Inheritance tax Andalusia
If a deceased person had properties in Andalusia, the legal heirs might need to pay inheritance tax over the worth of the Spanish inheritance. Even though it´s not the most pleasant subject, it´s wise to already think about this, as the amount of inheritance tax can be rather high. However, there are some smart legal choices you can make, which can have a huge fiscal advantage for your beloved ones in the future. Through efficient preparation you can not only save on tax money, but also on administration and stress for the heirs.
The lawyers of C&D Solicitors can give you fiscal and legal advice to plan your estate based on your personal situation. In the first place, it might be necessary to sign a Spanish will (testament) to make sure that the inheritance is assigned to the heir you chose according to the law of the country you appoint. Secondly, for the future tax obligations of the heirs, you might want to register your partnership in the Spanish Registro de Pareja de Hecho, change your official residency address, consider adopting the child of your partner or even get married or donate your property.
C&D Solicitors; specialized lawyers for Spanish inheritances and property sales
Furthermore, our lawyers can carry out the future Spanish inheritance process through a Power of Attorney. This legal document needs to be signed at the notary by all heirs to either accept or revoke the inheritance. Also, our law firm can take care of all the aspects of the sale of a property if the legal heirs decide not to keep the inherited property.
Criteria for inheritance tax in Andalusia
Although the rules of inheriting count for the whole of Spain, the inheritance tax is treated differently in every one of the 17 autonomy states. Andalusia, where our law firm is located, has relatively good conditions for the heirs when it comes to inheritance tax.
The Spanish Tax Office looks at several criteria to determine if and how much inheritance tax needs to be paid over Spanish assets. Please note that this information only concerns the tax rules in Spain. Your own country might require you to also declare the inheritance depending on the fiscal residency of the deceased. Also, even if someone doesn´t have to pay the tax in Spain, the declaration still needs to be done before the property can be inscribed in the new names. This can be done either through the Spanish inheritance deeds or -in some cases- the European Certificate of Succession.
Relationship between the deceased and the legal heir
Box I & II:
Spouses, children and parents belong to box I and grandchildren or grandparents to box II. In general, they pay almost no inheritance tax in Andalusia.
Other family members like siblings (brothers and sisters), nieces, nephews, cousins, aunts and uncles are all in box III and they pay a significant amount of inheritance tax.
For example, if you leave your house with a fiscal value of € 150.000 to your sister, she pays about € 31.000 of inheritance tax in Andalusia.
All officially non-related heirs pay the highest percentage of inheritance tax in box IV over the fiscal worth and this tax is also progressively. This group consists of friends, non-adopted children (adoption only can be done up to 18 years) and non-married partners that are not inscribed in the Spanish Registro de Pareja de Hecho.
Foreign registries or contracts are not recognized in Spain, so for fiscal reasons, it might be wise to register here (and possibly also in your own country) or get married. This especially if the heir is a tax resident in Andalusia because in this case you need to deal with Hacienda de Andalusia for your declaration instead of the central Tax Office in Madrid.
For example, over this house of € 150.000 a non-registered partner pays € 42.000 (28% in total). However, if the value would be € 300.000, the inheritance tax is € 110.000 (37%).
Charity organization or fiscal identity:
If you leave to a charity organization or other fiscal identity, there´s no inheritance tax applicable.
The tax amounts are progressive with a duty-free base and can be calculated at the time of carrying out the inheritance process according to the regulations of that moment.
Fiscal worth of the inheritance and worth of previous assets
The earlier mentioned spouses, children, grandchildren and parents of box I and II do pay inheritance tax in Andalusia in case the:
Worth of inheritance
The worth of the individual inheritance is more than 1 million Euros.
Previous assets of the heir
Previous assets of the legal heir before inheriting of the legal heir exceed 1 million Euros.
Minimal fiscal value vs market value for real estate property
The tax value of a real estate property is either the minimal fiscal value (which is based on the cadastral value multiplied by a factor that varies per town), the market value, or any number in between. Don´t have to pay inheritance tax and want to sell once the property?
In this case it´s best to put the market value which is normally higher. This avoids paying Capital Gain Tax over your official profit when selling. For heirs in box III and IV that want to keep the property, it needs to be calculated by the lawyer (solicitor) if it´s better to declare the minimal fiscal value to save on inheritance tax.
Fiscal value for the inheritance of ´right-of-use´ (usufruct)
Through a Spanish will you can leave the lifelong right-of-use (usufruct) of a property to an heir without leaving him or her the ´nude property´ (ownership). This can be interesting if you want to guarantee that your partner can stay in the property until the end of his days, but you want to have 100% guarantee that in the end your children inherit (your part of) the house.
