Unlike in the UK where inheritance tax (IHT) is based on the deceased's estate, inheritance tax in Spain (or Impuesto sobre Sucesiones y Donaciones - ISD) is assessed on the recipient (the heir). Heirs are generally liable as follows; Spanish resident heirs are taxable on everything received, irrespective of location. Non-resident Spanish heirs are taxable only on Spanish located assets. The following is the national inheritance tax rules. The Spanish central government grants each autonomy the power to amend the national rules, so if you are Spanish tax resident you will need to review any amendments in your autonomy.
Allowances are available in Spain and are based on the relationship between the deceased person and their heirs. Remember, if you are still UK domiciled when you die your estate could still be liable to IHT even if you and your family are resident in Spain. Furthermore the dual tax treaty that exists between Spain and the UK does not cover inheritance and gifts. However this area is often addressed by something called a bilateral agreement. Don't get caught out - Call us for more information. For residents of Andalucia please be aware that there has been a significant change in the IHT rules as of January 1st 2018 - effectively wiping IHT for most families passing on their assets to spouses or children. Please call for more details. There also exists an allowance for the transfer of the family business as well as a possible 95% reduction for the transfer of the main residence to the wife and children.
Patrick Macdonald ASCI
International Financial Adviser
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