Does Spanish inheritance tax and Spanish inheritance law apply to your worldwide assets? This guide explains who is subject to inheritance tax in Spain and if you need to write a Spanish will.
If you have relocated or retired to Spain, it’s important to determine if Spanish inheritance tax and Spanish inheritance law apply to your worldwide assets. What happens if you are a resident when you die in Spain? What if you buy Spanish property but also have assets in your home country? Do you need to make a Spanish will to protect your assets?
The rules and Spanish inheritance tax rates vary according to the relationship between the donor and beneficiary, although generally unmarried couples and step-children pay more tax than spouses and natural children.
This guide explains when inheritance tax in Spain (Impuesto de Sucesiones y Donaciones, ISD) applies to your assets, the conditions of Spanish inheritance law, and if you need to write a Spanish will, including for non-residents. It also explains Spanish succession law for unclaimed inheritance and Spanish inheritance tax rates. It also looks at the types of Spanish wills and how to draw up a Spanish will.
Spanish inheritance law
Spanish inheritance law derives from the Spanish Civil Code alongside some regional regulations by the Autonomous Communities, meaning inheritance laws can vary depending on which Spanish region is dealing with your estate planning.
This guide explains Spanish inheritance rules applicable to the whole country, while it is advised to seek local legal advice to find any regional variations. Generally, regional taxes will only apply to habitual residents (ie. residents in Spain for at least five years), while national law will apply to non-residents. Some regions may also allow more favourable conditions, such as almost complete tax exemptions for spouses and children.
Prior to August 2015, inheritance law in Spain dictated that a foreign resident’s estate would be dealt with according to the law of their home nationality. However, changes to EU rules in 2015 mean that EU citizens living in Spain, as well as a number of non-EU countries, can now choose whether the law of their home country or their country of residence applies. If a foreign resident dies without leaving a will or making an official declaration on which law they wish to apply, the law of the country where they resided for the last five years will apply.
If your estate is dealt with under Spanish inheritance law, ‘forced heirship’ rules apply (known as the ‘Law of Obligatory Heirs’ in Spain). This means there are restrictions on how you distribute your estate, as a certain percentage needs to be set aside for certain relatives.
The Law of Obligatory Heirs states that if the deceased was married at the time of death, the spouse keeps 50% of all jointly owned property. The remaining 50% is put towards the estate. The estate is divided into three equal portions:
- One-third is divided between surviving children in equal shares.
- One-third is reserved for surviving children but can be distributed equally or unequally according to instructions in a will. The surviving spouse retains a ‘life interest’ (usufruct) in this part of the estate and the children do not inherit until the spouse dies.
- One-third can be disposed of freely in a will.
- If there are no children, then surviving parents are entitled to one-third if there is a surviving spouse, or 50% if not.
If there are no children, parents or spouse, the estate can be left to anyone by means of a will in Spain or abroad.
Spanish inheritance law for non-residents
Foreign residents of Spain are not permitted to give away more than the freely disposed part of their estate (one-third) as this has to be reserved for the ‘obligatory heirs’. If an international or Spanish will is made stipulating that the laws of a person’s home nationality apply, however, no aspects of Spanish inheritance law will apply to either Spanish or worldwide assets.
Spanish property law recognises ownership according to the name on the title deed, so it is important to register any property in Spain to have it included as part of your estate. Spanish law does not distinguish between different types of ownership (trusts, equitable ownerships, etc.). Foreign residents will be required to have a tax Identification Number for Foreigners (NIE) before they can buy real estate in Spain. The Spanish Directorate of Commerce and Investments need to be informed of acquisitions of over €3 million. Read more about buying property in Spain.
The regional Autonomous Communities may have varying rules regarding the influence of marriage and matrimonial regimes on property rights. Assets will be typically recognised as jointly-owned by married couples (where each spouse has 50% ownership), unless an ‘own-assets’ agreement (where each spouse retains individual ownership of his/her own goods) has been drawn up.
If you qualify for a pension in Spain, in the event of your death it may be possible for your surviving spouse or dependent children to claim up to 70% of your Spanish pension. More information is outlined in our guide to pensions in Spain.
