Property Guides and Information for the Costa del Sol, Spain

Inheritance Tax Update for Residents in Andalucia

Ben Johnson / Bright

keywords: spain, inheritance, law, tax, non, residents, infromation, guide

This is an update to my article on Inheritance Tax in Spain for residents and non residents. It includes important information on tax breaks available within Andalucia.

Throughout Spain’s Autonomous regions there are certain tax breaks available to “official” residents of the region. Each region has different tax breaks which are detailed in the section 5478 Reducciones de las Comunidades Autonomas of the Official Law Statutes.

To qualify for the two Andalucian tax breaks mentioned below your inheritors must have Spanish residence permit and also apply for a Volante de Enpadronamiento (a certificate to show that you are a resident of the region) from the local town hall to become designated "official residents".

Tax exemption for main residence

Official residents can avoid 95% of the value of the main residence and 99.9% if the property is also the main residence of the inheritor. Similar concessions also apply to small businesses passed on through inheritance to direct family members. The inheritors must be spouse or children (brother or sister if living with the deceased for at least two years). There are three conditions:

1. The home transmitted must be the principal residence and you must have lived in it for three years
2. The inheritor must also have official residence and must not to sell the property for 10 years.
3. There is a €120,000 limit on the amount of inheritance to which the reduction applies any amount above this will be subject to tax.

General exemption for the estate

A recent exemption came into being on the 1st of January 2004, it also applies to inheritors who are direct family members and who are also official residents of Andalucia.

There will be no tax payable on an inheritance where all the following conditions are met:

1. Any individual inheritance must not exceed €125,000
2. The total estate must not exceed €500,000
3. The inheritor’s own wealth does not exceed €402,678

Once the total amount of the estate exceeds 500,000€ or each inheritor’s share exceeds 125,000€ the exemption disappears and the normal inheritance tax must be paid on the full amount.

Case Study: The double Tax Break for the Spouse

A couple own a house and one dies, the spouse gets the 99.9% reduction up to €120000, thereafter tax is paid on the balance.

That balance is then subject to the new €125000 rule. The Spanish wording of Article 5478 refers to the net tax base, ie the figure less the €120000.

That means that if the spouse keeps the house then it is effectively tax free up to €245000.

Children of course would only be entitled to the €125000 deduction and the 16,000€ general tax break of Spain.

August 10, 2005 | Category: Property Tax in Spain