Spanish Inheritance Tax Tips

What happens to inheritance tax for Britons after Brexit? Do they pay more inheritance tax than residents? Are there ways to reduce inheritance tax whether you are a resident or not? Erardo Ferrer of Lanzarote Abogados discusses the importance of planning your will well.

In 2014, a ruling of the Court of Justice of the European Union affirmed that there was discrimination against non-resident citizens in the payment of inheritance tax in Spain. Spain prevented non-residents from benefiting from the tax deductions applied to residents.

This all changed with the Supreme Court ruling of November 19, 2020, which put an end to this discrimination based on non-residence in a member state of the European Union. This case involved a deceased French citizen, resident in Venezuela, who did not have and had never had residence in Spain, but who owned a property in Madrid and three in Alicante.

Spanish law established the application of state regulations (with hardly any deductions or bonuses) over regional regulations, when the Communities of Madrid and Valencia had planned a reduction of 99%. This was ruled as discriminatory under article 63 of the Treaty on the Functioning of the EU and article 40 of the Agreement on the EEA, which oppose the existence of a difference in inheritance tax treatment between resident and non-resident heirs.

The application of the aforementioned Supreme Court ruling determines that non-EU citizens (including British citizens, of course) also have the right to the application of regional tax benefits. And this is a very important issue for the estates of non-residents in the Canary Islands, since this region offers very important inheritance tax advantages where bonuses of up to 99.9% of the tax can be applied.

There are ways to further reduce your liability to pay inheritance taxes, whether you are a resident or not, by planning your will well. Inheritance tax is a graduated tax – the higher the value of the award, the higher the tax percentage is applied. As a result, an heir who receives a house as an inheritance pays much more than four heirs who receive the same house as an inheritance.

It is also very important when accepting the inheritance to declare the correct value of the inheritance to avoid burdensome capital gains in possible future sales of those inherited properties.

Planning your will well means saving a lot on your taxes and we are specialists with more than 24 years of experience.