Inheritance Tax for non residents
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.
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This post was written by Daniel García ChagrinDaniel García Chagrin has written 3 posts on Cardenas Gran Canaria. |
ian Said,
July 18, 2009 @ 13:54
i cannot see how you arrive at the figures in the examples.
example 1 estate value = 203,000 less allowance of 15,956.87 = 187043,13 x tax rate 21.25% =39746,65 to pay, divided by 3 = 13248,88 How have you calculated to arrive @ 16,280 euro ?
Cardenas News Said,
July 22, 2009 @ 10:42
Hello Ian,
It is simple. You must not forget that inheritance tax is calculated on each share, not on the total value of the estate. Besides, the next of kin (mainly spouse and children) are entitled to a reduction of approx. 16.000 Euros each.
In our practical example, it means that after applying on each share the said reduction each of the 3 inheritors will be taxed for an amount of approx. 53.740 Euros. After applying the corresponding rate according the tax table (the tax rate is PROGRESSIVE) the tax amount to be paid by each of the 3 inheritors is the one quoted in our article: 5.426 Euros each, and consequently 16.280 Euros in total for the 3.
In summary: a) you seem to calculate the tax on the total value of the estate, b) apply one reduction only, and c) apply a rate of 21,25% which is not correct here.
Thanks for your comments and best regards.
Daniel García Chagrin
Heba Said,
December 1, 2009 @ 13:33
You mentioned above that “the filing deadline for acquisitions resulting from death is 6 months from the date of death.” My question is what happens if more than 6 months elapse without filing? Is there some kind of fine or penalty? Furthermore, what if the heirs have not received their inheritance yet, does this mean they lose the right to retrieve it?
Rolande Said,
December 2, 2009 @ 12:15
Thanks for your comment.
If more than 6 months elapse without filing and paying the inheritance tax, the tax amount will be increased by 5%, 10%, 15% or 20% according to the length of the delay, plus interests in arrears. That is why it is important – if someone expects not to be able to present the papers and pay the tax in due time – to apply for a delay (within five months from the date of death), in which case only the interest for the delay will be charged.
Of course the heirs do NOT lose the right to “retrieve” their inheritance, but the amount to pay as inheritance tax will become higher the longer they wait.
Julie Said,
January 10, 2010 @ 23:01
My mother resides in Spain, and has done for many years. She is ill, and has asked me to contact the Embassy here in Australia (where I reside) to obtain and complete an N.I.E. form. She says that we, her children cannot inherit if we have not completed and registered this form.
I have contacted the Embassy and they say I do not need to do this until my mother passes. Is this true? I have no idea what an N.I.E form is.
Thanks for any help with this.
Rolande Said,
January 12, 2010 @ 12:25
Yes, indeed, you do NOT need to have a NIE (Identification Number for Foreigners) before your mother passes and you appear (personally or by proxy) before a Notary public to accept the inheritance, which is when you MUST have it. Of course it is possible to apply for it earlier, but it is not necessary. The NIE form (i.e. application for the said ID number) is to be presented before the police authority personally or by proxy, so I doubt the Embassy can help with it. In due course of time do not hesitate to contact us by E-Mail and we can help you with it, giving you all necessary instructions. Thanks for you comment and best regards.
Mariel Carter Said,
January 26, 2010 @ 13:11
Could you please tell me if it makes any difference whether you reside in Spain (or have a property there and reside without being an official resident) or in the UK to the amount of inheritance tax that you will have to pay as a non family member of the deceased. Thank you.
Rolande Said,
February 4, 2010 @ 17:56
Hi Mariel,
It does not matter so much if you reside – officially or not – in Spain, what is relevant if whether THE DECEASED was a resident in SPAIN or not.
If he/she was a non-resident, you would be subject to the general Inheritance Tax, payable to the State Tax Agency without allowances or reductions of any kind except for next of kin.
Only if both the deceased and the inheritors were resident in Spain, the rules applicable would be those set out by the respective Autonomic Governments, they can set their own rules, tax rates, or even suppress the tax altogether. But any allowances made are generally only for next of kin.
In the Canaries for instance, an important reduction of the inheritance tax has been introduced as per 1.1.2008, provided that
i) the death has taken place after January 1st, 2008
ii) the inheritors are the parents, children, spouse or partner of the deceased
iii) the deceased has had his residence in Spain, not only at the time of his/her death but during the previous 5 years, which of course must be proven.
So whether you reside in Spain or elsewhere won’t make any difference to the amount of inheritance tax you will have to pay, if as a non family member of the deceased, you can’t avail yourself of any kind of allowance or reduction.
Regards.
lewis Said,
February 22, 2010 @ 2:37
my grandfather passed away leaving his bungalow in lanzarote to me and my uncle, my mother has passed away. it is worth approx E160,000. I think he was a non resident but did spend a lot of time over there. he has owned the property for approx 20+ years and bought it for approx E40000. my uncle is a resident of uk and i am a resident in canada. Any ideas whether we will be liable under the general spanish inheritance tax or will we be liable under the new reduction inheritance tax for canaries?
regards
Rolande Said,
March 9, 2010 @ 10:57
Thanks Lewis, for your comment. It gives us an opportunity to complete the previous thread, and to correct an error in the same, which might lead to confusion. Paragraph iii) should read:
iii) the deceased has had his residence IN THE CANARY ISLANDS, not only at the time of his/her death but during the previous 5 years, (…).
