Spanish inheritance law

Thank you to Raquel at Perez Legal for the following information. Raquel has kindly provided some of this previously but this is the most complete and up -to-date and supersedes all other inheritance tax information published on this blog.

Spanish Inheritance Tax - Perez LegalInheritance issues are something you may not want to think about, but you should plan ahead especially when you own any assets outside your home country.

This is a brief overview of certain facts and figures related to Spanish inheritance law and tax.

Foreign nationals enjoy free disposition of their assets in Spain

A foreign national can make a Spanish will leaving his Spanish estate to any person of his choice. The Spanish Registrar will accept its terms and, when the time comes for the will to be executed, the inheritors can take possession of their new property.

In practice, the authorities do not ask if the testator is an official resident or not. They accept the Spanish will as valid. The only requirement enforced by Spain is the payment of Spanish inheritance tax, which will be different for residents and non-resident inheritors.

Not leaving a will

If a foreign national dies in Spain without a will, his estate in Spain will automatically be distributed according to the prevailing Spanish laws of inheritance.

If, for instance, a husband and wife own a house 50% each and they have 3 children, the surviving spouse will continue to own half the house as their name is on the title deed as half owner already. The other half of the house constitutes the inheritable estate.

Under the standard state laws, the estate will be divided equally among the 3 children. When the estate is settled, each child will have a one-third title to half of the house, meaning that each one now owns one-sixth of the house, and the title deed has four names on it – that of the widow and each of the 3 children. The widow also holds a usufruct right on the children’s share, which means that she can use their half of the property until she dies, as well as her own half.

In practice this means all parties must be in agreement and sign the deed before the house can be sold.

Dying without a will can result in time consuming and expensive legal procedures for your survivors, so if you want to make sure they are taken care of and if you have definite ideas about how you want your estate distributed, you should prepare a Spanish will. It’s a very easy and inexpensive procedure that ensures you control the process and can have complete peace of mind.

Costs and fees associated with a Spanish will

The normal cost would be between 160 euros up to 250 euros, depending on the lawyer’s fees. In addition to this, you should count on Notary fees of approximately 50 euros.

Your lawyer will prepare your will as a double-barrel document in English and Spanish, and will take it to the Public Notary Office in order that you can confirm your identity (with a passport) and sign the will in front of the Notary. Unfortunately, no one can substitute you in the signing of a will, so it will have to be done in person.

Advantages of signing a Spanish will

There are several key points to bear in mind:

  1. It is advisable to make a Spanish will disposing of your Spanish assets in order to avoid time consuming and expensive legal procedures for your heirs. Make a separate will to dispose of assets outside Spain.
  2. You will be exempt from the Spanish law of compulsory heirs, according to which you are automatically obliged to leave two thirds of your estate to your children. Instead, a personal will allows you to leave your estate to whomever you choose, and apportion it as you see fit.
  3. You can plan ahead your Spanish inheritance tax. Spanish law provides exemptions for family members such as spouses and children. As a result, there is a tax deduction of 16.000 euros for the surviving spouse and approximately 11.000 euros for the children.
  4. If you are an official resident in Spain, leaving your property to a spouse or child that is also a resident can result in a reduction of 95% in inheritance tax. It is, however, an advantage that is not available to non-residents, and the reduction is applied to the first 175.000 euros of value.

Does my will in my home country cover my Spanish assets? 

Foreign wills can be probated in Spain, but there are a number of steps that must be followed, and they are complicated.

If you have lived in Spain for a long time, you will need to review your legal domicile in your home country.

Your lawyer back home will need to prepare a letter of intent on your behalf, confirming that even though you hold a Spanish residence permit now you intend to return to your home country eventually.

Setting tax values

Another issue is obtaining the official value of assets of different nature, such as real estate, personal belongings, automobiles, stock and shares, life insurance or bank accounts. All of these are necessary to make the Inheritance Tax declaration. They are obtained from different sources and subject to individual tax scales.

