Cardenas Real Estate Agent Blog - Gran Canaria

Liable to this tax are the persons receiving an inheritance, bequest or legacy and not having have their usual residence in Spain, as well as residents in Spain if the deceased person did not have his/her usual residence in Spain.

The competent Tax authority is the Special Branch of the Tax Authority in Madrid, i.e. depending on the State Tax Agency (AEAT), whereas for residents in Spain, the competent tax authority is the regional tax authority.

It is important to know that the filing deadline for acquisitions resulting from death is SIX MONTHS from the date of death.  For the case that the delay in obtaining the necessary documents from abroad (i.e. Certificate of Inheritance) might make it difficult to comply with the deadline, it is advisable to apply for an extension of the six months delay, but that must be done within FIVE MONTHS from the date of death.

How to pay the tax:

It is possible and advisable to pay the tax using the self-assessment Form 652 “Inheritance Tax Simplified Return”.  A Tax Identification Number (NIF) and tax identification labels provided by the Tax Agency are necessary. Before requesting them, Non-resident foreign national taxpayers must apply for a Foreign National’s Identity Number (N.I.E.).

Main documents to be presented

• Deed of Acceptance of the Inheritance (certified and simple copy), or, failing this, an Inventory of Assets and Heirs, in duplicate.
• Death Certificate.
• Certificate from the General Registry of Wills and Testaments.
• Copy of the Will or the Declaration of Heirs.
• Copy of the IBI (Property Tax) bill

besides any other relevant document about the inheritance assets (insurance, bank statement, car documentation etc.)

How high can be the Inheritance Tax? It is not as high as most people imagine. It depends mainly on the value of the estate and the degree of relationship with the deceased, and accessorily on the previous fortune of the inheritors too. The rate is progressive and varies from 7,65 % up to a maximum of 34% applicable to an estate over 800.000 Euros approximately, though in the case of remote relatives (cousins or similar) or non-relatives at all, the final amount could be multiplied by 2 or more (up to 2,4).

The tax is calculated on each inheritance share, which means that if one person only inherits the whole of the estate, he/she will pay a higher rate than if several persons share the inheritance.  Regretfully the tax free amount for next of kin  (spouse, children) is quite low (not quite 16.000 Euros) and has not been updated for a number of years.  Hopefully it will be increased in the near future.

A practical example:

A father leaves to his 3 children a house worth 200.000 Euros and 3.000 Euros in the bank.  Each child will pay approx. 5.426 Euros inheritance tax. The total tax amount (3 shares) will be approx. 16.280 Euros, which means an average rate of 8,02% on the total value of the estate.

If the same person leaves only one child to inherit, the inheritance tax to be paid will be approx. 30.180 Euros, which means a rate of 14,87%.

There are Agreements to avoid double taxation between Spain and many countries, and according to those, Inheritance tax to be paid in Spain for assets situated on Spanish territory is liable to be deductible in the country of residence.

Non-resident Inheritance taxpayers must appoint a tax representative.  It is most important to choose a serious and experienced person or legal person. Cardenas Real Estate has a large experience in dealing with inheritance matters and will provide you with a professional assistance and help, from the very first moment, providing exact information as to the documentation (including from foreign authorities) required, helping to obtain the NIE and NIF, assisting you with the signature of the Deed of Acceptance of Inheritance at a Spanish Notary public, preparing the tax returns and generally taking care of all necessary steps until the inherited assets including real estate are effectively transferred to the inheritors.

By Daniel García Chagrin (Lawyer & Tax Advisor) at Cardenas Real Estate.

Every now and then some of our clients have expressed the wish to buy the property under the name of their children, mainly to avoid inheritance tax /death duties upon their death.

That is a decision that should be duly weighed and considered. First of all the inheritance tax is not as high as many think, especially if there are more than one children to inherit the property. And the inheritance tax may well be reduced or even supressed in the future in all parts of Spain.

Secondly it is never advisable to buy the property in the name of the children if they are under age. Unless those have money of their own (i.e. from inheritance) and proof can be produced that the money used for the purchase indeed belongs to the children themselves, the tax authorities might well consider that the parents are making a gift to their children, and the gift tax is higher still than inheritance tax (same tax rate for both taxes, but no tax free amount for Gift Tax).

One should consider as well that if one wishes to sell the property again after some time, the children’s consent is required. Further problems may arise if the circumstances change, for example if one of the married children gets divorced, and the son-in-law or daughter-in-law wants his share.

Though it is unusual, it could happen that one child predecease his parents – by accident or illness – and if he dies without issue, it would be the parents who would have to pay inheritance tax on their own property. I have known such a case!

Only if the parents have already reached a certain age and intend to have the property for they own use – as a permanent or a holiday home – until their death, one could recommend safely that the children purchase the property (bare title) and the parents the life benefit.

By Rolande Chagrin Chevènement (Owner of Cardenas Real Estate)