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Solicitor Spain Inheritance Tax

The Inheritance and Donations Tax “is assigned by the State to the autonomous communities” that decide what the amount to pay will be (payable base) calculating the rate that will be applied, which is unpopular and frequently considered as excessive by taxpayers.

The difference in the amount to be paid between taxes began with “the competition between the Basque Country and Navarre:” The crisis in the budgets of the different regions caused the increase in the variations to be paid.

It is important to mention that some regions offer significant bonuses for the most direct heirs (example, 99% in Madrid).

In general, the payment is calculated from 7% to 34% with an exempt minimum amount that varies according to the region.

Inheritance tax in Spain

The inheritance tax in Spain is complicated to evade and what is frequently happening nowadays is that taxpayers are renouncing to the inheritance, especially if it involves housing or assets that are difficult to sell, which in addition, represents a burden in terms of maintenance charges and taxes in certain regions.

Among the inheritance tax norms stands out the responsibility of the heirs, who must pay taxes in the autonomous community in which “the deceased had lived, most of the time, during the five years prior to the death.”

This norm aims to prevent a person (whether elderly or very sick) from changing their residence to relieve the burden (taxes) on their heirs.

Some Autonomous Communities require you to pay the corresponding amount through the submission of a self-assessment form, whose official models required (650 and 660) can be found on the page of the Tax Agency (Agencia Tributaria).

Regarding inheritances, the deadlines for the presentation and verification of these payment forms must be considered as well.

In case of death, there is a period of six months from the death of the person (or as of the date of the death certificate) to present the corresponding requirements “in the liquidation office of the Autonomous Community where the main residence of the deceased is located.” Complying with the timeframes is of the utmost importance since “in some Autonomous Communities you can lose tax benefits if you do not pay within the term” indicated.

Another municipal tax that must be paid is the capital gains tax that is paid “in the city hall where the property left in inheritance is located.” The payment is made only if the value of the property increases.

Donations are also considered among the ways to leave assets as an inheritance, in this case respecting the will expressed in life by the person leaving the inheritance, who should be aware of the fact that once the donation becomes effective, the assets in question no longer belong to him/her “so, the beneficiary can allocate them as he/she pleases without the consent of the owner.”

Regarding inheritances, experts in the matter emphasize that the payment of taxes when leaving an inheritance is smaller than in the case of donations in life so, that option is valuable when it comes to evaluating the two alternatives.

 

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How much is the inheritance tax?

Inheritances in Spain

Spanish laws regarding inheritance matters are different from those of other countries, mainly in the sense that other nations allow the deceased to freely dispose of his/her assets, while in Spain there is the figure of the “forced heirs,” which establishes that the deceased “cannot dispose of the inheritance freely,” but “must respect 2/3 of the inheritance for certain people called Mandatory Heirs (who are mainly the descendants and spouses).”

In Spain, the next step after the person has died is to locate the last testament made by the testator, since this is the one that has validity. To find it you must verify the Register of Last Wills, where all wills are filed in Spanish territory.

Inheritance Tax in Spain

Accepting an inheritance in Spain can cost a lot of money in terms of tax payments. Everything depends on the taxes that the heir must face according to the Autonomous Community to which these taxes have been assigned, since each region manages its own regulations in relation to how these taxes are calculated and must be paid, as a measure that strengthens the municipal budget in an important way.

Thus, the current controversy has increased over the economic consequences that vary for each heir upon receiving an inheritance in one region or another.

To calculate the tax amount to be paid, you must consider that the Inheritance and Donations Tax is a direct tax (“that is applied to the assets and economic income of the people”) and that also has a progressive nature (“and consequently, the tax rate increases as the tax base increases.”).

You must also consider the following:

The relationship with the deceased: This depends on how close the deceased is to the person who inherits. The farther the relationship, the higher the percentage to be paid. Even the amounts are subject to review every year and if you are a close relative you may be exempt.

The type of asset: With some exceptions, there are inheritances that pay fewer taxes, especially when the children or spouse inherit the house or family business.

The value of the assets: Without exception, the more you receive the more you pay.

The previous patrimony of the heir: The richer the heir before receiving the inheritance, the more taxes he/she will pay, and the copy of the last Wealth Tax Return Declaration can be used to know his/her economic situation.

The total payment on a received inheritance will go through a calculation (gross and net hereditary estate, taxable base, individual inheritance portion, payable base, tax rate, deductions, and bonuses, etc.).

A report of the Forecast for the Autonomous and Municipal Taxation for 2017 presents the following novelties:

Heirs of Group I: They pay only symbolic amounts in Asturias, Balearic Islands, Canary Islands, Cantabria, Castile-La Mancha, Galicia, Extremadura, Madrid, Murcia, La Rioja, Navarra, and the Basque Country.

In Andalusia, an agreement was reached in 2017 in which, as of January 2018, the maximum amount exempt from taxation of one million Euros was raised to the heirs of group I and II.

In order to be aware of all the requirements and to be sure to get the documents on time, you can contact a solicitor in Malaga specialized in inheritance taxes procedures.

Inheritance tax on property

Since the payment of inheritance taxes on property changes depending on the autonomous community where it is applied, being a procedure that involves tedious paperwork, complying with it has turned into “a much greater effort than the benefit obtained with the inherited property.”

We cannot ignore the family conflicts that typically arise and that along with the above factors turn the last will expressed in a testament in a cause of anxiety, surprise and uncertainty among relatives and close people.

Also, determining the amount of an inheritance is not a simple calculation since the total amount will depend on many details, from the type of property inherited to the incorporation of debts that the heir must pay.

Against this background, the complaints of the heirs have increased considerably, who in the end must deal with large and disparate sums of money.

The fear and the difficulties “in the face of the expenses arising from an inheritance along with the lack of knowledge” of many procedures cause an increase in the resignations every day. The resignation to an inheritance is a procedure that requires appearing before a notary to formalize said resignation and it is even recommended to do so “before the end of the period of six months of voluntary payment of the Inheritance and Donations Tax” (at the time of death of the deceased, which implies that “he/she has never been an heir and is not subject to inheritance tax.”).

Inherit a property in a proindiviso or undivided regime

The most common confrontations usually originate “from the acquisition of assets under the undivided regime when it is not possible to allocate all of them entirely to one or the other heir.”

The truth is that it is a delicate matter since the new owners are forced “to agree on the management of the property, its use and, as the case may be, its sale.” The tension between the parties can be detrimental and complicate the situation, even more, leading those involved to court where differences of distribution can be settled as the legal code clearly states that “no one can be forced to remain in the undivided regime,” having the right to request “the division of it.”