Offshore companies

For non-Spanish citizens, the incorporation of an offshore company in order to own real estate has been a much-used way to avoid inheritance tax.

When the founder of the company dies, he leaves his shares in the company to whomever he chooses by means of a will made outside of Spain. However, as far as Spain is concerned, the same company continues to own the property and no transfer has taken place (which means there is no need to pay transfer tax or capital gains tax), yet such companies are liable for a special tax on property held by corporate entities registered in tax havens. This tax is normally 3% of the value of the property and is payable once a year.

Four-year limit

There is a statute of limitation on inheritance tax and it is 4 years. This means that the state cannot collect inheritance tax more than four years after a person’s death. If the deceased’s will is lost during this period and found and presented by the inheritors after the four-year period has lapsed, it can be possible to apply to re-register the property free of inheritance tax.

Spanish law requires that inheritance tax should be declared within six months of the date of death. If an inheritor is found tampering with legal material in the manner described above, they can be subject to a surcharge of 25% on the tax due, or even higher penalties. This six-month period is then added to the statute of limitations of 4 years so in reality its 4 years and 6 months.

Gifts

While it is also possible to give pre-inheritance gifts while you are alive, this does not provide any form of exemption from inheritance tax, as such gifts are governed by the same conditions as inheritance itself.

How to minimise your inheritance tax liability.

A lot of people think that having a Spanish will in place means there will be no tax to pay. Although this is unfortunately not the case, having such a will saves a great deal of trouble, expense and, if done properly, can reduce the tax bill significantly.

There is no one-fits-all solution, it depends on individual circumstances, but some alternatives are:

  • Incorporating a Spanish company.
  • Incorporating an Offshore company.
  • Or becoming a resident in Spain. If this is your preferred option, you should hold an official residence permit for at least 3 years. The home you live in will be your official residence and you must have lived in it for at least 3 years. Officially, your inheritor must undertake not to sell the property within a 5-year period, though this is not enforced in practice

Get the facts right

  • In Spain, death certificates must be applied for within 24 hours otherwise the application will be more difficult.
  • All inheritors must apply for a NIE number and will have to give power of attorney to the Spanish lawyer representing them to arrange it.
  • A lot of people don’t plan ahead and make it difficult for their inheritors to find documents such as title deeds to produce to the authorities in time, yet the law requires the inheritance tax to be paid within six month’s of the date of death.
  • The deceased’s bank accounts will be frozen until the will’s conditions are satisfied and inheritance tax is paid.
  • After the inheritance title deed is registered (within 30 days of payment of the tax and presentation to the Registrar Office), the Plus Valia tax will have to be paid to the town hall. This sum depends on the number of years that have passed since the last sale of the property.
  • Inheritance Tax is payable to the central government in Madrid.
  • If you don’t process the change of ownership of the property in the name of the new inheritors, they will not be able to rent or sell your property, and it is in danger of remaining in limbo for a long time.

Perez Legal Group

Tel: +34 952 833 169

info@perezlegalgroup.com | www.perezlegalgroup.es

Inheritance Tax‏ in Spain

Many people have been in my office, asking me what happens when a person dies in Spain, as far as their assets are concerned. Some were inheritors and others were trying to make things as easy as possible for their heirs when the day finally comes.

For most people, they want to make things as easy as possible for their heirs and a Spanish Will is the first step in the process. Many people think about making a Will but never actually get round to doing one.

Whatever people say to you regarding these three possible situations, there is a simple solution. A client told me the other day that he thought that the Spanish government would take everything if there was no Will. This is not the first time I have heard this rumour and it is totally unfounded.

