Inheritance Tax & Laws in Spain

Inheritance tax in Spain affects everyone who owns assets in the country, regardless of whether you are resident or not. While inheritance tax (IHT) is independent to how and who you leave your assets to, your heirs will have to pay IHT when they receive them. How much they pay depends on where your assets are located because, to make things a little more complex, each autonomous region in Spain levies a different rate.

It’s therefore important to know as much as possible about inheritance tax in Spain and to help you, we’ve put together this comprehensive guide. In it, you’ll find answers to basic questions plus detailed information on the rates applied in each region.

As a foreign resident living in Spain the subject of inheritance tax (impuesto de sucesiones y donaciones) will probably come up at some point.

Whether you own property and assets here in Spain or in your native country, you will need to know the tax implications when you make a will or decide to leave or gift money to your loved ones.

Inheritance tax is paid when a relative or friend bequeaths you money, property or assets. If you accept assets as a gift or donation you are also liable to pay tax. Beneficiaries have six months from the death of a relative or gift deed, to declare the inheritance. The inheritance won’t be paid to the beneficiary until the tax due has been paid.  

The right legal advice

But, before the guide, a caveat. Inheritance is a complex topic in any country, particularly when you’re not familiar with the law and language. To ensure your assets are protected and that your heirs pay only the tax they should, take professional legal advice.

At Costaluz Lawyers, we offer independent advice on making a will in Spain and the inheritance process itself. Get in touch to book your free consultation now. 

How does Inheritance Tax in Spain work?

IHT (known as Impuesto de Sucesiones y Donaciones (ISD) in Spanish) is a progressive tax that is paid by the individual who receives assets on inheritance (e.g. property, shares, money etc).

The same tax applies if you receive an asset as a gift.

What’s the timeline for IHT?

You have six months from the date of death to declare IHT in Spain. You can request an extension, which, if accepted, gives you an addition 183 days. You also have the possibility of paying the tax in instalments.

Is there a penalty for late payment?

If you have not requested an extension and fail to pay IHT within six months of the date of death, there is a surcharge. It is a percentage applied to the amount owing as follows:

Up to 3 months delay	5%
Up to 6 months delay	10%
Up to 12 months delay	15%
Over 12 months delay	20%

In addition to the surcharge, you must also pay interest, which increases exponentially.

Is IHT the same everywhere in Spain?

No, it is not. Each autonomous region has its own reductions, deductions and allowances. There are also nationwide regulations that act as suppletory when regional law cannot be applied.

How do I know which IHT regional law to apply to my case?

It depends on the residency status of both the heir and the deceased.

Resident heir and deceased in Spain – you apply the IHT regulations in the region where you live. So, for example, if you live on the Costa de la Luz, you apply Andalucian IHT rules.

Non-resident heir and resident deceased – you apply the IHT regulations in the region where the deceased was resident.

Non-resident heir and deceased – you apply the IHT regulations in the region where the asset with the highest value is located. For instance, if the non-resident deceased owned a property in Andalusia valued at €100,000 and another in the Balearics worth €250,000, the IHT regulations in the Balearics would apply.  

Do non-residents pay higher taxes than residents?

No, since 2015 the IHT rates and allowances are the same for residents and non-residents.

How is IHT calculated?

Spain has a three-step process for calculating inheritance tax:

1. Ascertain the tax value of the assets. In the case of properties, this is calculated from the tax value (cadastral registry and local index).
2. Apply reductions and/or allowances to the taxable amount.
3. Apply tax credits on the final taxable amount.

What determines IHT allowances in Spain?

Spain uses a system based on the relationship of the heir(s) with the deceased as follows:

Group I: Natural and adopted children under 21.
Group II: Natural and adopted children over 21, spouse, registered civil partners, parents, adoptive parents, grandparents and great-grandparents.
Group III: Relatives of the second and third degree (e.g. in-laws, siblings, nephews/nieces and aunts/ uncles).
Group IV: Relatives of the fourth degree or with no kinship, for example, a friend or common law partner.

What other IHT tax allowances exist in Spain?

Inheritance tax in Spain has both state and regional allowances.

State allowances

In Spain, these apply to both residents and non-residents.

Allowances for relatives:

Group I: just €16,000. An additional deduction of €3,990 for each year they are under 21. The total deduction is limited to €47,858 per child or grandchild.

Group III: €7,933.

Group IV: There is no exemption for unrelated beneficiaries, including unmarried couples unless they are registered as partners.

Main Home

For the purposes of inheritance tax in Spain, ‘main home’ is the property in which the heir has lived for at least three years before the death of their spouse, parent or child. The exemption also applies if the heir is a more distant relative over the age of 65 and lived with the deceased for at least two years.