To reply your question we must refer to the initial sentence of our main article. Beneficiaries that are non-resident in Spain are liable to the General Spanish Inheritance tax. Thus as regards your grandfather’s estate in the Canaries, even if you do fulfil the conditions of relationship to the deceased, if your grandfather passed away after January 1st, 2008 and it was established that he had been a resident IN THE CANARY ISLANDS, during the 5 years previous to his death, you would still be liable to the General Inheritance Tax law, since you are resident in the UK and Canada respectively, not in Spain.
Your uncle and you (as son and grandson respectively of the deceased) would each be entitled to the allowance for next of kin of almost 16.000 Euros, to be deducted from the value of each share. If the value of the estate was 160.000 Euros, you would each be taxed on approx. 64.000 Euros at the corresponding rate.
Do not hesitate to contact us for further information.
Regards
pauline robinson Said,
April 21, 2010 @ 16:46
my husband and i own a property in spain it is now worth aprox 110.000 euros we purchased it for 50.000 euros 10 years ago…we are non reidents as are our family.. we have 3 sons and 5 granchildren.at the moment our will leaves the property or 1/2 of it as we are joint owners to be shared between wife/husband and three sons, would it be more benificial to add the grandchildren as well.. and can you tell me aprox how much inheritance tax would have to be paid as we are not wealthy people and have very little money in the bank..
Rolande Said,
April 23, 2010 @ 13:30
Hello Pauline,
It is NOT necessary to include the grandchildren in your will, because with the present allowance of 15.956,87 Euros for each of the 4 inheritors (husband/wife + 3 children), the total allowance is more than the value of ½ of the property, so NO inheritance tax at all would have to be paid. You would only have to pay some inheritance tax (very little) if the value of the property would increase in the meantime and reach over 124.000 Euros approximately.
Including the grandchildren would make things only more complicated (many people having to agree in case of a sale, more expenses for proxies, NIE numbers, etc) so our recommendation would be to leave things as they are.
Regards,
John Said,
May 9, 2010 @ 20:25
Hi,
My Civil partner died last year and we have a holiday apartment in Gran Canaria in his name our main resident is in the UK and there are no other assets. He made a Spanish will with me as sole beneficiary do I have the same rights as a wife and should I be paying Inheritance tax
Rolande Said,
May 18, 2010 @ 14:57
Hello John,
Sorry for the late reply, the matter was not simple, and we had to check.
Regretfully, only some Regional Governments have recognised the situation of civil partners and given them the same rights as a wife/husband for inheritance tax. The deceased being a non resident as well as yourself, the competent Tax authority is the Special Branch of the Tax Authority in Madrid, i.e. depending on the State Tax Agency (AEAT), and they do NOT recognise civil partners as spouses. Therefore you will have to pay Inheritance Tax as if you were a non relative of the deceased. It means that you are not entitled to an allowance and moreover, the tax amount resulting from the application of the tax table to the inheritance value will be multiplied by 2.
Do not hesitate to contact us for further questions or to know exactly the amount you are liable to pay.
Tony Smith Said,
July 1, 2010 @ 16:01
Hi
We own a property in Spain worth about 230,000 Euros. In order to avoid a high Inheritance Tax, when we brought the property , we named only my wife on the deeds for the property and in her Spanish will, we named our daughter now aged 8 as the inheritor of her estate and me as a substitute inheritor (should anything happen to our daughter God forbid) This was done on the assumption that I die first. We have now thought of another scenario of my wife dying first. What would be the inheritance tax implications if this were to happen and would it reduce the inheritance tax implication if both me and my daughter were named as the inheritors of her estate in my wife’s Spanish will.
Tracey Swift Said,
July 4, 2010 @ 17:26
Hi
My father and step mother sold up in the UK and moved to Spain in 2004 and have spanish residence. My step mother died last year suddenly and now my dad has a terminal illness and I am the sole beneficiary of the estate. I live in the UK. I understand that the IHT has to be paid within 6 months – before the estate can be released. My dads property is worth about 200,000 euros and I believe he has approx 100,000 in bank accounts as well as UK premium bonds. How much IHT approx would I be liable to pay and what happens if you have not got the funds to pay for this before the assets are transferred.
Daniel García Chagrin Said,
July 7, 2010 @ 17:44
Hi Toni,
Yes, this solution would reduce the inheritance tax. Being a progressive tax, calculated on each share, the rate is lower if more than one inheritance share are involved, i.e. the tax amount will be lower for 2 shares of 115.000 Euros each than for one share of 230.000 Euros.
We feel we must point out that if you want to sell the property in the
future, and your daughter is still under age, the Spanish authorities will not accept the sale without permission of the Court (Spanish Court or Court of your country of residence).
Such a permission is a way to protect the wealth of a person under age
according to Spanish law, but coincident also the law in many European
countries.
Do not hesitate to contact us for further questions.
Regards
Daniel García Chagrin Said,
July 7, 2010 @ 17:50
Hello Tracey,
the inheritance tax must be paid within 6 months after from the decease but an extension of another 6 months can be applied for within 5 months from the decease, so the term of six months can be extended for another 6 months.
Being a non resident in Spain, the inheritance tax would amount roughly to approx. 50.000 Euros for the property valued in 200.000 Euros and 100,000 in bank accounts as well as UK premium bonds.
However it would be interesting to study (after comparing the inheritance tax to be paid in UK and Spain for the 100,000 in bank accounts) if it would be more convenient to pay inheritance tax in UK for the 100,000 Euros in bank accounts as well as UK premium bonds, if they are situated in UK, rather than to declare them with the inheritance in Spain.
The Tax Office offers the possibility of splitting the payment of the
inheritance tax in different payments. An application must be filed and expressly accepted, with the obligation in most cases of guaranteeing the payments (i.e. with a bank guarantee).
Do not hesitate to contact us for further questions.
Regards