The Spanish tax authorities (Dirección General de Tributos/DGT) have recently confirmed that non-residents can apply regional inheritance tax to assets inherited or donated in Spain.
As a result, the latest decisions have opened the door to non-residents enjoying more generous deductions than those applied at the state level.
When it comes to inheritance tax, Spain applies state regulations. However, collecting and managing the tax is in the hands of the regional governments, including allowances and deductions.
While the differentiation is crystal clear for Spanish residents, it becomes more complex when the beneficiaries of the estate or donation are not tax-resident in Spain.
However, the tax authorities have recently made several pronouncements on this matter, and consequently, non-residents in Spain can apply for regional inheritance and donation tax.
Applying regional inheritance tax for non-residents in Spain
The DGT allows regional inheritance tax rules in the following cases:
- Estate belonging to a non-resident in Spain – inheritance tax regulations apply in the region where assets of the highest value are located. For example, if the deceased had assets worth €200,000 in Andalusia and €150,000 in Murcia, the tax regulations in Andalusia would apply.
- No assets in Spain, but heirs are resident in Spain – they may apply inheritance tax regulations in their region.
- Resident deceased but non-resident heirs – the heirs may apply the inheritance regulations in the region where the deceased was resident.
Applying regional donation tax for non-residents in Spain
The DGT allows regional regulations in the following cases:
- Donation of property – the recipient may apply regional donation tax in the region where the property is located.
- Donation of moveable asset or right – the recipient may apply regional donation tax valid in the region where the asset or right has spent most days in the previous five years.
Paying inheritance and donation tax in Spain
As we have seen in the above examples, non-residents in Spain may apply for regional inheritance or donation tax. However, because they are non-residents, the taxes must be filed and paid at the state level.
If you wish to apply regional inheritance regulations for allowances and/or deductions, you must state this option when filing the tax forms.
You do this using form 650, which includes a section where you state which regional regulations you wish to apply.
Getting help with inheritance tax
This tax is notoriously complicated in any country and Spain is no exception. And of course, there’s the added complexity of regional regulations.
To ensure that you file the right forms and benefit from maximum allowances and deductions, get in touch with our expert team.