Changes in the Spanish inheritance tax in Andalucía, Spain

As of January 1, 2018, significant changes in the inheritance tax took effect in Andalucía, Spain. These changes affect both residents and non-residents who own properties such as vacation homes here

The recent reforms of the Spanish inheritance tax in Andalusia allow that in most cases the spouses, children and parents will no longer have to pay this tax

There is good news for residents in Andalucía: the Andalusian community has gone from being the most expensive in relation to the inheritance tax to one of the cheapest, taking into account that a large part of the British people registered in Andalusia resides in some municipality of the Malaga province, one of the main English destinations in Spain. From Marbella, we offer advice to any query on the Spanish inheritance tax in Andalusia.

When the new regional budget for Andalusia came into force on January 1, 2018, it brought a significant change for the inheritance and gift tax. The purpose of the change is to protect nearby families from this tax, especially in transfers due to decease (i.e., inheritance).

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Gift tax in Andalusia

According to the Spanish civil code “donation is an act of generosity by which a person disposes of a thing in favour of another, who accepts it,” and the tax is payable by the beneficiaries, that is, by the donee (which is the person favoured in the transaction).

Regarding the applicable rate to calculate the donation tax in Spain, we must say that it will depend on the value of the donation.

Do you and your heirs benefit from these new rules?

In general, this is good news for most residents and owners of holiday homes in Andalusia, since it means that unless you have assets in Spain for a total of more than 1 million euros, you can plan to leave your equity in Spain immediately to your family without having to worry about them being forced to pay taxes.

This law in Spais is especially beneficial if you are a resident in Andalucía and you receive an inheritance from one of your parents, or you want to transfer assets to your spouse and children in case of death. Unless your wealth, or that of your beneficiaries, is more than 1 million euros, you will avoid large bills of inheritance and donation taxes. The government estimates that around 95% of the Andalusian taxpayers will not pay inheritance taxes.

However, caution must be taken if the pre-existing wealth of your beneficiaries exceeds 1 million euros because they will not benefit from the new reduction.

Also keep in mind that this reduction only applies to those who meet the requirements to benefit from the regional regulations of Andalusia. Otherwise, taxes will be applied anyway.

If you have heirs with assets above the mentioned limit, or you wish to leave an inheritance to anyone else than your spouse and children, do not hesitate to aks our law firm, Welex, some personalized advice on how you can reduce your tax liability for donations and inheritance tax.

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Tax rates may change. Any tax return is based on current tax practices that are subject to change. The fiscal information we show in this article has been summarized and is not at all complete. We advise you to seek personalized and professional advice.

Lifetime donations in Andalucía

The new rules for lifetime donations are not as beneficial as inheritance rules. However, there are two key reforms. In short:

1) There is a 99% reduction for the donation for those with habitual residence if the beneficiary is a descendant and has a recognized disability, provided certain conditions are met.

2) There is a 99% reduction in donations to acquire or expand businesses; certain requirements apply which need to be consulted with an expert.

Inheritances in Spain

Acceptance of your inheritance in Spain.

After the decease of a person, the heirs have the right to accept their inheritance or reject it. In the case of acceptance, the following documentation must be obtained, in order to grant your deed of acceptance and allotment of the inheritance:

– Death certificate, issued by the Civil Registry of the place of decease.

– Certificate of the Record of Last Will. This shows if the deceased granted a will. In order to request it, it is necessary to have a death certificate.

– Will, in case it has been granted.

– NIE (tax identification number for foreigners) of the heirs.

– Deed of sale of the property in Spain.

– Bank certificate proving the balance of the account at the date of death.

A new € 1,000,000 reduction in Andalucía has been introduced for inheritances (not for lifelong donations). Among the reductions available, you may have the relative reduction, the reduction of the main dwelling, etc. valid for the entire Andalusian community.

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The inheritance itself may have some value, but the maximum reduction will be 1 million of euros and any higher amount will be taxed with the usual rates of inheritance and donation tax.

The reduction of 1 million euros will only be applied if the following two conditions are met:

1) The beneficiary must be within Groups I and II (that is, ascendants, descendants or spouse)

2) The wealth that the beneficiary already has, does not exceed 1 million euros. If it is more than 1 million euros at the time of death, the new reduction is not applicable at all. For Spanish resident beneficiaries, global assets would be taken into account for this purpose, but for non-residents only Spanish assets would be accounted for.

Note that this is a variable reduction of up to 1 million euros. This means that the maximum reduction that can be obtained is 1 million euros, this amount includes the other reductions of inheritance taxes already applied by the taxpayer.

A positive fact is that it is available for each beneficiary. Therefore, if you have, for example, three children, each of them could receive up to 1 million euros free of taxes.

Any questions? Request help from our experts

At “Welex” we provide legal, labour-related, tax and accounting advice. We offer legal security to our clients, from our experience and professionalism. We are a group of lawyers, economists, accountants and litigation lawyers in Marbella prepared to answer your questions and defend your interests.

Finally, we would like to remind you that the best way to plan your inheritance begins with your decision to know your options, so it is always better go to a suitable professional who can examine your situation and give you personal advice.

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