Is Spanish Succession Tax charged in the same way as UK IHT?
No. UK IHT is a tax which is payable by the estate of the deceased, according to estate value. By contrast, Spanish Succession Tax is assessed on each individual beneficiary personally, according to a range of criteria, including the value of the inheritance they receive.
At what rate is Spanish Succession Tax charged?
The calculation of a beneficiary’s Spanish Succession Tax liability is a fairly complex exercise, involving a number of criteria, including: the inherited value; residency status; the blood/relationship connection between the deceased and the beneficiary; the beneficiary’s pre-existing wealth; and application of relevant exemptions.
We provide detailed calculations for all our clients. There is a very broad range of applicable rates- the charge starts at just under 8% and in the most extreme cases, the marginal rate can go as high as just over 80%.
What is the equivalent of the UK IHT nil rate band under Spanish Succession Tax law?
As Spanish Succession Tax is a tax on beneficiaries rather than on the deceased’s estate, there is no nil rate band applied to the estate. Instead, individual beneficiaries may have the benefit of a tax free allowance. But in many cases, this can is a relatively small amount.
What exemptions are available from Spanish Succession tax?
There are certain exempt categories of beneficiary- e.g. officially registered charities. There are also some regional exemptions e.g. for main residence and small estates. But these do not always benefit non-Spanish individuals.
When does Spanish Succession Tax have to be paid?
The Spanish Tax Authority, (Hacienda), applies a strict deadline for the payment of the tax within 6 months of the date of death. In very specific circumstances, a time extension can be requested. But this will only be granted if certain preliminary paperwork is in order and in compliance with the strict deadline for the request.
How is Spanish Succession Tax paid?
Each beneficiary is personally liable to pay their tax amount before getting title to the assets. This financial liability has to be carefully catered for, to ensure funds are available for the tax payment before the inheritance can be completed.
Is Spanish Succession Tax liability affected by residency status?
Both Spanish resident and non-resident beneficiaries of Spanish assets are potentially liable for Spanish Succession Tax.
But additional allowances and exemptions are available in some regions of Spain. However, the issues of residency and EU citizenship can be relevant in calculating tax liability.
Following the death of the first spouse in Spain, does the surviving spouse receive the deceased’s Spanish property and assets free of Spanish Succession Tax, as in the UK?
No. It comes as an unfortunate surprise to many widowed spouses, that they can be liable for Spanish Succession Tax based on the value of the inheritance they receive from their deceased spouse (i.e. in many cases, 50 % of jointly owned Spanish assets).
Is there any advantage to married couples over non-married couples?
Yes. Surviving spouses often face a substantially lower tax rate than surviving partners who were neither married nor in a formally documented civil partnership with their deceased partner.
If Spanish Succession Tax is paid by my beneficiaries on my Spanish estate, does that mean my estate receives a credit for the tax paid in the UK?
There are treaties between Spain and many other countries, which are intended to provide relief against duplication of ‘equivalent’ taxes. But this is an issue that needs to be carefully considered in each individual case.
How can Spanish Succession Tax be mitigated or avoided?
Like UK IHT, Spanish Succession Tax is an optional tax- meaning that if an individual's affairs are properly structured, it is perfectly legal and to acceptable to avoid or minimize the tax liability.
However, those who are ill informed or who do not consider the issue, risk falling into a trap- with expensive consequences for their family.
We ensure that our clients are aware of their potential tax liability. And we can advise (always within the framework of the applicable tax law), on tax efficient ownership and succession of Spanish assets.
We will be happy to answer any questions you may have;
and to provide a fixed fee quotation.
Please contact us now on firstname.lastname@example.org.
Call us in the UK: 01442 78 1166
Call us from Spain: (+34) 911 235 333
Legal 4 Spain is a trading name of L4S Legal Services Limited. Registered in England and Wales. Company Number 08126536