Inheritance Tax in Spain. Tax Benefit based on residency of the deceased.

WITHIN the Spanish Inheritance and Donations (Gift) Tax there are some tax benefits or tax reductions depending on the specific characteristics of each inheritance.

The best known are the kinship reductions, which allows for a reduction in the base rate of the tax and the amount depends upon the actual kinship between the deceased and their heir.

There are other tax benefits that are less well known and from which a number of taxpayers can benefit so, for that reason, it is really important to obtain expert legal advice by the person leaving an estate prior to death and also when the inheritance is be dealt with.

This is in order to make sure that the inheritance is handled efficiently, according to the law and in the most tax efficient way.

In this article we will focus on the so-called reduction by acquisition of the habitual residence of the deceased.

The tax administration in Spain generally understands and accepts that the habitual residence of the deceased will be the property that has been the habitual residence of the taxpayer for a continuous period of three years.

Article 20 of the Inheritance Tax Law establishes that the heirs may benefit from a 95 per cent reduction in the value of the deceased’s habitual residence, with a maximum limit of €122,606.47 if the heirs are spouses, descendants or ascendants of the deceased or a collateral relative (e.g. brother) who is more than sixty-five years old and had lived with the deceased in the two years prior to death.

In addition to this, the inherited property must be retained for 10 years following the death (which means that the heir may not sell the property during that time), otherwise, the tax authorities could recalculate the tax without allowing the reduction and request repayment of the difference.

It should be taken into account that the Autonomous Communities have the power to improve or amend the conditions that apply to such a reduction. For example, in the case of the Valencian Community, the reduction limit is increased to €150,000 and the property maintenance obligation is reduced to five years.

As we have previously mentioned, spouses, descendants, ascendants and collateral relatives over 65 years of age who have lived with the deceased during the last two years of life can be beneficiaries of this reduction.

What happens if several heirs have rights in the inheritance, but only one inherits the habitual residence? The Law of the Tax establishes that it does not matter how the inheritance has been distributed and for purposes of the tax it must be considered as if it had been done with strict equality.

In other words, all heirs who meet the reduction requirements could benefit from it, in proportion to their share in the inheritance, even if they are not awarded the habitual residence.

Planning the tax implications for inheritance is essential if you do not want to pay too much in the way of tax.

If you are liable for Inheritance Tax and believe that you can benefit from this allowance, or if you have paid tax within a period not exceeding four years and did not benefit from this reduction to which you may be entitled, and you want a legal advice Contact Us.


The information provided in this article is not intended to be legal advice, it simply transmits information related to legal issues.


Carlos Baos (Lawyer)

White & Baos

Tel: +34 966 426 185


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