Up until now, Andalusia had a basic tax allowance for avoiding to pay inheritance tax on the first million euros. But the new decree 1/2019 passed on 11 April by the Andalusian government adds a 99% allowance for assets worth over a million euros, almost abolishing inheritance tax in Andalusia.
Whether you are a tax resident or not, if you own property in Spain your heirs will be obliged to declare these assets in Spain as a part of their inheritance in the event of your death. This is an obligatory formality, regardless of the nationality and residential status both of the donour or deceased person and the beneficiary.
If the inherited estate or assets are below the €1 million-threshold, your heirs will be exempt from paying inheritance tax. But interestingly enough, our experience as solicitors in Malaga and Costa del Sol shows that the value of a property can easily be over €1 million in areas like Mijas, Marbella, Estepona or Nerja.
With this new law, people inheriting assets worth over a million in Andalusia will only pay 1% tax on the actual value (so-called “Impuesto de Sucesiones y Donaciones”). In fact, inheritance tax applies to all types of properties, shares and bank accounts located in Andalusia.
An American citizen who owns a villa worth €1,500.000 in Mijas deceases. His son living in UK would have normally paid €474,260.08. On behalf of this new law, he will only pay only €4,742.60 .
In any event, declaring these assets in Spain does not take from the legal obligation to inform the tax authority in your residence country. Tax distribution will basically depend on the existence of a double taxation agreement between both countries. To avoid any formal requests from both countries, transparency is always a wise strategy.
Although this change will clearly benefit high earners, it can also be interpreted as a way of attracting foreign investment, therefore stopping capital outflow and stimulating economic activity.
Who can benefit from the changes in Andalusian inheritance tax
The inheritance tax allowance is only applicable to first and second-degree relatives (Groups I and II), which in this case means specifically spouses and children. Therefore, siblings, uncles, nephews and “odd heirs” would fall out of this category.
Furthermore, this law treats de facto couples (parejas de hecho) as married couples regarding the inheritance tax allowance, but only as long as they are registered in the Andalusian Registry of De Facto Couples (Registro de Parejas de Hecho) As a result, the inheriting spouse will avoid paying inheritance tax if the estate or assets are worth less than a million and only 1% if they are over this amount.
Each partner of a British unmarried couple living together in Andalusia makes a will on behalf of the other partner. The estimated value of the inherited estate is €160,000. If the couple isn’t listed at the Andalusian Registry, the heir will pay €46,281.68, whereas a registered couple wouldn’t pay anything.
Please note that this allowance will only be accepted if the origin of the estate can be clearly proven and if it is specifically mentioned in the will, which should have been signed before a notary public.
Inheritance tax can be a big economic burden in a difficult moment in life. By planning things in advance, you can make things easier for your loved ones.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.
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Legal & Tax Help is an English-speaking law firm based in Malaga and Costa del Sol, specialised in property conveyancing, inheritance tax, residence for foreigners, self-employed tax declarations and most legal and financial aspects of relevance to foreigners and expats living in Spain. For any questions and enquiries regarding the Spanish property market, don’t hesitate to contact us either by phone or e-mail.
Author: Rosana Tejada
Biographical Info: Rosana Tejada Crespo is a tax advisor holding a Master’s Degree in International Taxation. She specialises in companies and freelancers, tax regulations concerning foreign employees (Beckham Law), non-resident tax, inheritance tax and Spanish income tax. She is one of the founders of Legal & Tax Help (2000), which comprises a group of English speaking solicitors, economists and architects.
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