The news that you are due to inherit a property in Spain may be a surprise or you might have known for a while. What you may be unaware of, however, is how to proceed to ensure that you really are the legal owner and how to pay the mandatory taxes. This article provides a step-by-step guide to the process and how to pay inheritance tax in Spain.
We are sorry to hear that you may have recently lost a close member of the family or a friend. Whether this is a sudden bereavement or one that was expected, it is difficult to handle emotionally. We understand. Alongside the grief, of course, is the need to ensure that matters are managed correctly and that legal requirements, such as inheritance tax in Spain, are met.
Step 1 – seek advice
With most matters involving Spanish bureaucracy and legalities, we advise that you speak to a professional. Every case is different and getting it wrong can cause long term problems and lead to frustration. The advice of friends and local ‘experts’ can at best be vague and in many cases misleading.
If the deceased was a client of Ábaco they may have completed an inheritance planning pack. If this is the case then all the details of how you should proceed will be included in this. However, if not, our inheritance department will be able to give you the advice you need including how much tax there is to pay.
Step 2 – change names on the Title Deed
Once all necessary documents about the death and deceased’s assets are obtained then the property can be transferred from the deceased’s name to yours. This requires you, or a representative if you have taken out a power of attorney, to sign in front of the Notary. The Notary is a professional within the Spanish law system who certifies Spanish documents.
Step 3 – pay inheritance tax
Before any transfer of property is made at the Land Registry, you must declare inheritance tax in Spain. The exact amount payable depends upon your relationship to the deceased and also where the property is located. Different autonomous communities have different levels of allowance.
There are four groups of inheritors:
- Children and grandchildren under the age of 21
- Children and grandchildren over the age of 21, parents, grandparents and spouse
- Brothers, sisters, uncles, aunts, cousins, parents-in-law, daughter/ son-in-law
- Anyone else
In Valencia, for example, there is an allowance of 100,000€ for close relatives. This can mean that as an inheritor you might have nothing to pay, especially if the inheritance is shared between more than one person.
It is important to be aware that if you do not make the tax declaration within six months of death you can become liable for a penalty fee and late payment interest on the tax. The additional amount that you need to pay will depend upon the length of time that payment has been delayed. Every three months you will be charged 5% more up to a total additional payment of 20% if the payment is delayed by a year. This extra, unnecessary charge is something you definitely want to avoid.
You will need to pay inheritance tax on the value of the share of the property you inherit along with any money that is held in bank accounts, vehicles, deposits or other assets that are left to you.
Step 4 – register with the Land Registry
After correctly entering the new owners of the property on the Title Deed and declaring inheritance tax the change of owners must then be registered at the Land Registry (registro de la propiedad). From here you can also obtain a ‘Nota Simple’ which is confirmation that you own the property.
Step 5 – decide what to do with your inheritance
So, now. The names on the Title Deed and at the Land Registry are correct and the inheritance tax is declared – it’s time for you to make a decision about what you want to do with the property. You might want to keep it, to spend time in Spain on holiday or even to move there eventually yourself. Many families choose to continue the tradition and use the property as a base for family holidays as the grandchildren grow.
Renting out the property is another option. If you do decide to do this remember that you will need to pay Spanish rental tax on the income. If you do keep the property there will be other actions that you will need to take. For example, changing the names on the contracts for utilities and arranging to pay any community fees that are owed.
If, however, you decide to sell the property you can now do it and know that there will be no hold ups due to inconsistencies in ownership or failure to pay inheritance tax in Spain. Either way, you can make the decision to enjoy the property or the proceeds in the way that your loved one would have liked.
For any assistance in the inheritance process and/or payment of any inheritance tax in Spain do not hesitate to contact us at firstname.lastname@example.org