EU inheritance rules for foreigners in Spain
A change in EU rules on cross-border successions came into effect in August 2015, enabling EU citizens to choose whether the laws of their country of residence or their country of nationality apply to their estate planning. This law also applies to non-EU nationals. However, the rules don’t apply in Denmark, Ireland the UK as these countries opted out, although will apply these nationals if they live elsewhere in the EU.
If you are an expat living in Spain and want the inheritance laws of your citizen country to apply rather than Spanish inheritance law, you need to express this clearly in an international or Spanish will or separate declaration. These laws will then apply as long as they don’t contravene local public policy (eg. discrimination of heirs based on gender or whether born out of wedlock).
The EU rules, however, do not overrule national laws on the following matters linked to inheritance:
- inheritance taxes
- your civil status
- the property regime of your marriage/partnership (how your property should be divided after the death of your spouse/partner)
- matters concerning companies.
Spanish succession law
If a Spanish citizen or resident dies without leaving a Spanish will, the laws of intestate succession apply. In Spanish succession law, this means that the estate will be inherited by the following (taking into account the Law of Obligatory Heirs):
- Children of the deceased
- If there are no children, the parents
- If no children or parents, the surviving spouse
- If there are none of these, then the next closest blood relatives (up to a 4th grade limit in the family tree).
If there are no legal beneficiaries from any of these groups, the Spanish state inherits the estate.
Unclaimed Spanish inheritance
If an inheritance is unclaimed, if there are no heirs or it is rejected by all beneficiaries, then the estate is passed to the Spanish state.
Spanish inheritance tax
Spanish inheritance tax rates vary slightly depending on the relationship to the deceased and region of Spain. Spanish inheritance tax is paid by the recipient on assets received after death and on lifetime gifts.
Inheritance tax in Spain is levied on all Spain-based residents who receive an inheritance, as well as on non-residents who inherit property in Spain. Changes to Spanish inheritance law in 2015 mean that both residents and non-residents are treated the same for tax purposes with regards to rates and allowances.
Spanish inheritance tax rates as set by the national government are progressive and fall within the following brackets based on inheritance amount:
- Inheritance up to €7,993: 7.65%
- €7,993–31,956: 7.65 to 10.2%
- €31,956–79,881: 10.2 to 15.3%
- €79,881–239,389: 15.3 to 21.25%
- €239,389–398,778: 25.5%
- €398,778–797,555: 29.75%
- €797,555+: 34%
Tax free allowances, however, are given depending on relationship of the beneficiary. Relations are split into four groups:
- Group I – children (including adopted) under 21 years get an allowance of €47,859.
- Group II – children (including adopted) older than 21, grandchildren, spouses and parents/grandparents (including adoptive) get an allowance of €15,957. Some regions may recognise unmarried partners registered as parejas de hecho.
- Group III – siblings, aunts and uncles, nieces and nephews, in-laws and their ascendants/descendants get an allowance of €7,993.
- Group IV – cousins, all other relatives, unmarried partners (unless the region allows it) and those unrelated get no allowance.
- Those with disabilities are entitled to an allowance of either €47,859 or €50,253 depending on the extent of the disability.
Unmarried couples may be treated like married couples for legal purposes in certain Spanish regions, if they were registered as a pareja de hecho (de facto couple) and were living together. Some regions call this registration different names. In some cases, children may be able to claim an additional exemption for each year aged under 21.
Each Spanish region can increase the tax allowance amounts for these groups, so it’s worth with the regional authorities to work out exactly how much Spanish inheritance tax is owed. Spanish authorities will not release an estate until all Spanish inheritance tax has been paid. Beneficiaries have six months to pay taxes, but can claim a one-time extension of an additional six months or pay in installments.
Filing US taxes from Spain
Despite the fact that every US citizen and green card holder is required to file a tax return with the IRS even when living abroad, many expatriates still fail to do so. Many are unaware of these obligations, thinking that as an expat they do not need to pay or file tax returns in the US. You do! For more information and help filing your US tax returns from Spain, contact Taxes for Expats and see our Guide to taxes for American expats.
Reducing your inheritance tax in Spain
Depending on your family relation, Spanish inheritance tax can double between categories I and IV. It is thus important to consider how to lower your Spanish succession tax liability.
