Brexit has certainly affected many aspects of life in Spain for British nationals, but is inheritance tax one of them? In this blog post, we look at the rules to ascertain whether anything has changed for British heirs regarding inheritance tax in Spain.
Spanish Inheritance Tax Law and Norms
Although the law governing inheritance tax is national, i.e. the Spanish government sets out its rates and rules, the autonomous regions are responsible for collecting the tax. This means that each region applies different norms for deductions and discounts. These usually apply to close relatives only – e.g. spouse, children and parents.
As a result, you’ll find as many different deductions on inheritance tax in Spain as there are regions. And they’re very varied. For example, in Andalucia, the first €1 million value of assets is exempt. In the Balearics, the first €700,000 of asset value attracts just 1% tax.
How and When do the Regional Norms Apply?
Regional deductions apply on most inheritances in Spain. However, ascertaining which region applies can be a little complex, particularly when the heirs or assets are not in Spain.
Things have become easier since the National Tax Directorate (Dirección General de Tributos) recently made a final ruling.
Non-resident heir
When the heir to the assets in Spain is not resident, the regional inheritance deductions to apply depend on where the assets are. Under Spanish law, the estate must determine where the highest value of assets is located and apply the regional rates in this location.
For example, if a non-resident heir inherits a property on the Costa de la Luz (Andalucia region) valued at €150,000 and a property on the Costa Blanca (Valencia region) valued at €300,000, the inheritance tax rates in Valencia apply.
Find out more about inheritance tax and laws in Spain.
Heir resident in Spain
When the heir is resident in Spain and inherits assets liable to tax, the regional rates of his place of residence apply. This is the case even when the inherited assets are not in Spain.
For example, the heir lives in Marbella and inherits assets in the UK. These are liable to inheritance tax in Andalucia and the heir is eligible for any regional deductions there.
Resident deceased
If the deceased was resident in Spain but the heirs are non-resident, the estate applies the deductions in the region where the deceased lived.
For example, the deceased was resident in Mallorca but the heirs live outside Spain, the deductions applicable to the estate are those in the Balearics.
Tax on Non-resident Heirs
Under EU law, EU and non-EU heirs must have the same fiscal rights for inheritance tax in Spain. This means that Spain cannot discriminate between a French heir and an Australia heir when it comes to tax on inherited assets.
The Spanish Supreme Court has ratified this on several occasions, the most recent in 2018.
What Does This Mean for British Nationals?
Although the UK has left the EU and become a third country for many aspects of Spanish law, this is not the case with inheritance tax. British nationals are subject to the same rules and regulations as EU nationals when it comes to inheritance tax law in Spain.
Therefore, nothing has changed for inheritance tax after Brexit.
Take Professional Advice
Inheritance law is a complicated subject and you should always take legal advice when making a will and when inheriting assets in Spain. The expert team at Costaluz Lawyers has extensive experience in inheritance law in Spain – contact us to ensure peace of mind both for your legacy and your inheritance.
Maria Luisa Castro