To quality for this allowance, the heir must be a spouse, parent or child and continue to own the property for ten years from the date of death.

If all the conditions are met, the value of the house for inheritance purposes may be reduced by 95% with a maximum reduction of €122,606.

Life insurance allowances

The maximum permitted is €9,195.

What happens if an asset is inherited more than once within a short time?

If an asset such as a property is inherited more than once within a timeframe of ten years, the Spanish inheritance tax paid on the first transmission is fully deductible on the second and subsequent, transmissions. As a result, almost no tax would be paid if the second death comes within ten years of the first.

Need information on inheritance tax law in Spain? Read our guide.

Regional IHT in Spain

The rest of the guide to inheritance tax in Spain covers the allowances and deductions available in the different autonomous regions. Just click on a region below to read the information.

Andalucia

Andalucía is one of the regions in Spain where IHT has almost been abolished. There is a general reduction of up to €1 million for the spouse and direct relatives plus a reduction for disability. There are also deductions for the following assets.

• Habitual residence
• Individual company, business, professional and shares in entities
• Agricultural holdings.

Aragon

In this part of northeast Spain, there are deductions for:

• Kinship
• Individual company or professional business
• Shares in companies
• Habitual residence
• Disability
• Spouse, ascendants and descendants
• Business creation and employment.

Asturias

Heirs to assets in the small region of Asturias are eligible for deductions in the following instances:

• Main house of the deceased
• Individual company, professional business or Shares in entities located in Asturias.
• Equalization of inherited assets.

Balearic Islands

On the islands of Mallorca, Menorca, Ibiza and Formentera, the following deductions are applicable to inheritance tax in Spain.

• Main home
• Life insurance
• Acquisition of goods and rights related to economic activities
• Equity interests in entities, shares
• Assets that are part of the historical or cultural heritage of the Balearic Islands
• Assets of the Spanish historical heritage or historical or cultural heritage from other autonomous communities
• Consecutive transfer of goods

There are also deductions for kinship and disability.

Canary Islands

Inheritances of assets on the Canary Islands (Fuenteventura, La Gomera, Gran Canaria, El Hierro, Lanzarote, La Palma and Tenerife) may apply deductions for:

• Life insurance
• Individual company, professional business and company shares and main home
• Acquisition of shares in non-listed companies (except institutions for collective investment institutions)
• Main home of the deceased
• Acquisition of assets that are part of the Historical or Cultural Heritage
• Reduction for the acquisition of assets that are part of the Natural Heritage.

There are also deductions for age, kinship and disability.

Did you know? Inheritance tax rates in Spain are standard. Find out what they are.

Cantabria

The small northern region applies deduction for kinship and disability as well as for the following inherited assets:

• Life insurance
• Individual company, professional business (including those related to production and marketing in the livestock, agricultural or fishing sectors) and Shares in entities or usufruct rights over them
• Main home of the deceased
• Historical or cultural heritage assets.

Castilla y León

You’re entited to deductions for kinship, disability and de facto union in this part of Spain as well as on assets such as:

• Agricultural exploitation or right of usufruct over it
• Individual company or professional business
• Shares in entities
• Compensation paid by public administrations
• Extraordinary public benefits
• Movable assets of historical heritage.

Castilla-La Mancha

Deductions for kinship and disability are available as well as for:

• Acquisition of an individual company, a professional business or shares in non-listed entities. 

Cataluña

This region of Spain applies deductions for inheritance tax in Spain for kinship, disability and heirs over 65 as well as for assets such as:

• Life insurance
• Acquisition of goods and rights related to an economic activity
• Shares in entities
• Shares in entities by people with employment or professional ties
• Main home of the deceased
• Acquisition of rustic farms with forest status
• Inheritance of cultural heritage assets
• Inheritance of natural heritage assets
• Acquisition of assets of the deceased used in agrarian entreprises owned by the heir.

Comunidad Valenciana

Kinship and disability deductions apply in the region on the Mediterranean as well as for

• Individual agricultural company
• Assets of the historical-artistic heritage
• Individual company or professional business
• Shares in companies.

Extremadura

In this region, heirs are entitled to deductions for kinship and disability as well as for:

• Main home of the deceased
• Agricultural holdings.

Find out how to reduce inheritance tax in Spain.

Galicia

Deductions for kinship and disability apply plus for the following assets:

• For the acquisition of assets and rights related to an economic activity and shares in entities, 99% of the value of the individual company or professional business or of shares in entities or usufruct rights over them.
• For the acquisition of agricultural holdings and related elements
• For the acquisition of the deceased’s main home
• For the acquisition of rural properties included in the Galician network of protected areas.
• For the acquisition of forest land that forms part of the joint management and commercialization area of ​​productions carried out by groups of forest owners
• Amounts received by the beneficiaries of life insurance.