For example, if regional laws allow for de facto couples, unmarried couples that are not registered as pareja de hecho can typically pay twice as much Spanish inheritance tax; similarly step-children will pay at more than what a natural or adopted child would pay.
Spanish inheritance law provides more for children (allocating them two-thirds in preference to the spouse), while spouses are covered by usufruct where they can qualify for a ‘life interest’ over assets, normally the family home, rather than a direct property share. This can sometimes reduce Spanish inheritance tax; by leaving a spouse a usufruct, full ownership of the house can eventually pass to children without further tax at that stage, while the surviving spouse can live free in the property for the rest of their lifetime.
In some cases you may be able claim another country’s inheritance law to avoid Spain’s forced heirship rules. However, if the estate consists mostly of Spanish assets, legitimate heirs may be able to contest a will that seeks to disinherit them.
It is particularly advisable to make a Spanish will if you have remarried and have step-children, or other family members you want to include that are less protected by Spanish succession law.
In all cases it is advised to seek qualified professional advice to make the best arrangements for your Spanish inheritance.
If you are an expat living in Spain, there is no legal requirement to make a Spanish will regardless of which national law will apply or whether your assets are based in Spain or abroad. Spanish law recognises foreign wills if they concern property and assets in Spain.
However, foreign residents who haven’t left a will or haven’t stipulated the laws of another country, Spanish inheritance law will apply, as will the Law of Obligatory Heirs
Although making a Spanish will is not a legal requirement, it is worth considering even if you intend to have your estate dealt with by your home country. If you only have a foreign will, it will need to be legalised and translated into Spanish, which can sometimes be more expensive than drawing up a Spanish will. A Spanish will can also save time as using a foreign will from certain countries, such as the UK, means waiting for the Grant of Probate to be issued. This is worth bearing in mind given that the inheritance process needs to be completed within six months of the date of death to avoid penalties from the Spanish tax offices.
If you are thinking of writing a Spanish will, it’s advisable to consult a solicitor familiar with Spanish inheritance law. A solicitor in Spain can advise on what to include in your Spanish will and the process for drawing it up. If you decide to have two wills – a Spanish will for your assets in Spain and a foreign will for your assets abroad – a solicitor can also help ensure that one will doesn’t accidentally revoke or negate the other. It is possible to find lawyer (abogado) offering English-language services.
There are three types of Spanish wills:
- Holographic will – a handwritten Spanish will authenticated by two witnesses and verified by a judge.
- Open will – a Spanish will made before two witnesses and given to a notary who registers it.
- Closed will – a Spanish will made in secret and sealed in an envelope, then given to a notary who registers it.
How to draw up a will in Spain
If you choose to draw up a will in Spain, it is important to note that Spanish wills follow a specific style and format which need to be followed. For example, the will needs to be drawn up in two columns – one in Spanish, and one in your own language approved by an official translator. A solicitor or professional will writer can guide you through the process.
Holographic Spanish will
This Spanish will is the simplest and cheapest to draw up, although it is the easiest to challenge and takes longer to execute. It is handwritten, signed and dated and can be voluntarily registered at the Spanish will registry (Registro Central de Ultimas Voluntades) in Madrid. The will is authenticated by a judge upon the death of the testator.
Open Spanish will
This is the most common form of Spanish will. The will is prepared by a notary to ensure it complies with necessary guidelines, and signed by the testator and two witnesses. The will is registered with the Spanish will registry and the testator receives a copy.
Closed Spanish will
This Spanish will is prepared by the testator with the help of a solicitor to ensure it complies with guidelines. It is then sealed in an envelope which is signed by a notary and two witnesses. The notary then registers the will.
A testator can revoke a Spanish will at any point in time simply by drawing up a new will or declaring the cancellation of an existing will to a notary. If there is more than one Spanish will, only the last one will be legally valid.
There is no requirement to appoint an executor to administer a Spanish will, although you can appoint one if you wish. Execution of the will is normally carried out by a notary. It is also possible to appoint a Spanish solicitor to execute the will, although this may be more expensive.
You can find notaries in Spain here.