets
• Up-to-date bank statements, if applicable

Unclaimed Spanish Inheritance

If an inheritance is not claimed, if there are no legal heirs, or if all beneficiaries refuse the inheritance, the estate will be transferred to the Spanish state.

Spanish Inheritance Tax

The Spanish General Directorate of Taxes (Agencia Tributaria), often called Hacienda) is responsible for administering inheritance tax and related allowances in Spain. This is done according to the country’s Inheritance and Gift Tax Act (IGTA), which provides a general framework for regulating these taxes.

Although the Inheritance and Gift Tax is a state tax, it has been transferred to the autonomous communities, which establish their own regulations based on this law, including tax rates, reductions and allowances.

Unlike some other countries, in Spain, the individual who receives the inheritance pays inheritance tax on assets received after death and on gifts received during the donor's lifetime. Inherited pension funds are also subject to succession tax.

Brussels IV, EU Succession Regulation

Changes in European Union regulations in 2015 have provided EU citizens residing in Spain, as well as individuals from several non-EU countries, with the option to choose whether the inheritance laws of their home country or their country of residence (Spain) will apply to their estate. This choice must be expressly stated in a will.

• EU Regulation 650/2012 (Brussels IV) grants this right to all individuals habitually resident in an EU member state (except Denmark, Ireland, and the UK, which opted out of the regulation itself, but Spain applies the rule universally).
• Default Law: If no choice is specified in a will, the law of the deceased's habitual residence at the time of death will automatically apply, which would be Spanish law for residents in Spain.
• Forced Heirship: Choosing your national law is a common strategy to bypass Spain's "forced heirship" rules, which reserve specific portions of the estate for children and a spouse.
• Documentation: To ensure the choice is effective and to simplify the process for heirs, it is highly recommended to make a Spanish will and explicitly state the choice of law. 

Furthermore, the updated regulations concerning Spanish inheritance and gift tax ensure that non-residents from within the EU/EEA are treated in the same way as residents for tax purposes.

Spanish Inheritance Tax Rates

The national government sets the Spanish Inheritance tax rates, which are progressive and fall into the following brackets based on the value of the inheritance:

Reduction of your inheritance tax in Spain

Spanish law provides several allowances that can reduce inheritance tax. These allowances vary depending on the relationship between the heir and the deceased. For inheritance tax purposes in Spain, beneficiaries are categorized into four groups:

• Group I: Children (biological and adopted) under 21 years old receive an allowance of €47,859.
• Group II: Children (biological and adopted) over 21, grandchildren, spouses, and parents/grandparents (including adoptive) receive an allowance of €15,957. Some regions may recognize unmarried partners registered as a pareja de hecho.
• Group III: Siblings, aunts, uncles, nieces, nephews, in-laws, and their ascendants/descendants receive an allowance of €7,993.
• Group IV: Cousins, all other relatives, unmarried partners (unless recognized regionally), and unrelated individuals receive no allowance.

Individuals with disabilities are entitled to an allowance of either €47,859 or €50,253, depending on the degree of disability.

Each Spanish region has the discretion to modify these tax allowance amounts. For example, Valencia, Andalusia, and Catalonia all offer significant inheritance tax reductions for spouses and children. Therefore, it is important to consult with regional authorities to determine the exact amount of Spanish inheritance tax owed.

Tax Exemptions on Property

There are also allowances related to Spanish property. The inherited value of the deceased's primary residence may qualify for a 95% reduction, up to a limit of €122,000 per inheritor. This reduction is only applicable to beneficiaries in Groups I or II, or if a relative over 65 years of age had been living with the deceased for at least two years before their death. 

Furthermore, if the heirs do not sell the main residence of the deceased within five years, they may be eligible for an additional tax allowance.

Inheritance Tax for Spouses

Currently, there are no universal exemptions between spouses, unlike in other countries. When a married couple resides in Spain, the surviving spouse may be fully liable for inheritance tax on the deceased's worldwide inherited assets, subject to applicable deductions and reductions.

In certain Spanish regions, unmarried couples who are registered as a pareja de hecho and live together have the same legal rights as married couples. The specific term for this registration can vary by region. Additionally, in some cases, minor children may be eligible for an additional exemption for each year until they reach the age of 21.

Gift Taxes in Spain

The Spanish state treats gift tax and inheritance tax together. Inheritance tax is levied on any increase in wealth resulting from someone's death. Conversely, gift tax is payable on increases in wealth due to gifts from a living person. The definition of what constitutes a gift for tax purposes can be complex; for instance, allowing someone to use your property might be considered a gift. Such gifts may also be subject to personal income tax on any potential capital gains.

However, unlike Spanish inheritance tax, gift tax in Spain must be declared within 30 calendar days of the gift being made. The beneficiaries are responsible for these payments from the date the gift is received.

Gift tax is calculated based on the net value of the assets and rights involved. It is levied at the same progressive rates as Spanish inheritance tax, as detailed in the table above. The same allowances also apply to gift tax.

Block Field

A specific rule applies to gifts of real estate. In these cases, the municipal tax on the transfer of real estate is also triggered, although certain exemptions may exist.

Since 2015, Spain has aligned its gift tax rules with EU regulations, offering the same fiscal advantages as other EU countries. This is particularly relevant for British nationals following Brexit, as non-EU members typically face higher tax rates with no applicable allowances or reductions. It is advisable to seek legal help for specific advice regarding your situation.

Paying inheritance and gift taxes in Spain

Spanish inheritance and gift taxes can be paid directly to the Agencia Tributaria. This can be done by completing out  Form 650, a self-assessment inheritance tax return, on the authority’s website. For gifts made within the lifetime of the donor (inter vivos­) it’s Form 651 that you need instead.

This tax ranges from 7.65% to 34%, but some autonomous communities have modified the values and, in some cases, the brackets have been reduced as is the case in Catalonia. Likewise, there are other autonomous communities whose brackets are wider, for example, in Asturias they are between 7.65% and 36.50%.

Madrid leads the way in reductions, while Andalusia, the Valencian Community, Galicia, Murcia, Castile and León, La Rioja, Extremadura and the Balearic Islands offer 99% tax breaks for direct relatives.

The amount to be paid depends on the valuation of the inherited assets, so it is a progressive tax: the more you inherit, the more you will pay. However, with the different regulations in place, it is difficult to determine the exact amount to be paid.

Given the intricate rules governing gift and inheritance tax in Spain, it is highly advisable to consult with a specialised lawyer to act on your behalf. This can be especially useful for people residing outside of Spain.

Documentation required to pay the tax

The documentation required to present the inheritance and gift tax return to the Tax Agency is as follows: 

• Death certificate and Certificate from the register of last wills and testaments (Certificado de últimas voluntades) provided by the Ministry of Justice.
• Declaration of heirs or private document stating the assets of the deceased.
• Copy of the Spanish Tax Identification Number for Foreigners (NIE) of both parties.
• Certificate from the banks reflecting the current account balance and deposits at the date of death.

Deadline and Penalties for Spanish Inheritance Tax

Spanish authorities will not release an estate until all due inheritance tax has been paid. Beneficiaries have six months from the date of death to pay these taxes. However, it is possible to request a one-time extension of an additional six months or to arrange payment in installments. Taxes that remain unpaid after this deadline incur an additional 5% surcharge every three months, up to a maximum of 20%.

Failure to pay the tax or any associated penalties may result in the state seizing and selling the inherited assets.