Madrid region

In the capital region, heirs benefit from deductions for kinship and disability as well as for:

• Life insurance
• Individual company, professional business, participation in eligible entities (see article 4 (4.8º) of Law 19/1991)
• Main home
• Assets that form part of the historical or cultural heritage of Spain regions.

Murcia

This region applies deductions for kinship and for assets in:

Individual company, professional business and shares in entities.

Navarra

In this small region in northeast Spain, heirs are eligible for a deduction on the acquisition of land declared part of protected natural areas or proposed as sites of community interest within the European Natura 2000 network.

País Vasco/ Basque Country

The Basque Country applies no specific deductions on inheritance tax in Spain.

La Rioja

Heirs may apply deductions for kinship in this small region plus for assets including:

• Individual company, professional business and Shares in entities
• Agricultural exploitation
• Main home.

What are the inheritance laws in Spain?

Amendments to the succession bill were introduced here in Spain in 2015 to fall in line with European regulation 650/2012 which can have significant implications for some inheritance beneficiaries. It’s important to be aware of your individual situation and update your will, if necessary, so as not to leave your beneficiaries with problems and, potentially, in lengthy litigation cases fighting over an inheritance.  

Inheritance tax is determined by the Act on Inheritance and Gifts Tax and regulated by each autonomous region. Depending on where you live will affect the amount you pay in inheritance tax. If you are a resident of Spain for the past five years you will be subject to regional inheritance tax regulations. If you are a non-resident living in Spain, then you will be subject to national inheritance tax regulations. 

The general Spanish Succession Law stipulates that your descendants (children) automatically inherit at least two-thirds of your Spanish estate, with priority over a surviving spouse. 

Previously foreign nationals were entitled to leave their estate to their chosen beneficiary as long as the law of their native country allowed. But the 650/2012 regulation means that this is no longer the case.

Now you are beholden to the law of the country you reside in, not your native state, unless you explicitly choose this law governing your succession in a will. If you want to avoid forced legal heirs, it is important that you grant a will. 

If you own property in Spain, it’s likely that you were recommended to set up a Spanish will during the purchase. If you purchased your property before 2015 then it’s time to review your will with a lawyer, as before this date you had free testamentary disposition in the will, which is now null and void, unless you chose your nationality law to govern your inheritance in a will.  

Example: if you are a British national who left the majority of your Spanish estate to your second wife. Choosing to leave your children from your first marriage only a smaller percentage or nothing from your estate, this testament would now be overruled by the Spanish Succession Law. With your children named as inheritors of your estate by law, not your spouse. 

The UK did not sign up to Brussels IV or European Regulation 650/2012 (neither did Denmark or Ireland), so your succession is regulated by UK law. Still, if you are a UK national with real estate assets just in Spain, UK Law will forward your succession to Spain.

What happens to an unclaimed inheritance in Spain?

If an inheritance goes unclaimed, there are no heirs or the inheritance is rejected, the estates is transferred to the Spanish state. Inheritances are often rejected in Spain because the tax owed outweighs the benefits. 

Do you have to pay inheritance tax in Spain?

“In this world, nothing can be said to be certain, except death and taxes.”

Benjamin Franklin.

And that is certainly the case when considering your inheritance tax commitment as a Spanish resident.

In fact, both residents and non-residents may be liable to pay some form of Spanish Inheritance Tax depending on the circumstances, so it’s essential to be aware of what would be due on your assets so your inheritors can be prepared.

In the UK, it is the estate that is taxed, whereas in Spain it is the appointed beneficiary who is liable to pay and settle the IHT (inheritance tax). There is no blanket exemption for spouses or direct descendants and ascendants and to complicate the matter further, depending on the autonomous community where you reside, the tax level differs. 

As the inheritor, how much you will pay in inheritance tax depends on a number of factors, including:

• The value of the assets which have been left to you together with any life insurance payment due
• Your relationship to the deceased
• Whether you are, and the deceased was, resident or non-resident
• Your age: beneficiaries under 21 years of age have considerable reductions in tax payments
• Your existing wealth will be taken into consideration
• If you have disabilities: depending on your grade of disability there are reductions applied 
• Where you live: inheritance tax is regulated by the Act on Inheritance and Gifts Tax and each autonomous community has powers in the collection and verification of inheritance and can also apply their own rules in relation to aspects such as tax rates or reductions of the tax base. Therefore the region where you reside may have a higher or lower inheritance tax bracket.

The basic elements used to work out inheritance tax payments are the value of the assets together with the life insurance payments. Added together they are known as the ‘base imposible’ to which a rate ‘tipo’ is applied and from there the tax amount payble, ‘cuota’ is decided. 

