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Non-residents with property in Spain need to consider how to handle the Spanish inheritance tax system. It is quite complex and can differ between the various autonomous communities, i.e. the rules in Andalucia may be different to those in Catalonia, which is why you need the advice of an experienced lawyer in the region where you own property.

In Spain, inheritance government and regional authorities manage this tax, hence the differences between regions. The tax applies to:

  • Taxpayers who usually reside in Spain
  • Non-resident heirs who are inheriting property in Spain
  • Anyone receiving a payout from life insurance policies where the insurer is Spanish

Non-resident inheritance tax, Spain

Until recently, the inheritance tax rules were applied differently to non-residents. Before a new law came into being in 2015, non-residents often paid up to 80 percent more tax than Spanish residents. However, now inheritance tax laws can’t discriminate against non-residents and all EU citizens can ask to be treated in the same way as a Spanish citizen would, according to the local laws of their region.

One thing to note is this: inheritance tax in Spain is very closely based on the relationship of the heir to the estate owner. This was established to protect the rights of children of property owners. However, it becomes more complicated where there are no direct heirs, or in cases where a couple are not married.

Inheritance tax rates, Spain

This is where it gets complicated and where you need a tax lawyer to help with forward planning. For example, the biggest tax allowance is given to natural and adopted children under 21. Children over 21, spouses, grandparents and grandchildren are in the second category and have a lower tax free allowance. Unmarried partners will need to be registered as ‘pareja de hecho’, a de facto spouse, in some regions to qualify for the same level of exemption; otherwise, they don’t receive any tax allowance at all. Other relations, such as aunts, uncles, sisters, brothers and cousins etc get the smallest tax free allowance.

Check your liabilities back home

Overseas property owners may also be liable for inheritance tax in your home country. Even those who are considered resident in Spain might be liable and while you may be able to offset payment in one country against the amount demanded in Spain, this is something that requires expert advice.

Tax planning is something every property owner should think about after buying a property in Spain. Otherwise your heirs may find they have to pay more than is necessary.

Umuzee.com can help you find a lawyer to handle your tax planning in Spain.

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