The Spanish inheritance procedure is complicated and the requirement to pay Spanish inheritance tax can make the transfer of property more difficult. Making a Spanish will can help inheritors in the long run.
You quite often see them in Spain. Abandoned properties, sometimes in the middle of nowhere but they can also be on urbanisations or even in the middle of town. They’re probably dilapidated, perhaps even falling down. You can be forgiven for wondering how they came to be like this. There are several possible reasons but one of the main ones Spanish inheritance. The inheritance law in Spain is complicated and can be quite expensive for those who inherit. In the UK, inheritance tax is non existent or minimal for the majority and if necessary, property can be sold in order to pay any tax due. This is not the case in Spain.
Spanish Inheritance tax (Impuesto sobre Sucesiones y Donaciones or ISD) not only exists but can be quite a substantial amount. This is particularly the case if you are not closely related to the deceased or if are UE non-resident. How much you will have to pay depends upon:
- The value of the estate
- Your relationship to the deceased
- Whether you are EU resident or non-resident
- The Autonomous community or region in Spain that the property is in
- Whether a property inherited by a non-resident from a resident is then sold on
In most of the cases, for example where a EU resident man leaves property to his EU resident wife, there may be nothing to pay. However, in other cases the amount of Spanish inheritance tax to pay can be quite steep. In some regions if you are not married you will pay the same amount of tax as if a friend had bequeathed the property.
Here are two examples:
- Example 1:Mr. and Mrs. Worthington have been living in the Costa Blanca for ten years. They own a two-bedroomed house on an urbanisation. The house is valued at 257,000€. They are both residents in Valencia Region (Comunidad Valenciana) and can prove it through their annual tax declarations. They have no children and the house is in both names. When one of them dies they will leave their 50% share to their spouse.Inheritance tax calculation = 0€
- Example 2:The Scott’s bought a sea front apartment in Torrevieja. They both live in Australia and use the apartment for themselves and friends during holiday periods. The apartment is currently valued at 94,000€ of which they own 50% each. When one of the couple dies they will leave their assets to their spouse. They are both EU non-resident.Inheritance tax calculation = 2,900€
What many people don’t realize is that you have to pay Spanish inheritance tax before the property can be signed over. This makes it harder for many families to find the necessary money to take possession of their inheritance. Where a property has been left to several inheritors it can be difficult for them to agree how to proceed or find the money to put their plans into action.
The issue of abandoned properties is a real shame and a waste but there is little that can be done without a change in the law. In the meantime, individually, there is plenty that people can do. Making plans for your inheritance is important and your inheritors need to be aware of what to expect. Although making a Spanish will is not compulsory we do advise our clients to make one in order that the process is simpler and quicker for inheritors.
At Ábaco Advisers we offer our service ÁbacoInheritance, which includes comprehensive support for inheritors as well as a will-making service. For more information call the Ábaco Inheritance team on (0034) 96 571 26 56 or visit our ÁbacoInheritance page.