Spanish inheritance law for non-residents
When the deceased person is a non-resident in Spain, there is only taxation on the Spanish assets, whereas as the person was a resident, you will be taxed on your worldwide assets.
In order words, if you are inheriting Spanish property or money from a deceased person who was a non-resident in Spain, you will be liable to pay Inheritance Tax on their assets held in Spain. It does not matter if a person lives outside of Spain; you will still need to pay Spanish inheritance tax.
In addition, the Spanish inheritance law states there you will be able to get allowances and deductions. For example, there is a special allowance for spouses, parents and children who inherit the primary family home.
Differences between residents and non-residents
So when are you a tax resident or not? In Spain, generally, an individual is considered a tax resident if they have lived in Spain for more than 183 days in a calendar year. However, other factors may be taken into account for tax residency, such as whether the person has their economic centre of interest in Spain or if their spouse or children live in Spain.
Spanish inheritance tax rate for non-residents
Tax residents and tax non-residents, whether they are EU nationals or not, are subject to the same Inheritance Tax Rate in Spain. Therefore each calculation will be different. The Spanish inheritance tax is a progressive tax. This means that the tax rate depends on the value of the:
- Assets being inherited
- Relationship between the person inheriting and the deceased
- The amount of wealth the person inheriting already has
Every Autonomous Community has reductions, with the type and amount of tax rates varying considerably from one to another. In some regions, the Spanish law states that certain relatives may be exempt from paying succession tax.
Calculating the inheritance tax
Below, we have set out some key points on how Spain’s inheritance tax in Spain is calculated for non-residents. To understand the inheritance process we have outlined three steps below:
- The first step in calculating the inheritance tax is to calculate the estate’s value. For non-residents, this includes all assets located in Spain, such as property, savings, investments and other possessions.
- Make the proper deductions based on the tax allowances which depend on the degree of connection with the deceased or the sort of property received, as appropriate. The taxable base of the tax is adjusted according to kinship status.
- Once you have calculated the estate’s value, you will need to apply the relevant inheritance tax rates to find out how much tax is payable. These are between 7.65% and 34%, with a multiplier of pre-existing assets ranging from 1 to 2.4.
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Allowances and deductions that can be applied
There are some allowances and deductions you can take into account when working out how much Spanish Inheritance Tax you will need to pay. These include:
- The amount of any debts owed by the deceased
- If the inherited property is the primary residence of the deceased
- The value of any assets which are inherited by a person with disabilities
- Certain professional inheritances, such as businesses or farms
- and additional tax allowance for specific situations
When you have to pay tax, you need to take all of the relevant allowances and deductions into account. Therefore it is advised to do your due diligence or contact a law firm in order to make sure you don’t overpay any tax.
Foreign assets and the Spanish tax administration
It is important to note that non-residents who inherit assets in Spain are also subject to taxation in their home country. Therefore the double taxation treaties need to be taken into account to ensure no double inheritance taxes on assets in Spain and abroad are paid.
The Spanish Tax Authorities will not automatically exchange information about Inheritance Tax with foreign tax authorities. Still, they may do so if there is a request from a foreign authority or indications of fraud or tax evasion.
Who collects Spanish inheritance tax for non-residents?
The Spanish Tax Authorities on an Autonomous Communities level are responsible for collecting Inheritance Tax in Spain. In other words, when you need to pay Inheritance Taxes as a non-resident, you will pay taxes to the Spanish Tax Authorities in the Autonomous Community where the last habitual residency of the deceased was located.
If the deceased did not have regular residency in Spain, the Spanish inheritance law states that the place of taxation of the Spanish estate will be the tax office of Madrid or where the heirs have a habitual residence.
What can a Will do for the inheritance of non-residents
The Spanish Inheritance Law is different from other countries in the world. This means that if you are a non-resident in Spain and you die without having made a Spanish Will, your assets may not be distributed how you wanted or expected.
As a non-resident in Spain you can put the following in your Will that will override the Spanish Inheritance Law:
- You can choose which country’s laws you want to apply to your estate, which will override Spanish law.
- You can also choose which currency you want your estate to be valued in for Inheritance Tax purposes.
- You can appoint executors who live outside of Spain to administer your estate.
The Spanish Will allows you to specifically designate who will inherit your property, and how it will be divided. In addition, the Will can help to avoid potential conflicts between heirs that expected a different distribution and can provide peace of mind knowing that your final wishes will be carried out.
We strongly advise that all non-residents in Spain make a Spanish Will to ensure that their assets in Spain are distributed according to their wishes.
If you have any questions about Spanish Inheritance Tax or Wills, please get in touch with us and we will be happy to assist you.
Paying inheritance tax as a non-resident
As previously stated, when you inherit assets located in Spain as a non-resident or resident, you will be liable to pay Inheritance Tax
If you are inheriting property located in Spain, you will need to obtain a Spanish NIE number. The NIE number is needed to complete the sale or transfer of the property into your name.
The Spanish NIE number is also needed to deal with the Spanish tax authorities and open a bank account in Spain.
Deadlines for filing the tax
Over the inherited assets, the beneficiaries have six months since the death occurred to file the tax return and make the relevant payment.
In case of issues, the government may grant a six-month extension if requested within five months of death.
The surcharges for late payment must be included in the settlement if you obtain an extension. The request must be accompanied by a detailed value of the assets to be taxed.
If it is denied, the period is extended by several days equal to the amount of time that has passed since the filing of the application until notification. A provisional agreement can be reached through a formal request if the deadline is not made. If this is necessary, we recommend contacting a professional.
Receiving an inheritance as a resident
Similar to when you are a non-resident, if you are a resident of Spain and you inherit assets located in Spain, you will need to file a tax return with the Spanish Tax Authorities.
However, as a resident, you will be liable for Inheritance Tax on the worldwide assets, not just those held in Spain. This means that you will need to declare all assets located outside of Spain that you have inherited.
However, you don’t have to pay double taxes, so if you have already paid Inheritance Tax in another country on those assets, you can deduct that amount from what you owe in Spain.
Is the inheritance tax and gift tax the same for non-residents?
If your receive an inheritance, you will be liable to pay Inheritance Tax. If you give someone a gift, you may be liable to pay Gift Tax. Inheritance and gift tax rates are the same. The tax base, on the other hand, is the real worth of goods bought with fewer deductible costs and obligations. With certain exclusions provided by state laws.
A Word from SpainDesk
We hope that this article has clarified some of the questions that you may have had about Spanish Inheritance Tax and Wills for non-residents.
If you have any further questions, please don’t hesitate to get in touch with us and we will be happy to assist you. You can also find more information about Spanish Inheritance tax rates and the Spanish inheritance tax law in our dedicated posts.
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