How to Pay Less Inheritance Tax in Spain

Paying less inheritance tax in Spain sits at the top of most heirs’ priorities, closely followed by the need to avoid conflict of interests. These objectives are particularly common when two or more people inherit a property whose ownership they have to share. 

“Segregation procedure” is one way of avoiding potential conflict among heirs and a means to pay less inheritance tax in Spain. For this process to take place, the property in question must meet certain requirements and have approval from the authorities. In this article, we look at how it works. 

Read our guide to inheritance tax in Spain 

What is the segregation procedure? 

This process involves dividing the original property into one or more parts. As a result, the segregated parts become independent from the original property and may be registered as separate properties. 

When is the segregation procedure possible? 

It’s only possible to include this procedure in an inheritance when the property meets certain requirements and the region it’s situated in allows it. For example, the property must be a minimum size. We, therefore, advise that you find out if this option is available for the property you’re inheriting. 

Discover how international succession works in Spain

How does the procedure work?

If it is possible to carry out the segregation, the process follows these steps: 

  1. Obtain permission from the regional authorities. 
  2. Obtain permission from the community of owners. Note, however, this step is only necessary if the community of owners’ statutes does not mention it. 
  3. Sign the segregation deeds at a notary to allow each segregated part to be registered as separate properties in the Property Registry. 
  4. Inform the Cadastral Registry of the change in the property within two months of signing the deeds. This Registry then has six months to approve the segregation. Note that some notaries allow you to carry out this step directly when you sign the deeds. 

Find out how to apply for regional inheritance tax in Spain if you’re a non-resident

How does segregation help you pay less inheritance tax in Spain?

This procedure is subject to stamp duty (Impuesto de Actos Jurídicos Documentados/AJD) in Spain. The amount you pay is levied on the value of the segregated part only. As a result, you pay much less than if you’d inherited the whole property. 

You also do not need to pay transfer tax or municipal plus valía tax. 

What next?

If you are inheriting a property with others and believe segregation would be possible, get in touch with our legal team. We’ll be happy to provide a no-obligation quote to help you avoid conflict and pay less inheritance tax in Spain.

Maria Luisa Castro

Director and Founder
María founded CostaLuz Lawyers in 2006 and is the Firm’s Director. María is registered Lawyer number 2745 of the Cadiz Bar Association and is licensed to practice in all areas of law throughout Spain. Working closely with her team, María has developed the firm into one of the most highly regarded and trusted Spanish Law Firms acting for English-speaking clients with legal problems in Spain. We’re here to help. Contact us today for a free, no-obligation, initial legal orientation.
María Luisa De Castro - Costaluz Lawyers
 

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