However, there are so many factors to apply that it’s essential to seek professional legal counsel for all inheritance issues.

Would I pay inheritance tax on a property or assets abroad?

If you are the beneficiary of an estate made up of foreign assets and inheritance tax has already been paid in the deceased native country, so it figures that you won’t have to pay inheritance or gift tax here in Spain right? Wrong. 

Your tax commitment may be reduced but you do have to declare the inheritance and, in some cases, you will have to pay tax in both countries; resulting in a double taxation problem. If you have been named as heir to a foreign inheritance it is essential to consult a professional on the tax implications.

In these circumstances, before applying a tax rate, the amount due after standard inheritance tax is applied in Spain and the capital gains generated from the foreign assets are both taken into consideration.

Do I need a Spanish will if I own a property in Spain?

When buying a property in Spain, many of our clients ask if they should make a will at the same time. It is not obligatory by law to make a will when you buy a property or have Spanish assets, but it is recommendable.

You may already have a will in your native country and this can be updated to include your Spanish assets. However, it is important to ensure that you are aware of Spanish inheritance tax law, as you may have to update your will accordingly to ensure that your chosen beneficiaries receive your inheritance. 

In Spain, there is a forced heirship law (Law of Obligatory Heirs), which states that two-thirds of your assets are automatically passed to your children (in preference to your spouse). If you are resident in Spain this regulation will apply. If you wish another beneficiary to receive the inheritance i.e. your spouse or another relative, then you must make a Spanish will which clearly states that you wish to overrule this regulation and apply your UK rights and name other beneficiaries. 

If you die without leaving a will the law where you have resided for the past five years will be applied. And if you are a Spanish resident but have only made a will in your native country, it must be legalised in Spain before the contents can be executed. This can be an expensive process, and therefore makes more sense to set up a Spanish will. 

If you keep your original will then your beneficiaries must go through the following steps to be able to execute the will and release the assets here in Spain:

• Applied for a certified copy of the Grant of Probate which must include La Hague Apostille stamp, which can be obtained from the Foreign Office. 
• You must have a sworn translation of the Grant of Probate. 
• You must give a Spanish lawyer power of attorney to prepare a list of your assets in Spain, execute the will and pay the inheritance taxes. 
• The execution of the will then takes place at a Spanish notary

Does a spouse pay inheritance tax in Spain?

Unlike in the UK where your spouse or civil partner were exempt from paying inheritance tax, here in Spain, the system does not recognise this privilege. Regardless of your relationship to the deceased, you will have to pay inheritance tax in some form. What’s more, tax may be applicable even if you lived in Spain with your spouse, but your assets remain outside of Spain. 

How much inheritance tax will I pay in Spain?

As the beneficiary of inheritance here in Spain, you will be liable to pay inheritance tax. As we have discussed, how much you will pay depends on various factors. But the two main factors are where you live and your relationship with the donor. 

Each beneficiary group has a different tax level and allowances are given based on your group. With Group One paying less tax and Group Four paying a higher tax rate: 

Group One: Natural and adopted children under 21

Group Two: Children over the age of 21, parents, grandparents, grandchildren, spouses and civil partners registered as a Pareja de Hecho

Group Three: Sisters and brothers, in-laws, aunts and uncles, stepchildren, nieces and nephews

Group Four: other beneficiaries including partners who are not registered as a Pareja de Hecho

The standard inheritance tax rates are set by the Spanish state but depending on where you live are modified. 

Standard Inheritance Tax Rates in Spain

Inheritance up to €7,993: 7.65%

€7,993–€31,956: 7.65 to 10.2%
€31,956–€79,881: 10.2 to 15.3%
€79,881–€239,389: 15.3 to 21.25%
€239,389–€398,778: 25.5%
€398,778–€797,555: 29.75%
€797,555 and over: 34%

Can I reduce my inheritance tax in Spain?

Depending on your relationship with the donor your tax payments can double.

For example: if you are married to the deceased, you have tax allowances higher than if you are just living with a partner. Several regions have already given unmarried partners equal status to married couples in order that they may enjoy the same reductions in the Inheritance and Gift Tax.

As a spouse, your inheritance tax commitment can be reduced if your claim is a life interest over direct asset payments. For example: if the deceased leaves you usufruct rights to your home and other assets. 

If you have assets outside of Spain, setting up a will in your native country can sometimes help to reduce your tax liability here in Spain.

However, we strongly recommend that you set up a Spanish will and seek professional advice for all issues regarding inheritance tax in Spain.

Need help with a Spanish inheritance?

Our expert team offers professional advice to save you time and money on the inheritance process in Spain. Get in touch to find out how we can help you.

Further reading

Inheritance laws for dummies