There are three possible situations:

  1. You have a Spanish Will
  2. You only have an English Will or
  3. You do not have a Will

1. The deceased person has made a Spanish Will

A. Some documents must be gathered

  • The original death certificate. If the testator died in Spain, we have to apply for a Spanish death certificate, but if the testator died in England, the death certificate will need the Apostille affixed (Hague’s Convention). It will also need to be translated by an official Spanish translator, or by the Spanish Consulate in England.
  • We also need to write to the “Registro de Últimas Voluntades” (Register of last Wills) in Madrid on your behalf so that they certify that a Will was made, that the Will in question was the last one and which Notary has the original documentation. Even if you already have a copy of the Will, we must write to the Register, so that they can certify that there is no other Will with a later date. Most solicitors have a collaborating firm lined up in Madrid to avoid the procedure by post which tends to be lengthy. In our case, we can obtain certification within two weeks.
  • Gather the original escrituras de compraventa (title deeds) and bank account details. If you cannot find the deeds, do not panic, a certificate from the property register can be obtained and will work just as well.
  • Your last Patrimonio declaration. If you have never made one, a written declaration to the effect of not having an estate worth more than 500,000 Euros.

B. You must have an acceptance document drafted, which must be signed in front of a Spanish Notary, exactly the same as when you are purchasing a property in Spain.

C. You then have one month to pay the inheritance tax or claim part or total exemption depending on your situation. The tax has to be paid in Madrid if both the deceased and the heirs are non-residents. If any of the people involved is a resident then one can present the forms at the local tax office. If the heirs are group 1 or 2 (spouses or direct descendants) there is a major benefit of Andalucían Jurisdiction (which you can only claim if the deceased or one of the heirs are residents in Andalucia and can prove it). The benefit consists of an exemption rate of 125,000 Euros for each heir instead of 16,000 Euros for each heir.

D. As soon as the Inheritance Tax has been paid or the exemption is claimed, you can go to the bank where the deceased person held his/her money and the bank will release the money to the person the Acceptance Escritura confirms has inherited.

When this is done, you must deal with whatever property you may have inherited. You must go to the property register and ask to register the Escritura of acceptance (In the same way one does when purchasing a property with the purchase escritura). It will take approximately one month for the register to be handed over to the registered title. After this deed is completed, plusvalia needs to be paid to the Town Hall to which the property belongs.

2. The testator has made a Will in England, which refers to his / her assets and properties worldwide

A. You must obtain the Grant of Probate in England. You must then get the Hague’s Apostille affixed and send it to an official translator in Spain, or to the Spanish Consulate in your home country. (If the English Will mentions the word “trust”, then you have a problem, as trusts do not exist in Spain).

B. You must take the same steps as if the translated document is a Spanish Will.

3. The deceased person has not made a Will.

A. If the deceased person is English, his heirs should appoint an English solicitor, who will need to obtain letters of Administration in England. You then need the Apostille affixed. Next, the document needs to be translated by the Spanish Consulate in England, or by an official translator in Spain.

B. Then we take the same steps, as if the translated document is a Spanish Will.

IMPORTANT THINGS TO REMEMBER

  • From the moment of death, the heirs have a maximum of six months to pay the death duties. If you do not think you can sort things out within that time limit, you can ask for a 6 month extension, but you must ask for it in writing, within the first five months.
  • Any document signed by an English public official will need the Apostille affixed before it is valid in Spain.
  • Any document that is written in English will need to be officially translated, before it is valid in Spain (Consulate or official translator).
  • The information I have provided is only a guideline and in no way substitutes my legal advice for your own particular situation.

There is no doubt that the best situation is to have a Will in your country of origin concerning your home assets and one in Spain for your Spanish assets. This will avoid a heavy legal bill later on and save a lot of time and distress.

In the absence of a last Will and testament, you will need judicial or notary documents declaring you are a legitimate heir and provide evidence of the laws of the late person’s country of origin in order to justify your claim to the inheritance. These documents, together with the rest of the papers required to formalize the inheritance, will then be taken to a Notary to allocate the inheritance.

By Raquel Perez

Perez Legal Group

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