The fiscal value of the right-of-use varies per year as it is based on life expectation (age) and needs to be calculated by the lawyer. Of course, the right-of-use needs to be officially inscribed in the Land Registry through the inheritance deeds to give maximum legal guarantee for the heir. On the other hand, this also means that this heir needs to have a fiscal NIE document, sign a Power of Attorney to the law firm and needs to pay IRPF or IRNR income tax over his share of the house. Also, if the property needs to be sold, automatically all parties need to sign the sales deeds and get the payment of their share of the house.
The percentage of the right-of-use is counted back from 89 years, so a person of 70 years will own 19% of the property in the corresponding year. However, there is a maximum of 50% and a minimum of 10%.
Bank account value
For the worth of a bank account or other banking products like pension plans, the proportional value is taken at the day of death and this needs to be officially bank certified by the bank director.
Cars and other vehicles
For vehicles the official yearly worth is used according to the official yearly data of ´Trafico´.
Fiscal value of furniture and inventory
In very few cases the furniture and inventory of the house are specifically left to only certain heirs by the will/testament. In this case the notary will make a calculation of the official worth which is related to the total declared value of the property. If the furniture not is specified with an extra average worth in Andalusia a 3% is counted.
When must you pay the inheritance tax?
Officially there is a 6 months rule to pay the inheritance tax from the date of decease. (Nevertheless, there is a possibility that the lawyer asks for an extension of another 6 months due to justified causes.) After that a percentage of interest must be paid plus potentially a fine. Box I and II mostly hardly pay inheritance tax anyway, but if they don´t declare within 6 months they will have a small fine of a few hundred Euros.
After four and a half years after the date of death, the tax obligation (including fines for late payment) expires completely.
Does the heir pay to Hacienda de Andalucia or the central Tax Office in Madrid?
If either the deceased or the heir is resident in Andalucia, the tax must be declared into Hacienda de Andalucia. However, if the heir is resident here but doesn´t pay the IRPF income tax here, in certain cases it´s interesting for Box III and IV heirs to try to declare the tax in the central Tax Office in Madrid. They use the same rules and rates for the tax over the Andalusian property, but don´t take into account certain details. Your lawyer can tell you if this is an option for you.
What if you don´t have the money to pay the inheritance tax?
If you are an heir in box III or IV it might be possible that you can´t pay the inheritance tax, as these amounts can be significant. This means that you can´t inscribe the property in your name in the Land Registry through the normal inheritance process, so you can´t sell it either. In this case there are 3 options.
Special procedure for paying inheritance tax from the inherited bank account
In the best-case scenario, the deceased does have the money for the inheritance tax in the bank account. Your lawyer can then follow a special administrative procedure to already access this money and pay the inheritance tax before the inheritance deeds are approved by the Tax Office.
The buyer pays the inheritance tax through the down payment of the purchase
If the sales price of a property is very attractive, the buyer might be willing to agree to take the extra risk and agree to the payment of the inheritance tax through his down payment to make the sale possible. This deal is formalized in the private purchase contract. A buyer of course runs a certain risk that if there are any serious problems with the inheritance procedure, he´ll lose (part of) his money.
Wait 4,5 years until the inheritance tax obligation has expired
In some cases heirs decide to wait with the inheritance process for four and a half years until the tax payment obligation (including fiscal fines for the delayed payment) has expired. Of course, a property can´t be sold during this time and officially it can´t be renting out either.
Are there different rules for inheritance tax for EU- or non-EU citizens, like British?
No, there isn´t any difference anymore in inheritance tax rates or procedures between Spanish, EU- and non-EU deceased citizens or heirs (like the British after Brexit). The highest European court has ruled that this would be discrimination. There is a 4-year period to reclaim inheritance tax if you would have paid too much.
However, for the Capital Gain Tax when selling, there still is a difference.
Other taxes: Plusvalia and IRPF/IRNR income tax
Also, take into account that you might not have to pay inheritance tax when inheriting real estate, but in most cases there is local Plusvalia tax to pay. This tax is calculated over the years of ownership according to the percentage of the house that is inherited. Our law firm will make you a calculation for urban properties based on the cadastral reference and Purchase Deeds.
Another matter to take into account is the income tax of the deceased. Legal heirs are held legally accountable for any debt including IRPF (fiscal residents) or IRNR (non-fiscal residents) up to the date of death.
More information on inheritance tax (succession tax)?
For more interesting information about this subject, we refer you to our news article Spanish inheritance tax 2021: 10 things you need to know. You can also watch our video on the standard inheritance process: