Spanish Estate Law and Inheritance Tax in Spain

If you're thinking of buying a property in Spain or moving to live in Spain permanently you need to consider the Spanish inheritance laws and taxes and how they will affect your estate and your future heirs.

Even if you manage to successfully tie your estate up tightly enough to legally avoid Spanish succession laws, please do not assume that your estate will avoid Spanish inheritance tax!  Inheritance or estate tax is unarguably the most unfair tax of them all, but it is also the one tax that generates governments so much ‘free’ revenue that they will pursue it above all other forms of taxation.

When it comes to inheritance tax in Spain you need to know that the rate of tax levied depends upon the amount each beneficiary receives, who the beneficiary is in relation to the deceased and the levels of wealth already enjoyed by that individual.  Basically the more a beneficiary receives, the richer a beneficiary is and the further away from the deceased in terms of bloodline that individual is the higher the rate of tax levied against the inherited gain.

In the UK anything a spouse inherits is tax exempt - in Spain this is not the case.  For close family including children, spouse and parents the highest level Spanish inheritance tax reaches is 34% and that’s on gains over EUR 800,000.  For an already wealthy, non-related individual who benefits, inheritance tax rates levied reach in excess of 81%! 

There is a double taxation agreement in place between Spain and the UK and this also covers inheritance tax.  Therefore any inheritance tax your estate suffers in Spain will be taken away from your UK liability.  If you’re British and reside in Spain and bequeath your Spanish property and assets according to Spanish law and leave everything to your spouse and children you may pay less in Spanish inheritance tax than if you chose to dispose of the Spanish assets in the same way but under English law.  A lot depends on your exact personal and financial circumstances.

There are ways to legally reduce your Spanish and British inheritance tax liability.  Some options available to you may include gifting assets during your lifetime, selling your Spanish home to your heirs whilst retaining the right to live in the house for your lifetime, establishing a trust or purchasing your Spanish property through an offshore company. 

You owe it to yourself to make sure your estate is disposed of according to your wishes, and you owe it to your heirs to protect their future interests.  Therefore we would recommend you speak to both an offshore independent financial adviser and a lawyer specialising in international inheritance laws.  The entire process need be neither complicated nor expensive, but governments worldwide rely on the fact that people are too afraid to even investigate the options available to them for fear of the complicated and costly processes they will need to enter into.  Don’t be a sorry statistic; get informed of your options.  If you would like assistance locating specialist advice please contact us with your requirements in complete confidence today.