In these Spanish regions, you do not have to pay inheritance and gift taxes

by Lorraine Williamson
inheritance and gift taxes

MADRID – The agreement between the Partido Popular (PP) and Vox to form the government of the Autonomous Region of Valencia includes the abolition of inheritance and gift taxes. Furthermore, it is not the only region with such fiscal measures. 

Inheritance and gift taxes are taxes levied on an inheritance after the death of a person. It is a levy that comes into effect when there is a transfer of goods or rights from one natural person to another, without compensation. 

Also read: Spanish lawyer files a complaint with the EU against inheritance tax 

It is a progressive tax because the tax rate gets higher the larger the inheritance is. This tax is personal and direct. In Spain, its collection is arranged by the autonomous regions and the descendants or heirs have to pay. 

PP and Vox in Valencia are considering the abolition 

Lately, there has been a lot of talk about inheritance and gift taxes because one of the points in the agreement between the PP and Vox in the Valencia region considers the abolition of this tax. In 2022, the regional government managed to raise more than €47.5 million in the province of Castellón alone. Consequently, if this tax is abolished, it will mean a major loss to public finances. 

Fiscal measures as a political weapon 

Political parties use tax policy as one of their main electoral weapons. In recent years, the Partido Popular has introduced tax cuts for the wealthy in Andalucia and lowered the Income Tax Rate (IRPF) in Madrid. 

Inheritance and gift taxes are the responsibility of the autonomous regions, so the central government cannot intervene in their application. Therefore, such fiscal policies have direct implications for regional budgets. Eliminating or increasing them leads to significant disparities between regions and often leads to tax issues. 

Regions with lower inheritance and gift taxes 

The Valencia region is not the first to abolish inheritance and gift taxes. The tax cuts started a decade ago and currently, five regions have virtually eliminated this tax. These regions are Cantabria, Madrid, Murcia, Andalucia and Castile and León. The differences are in some cases so great that there can be deviations of up to €100,000, depending on the region in which a taxpayer inherits. 

If the heir is a direct descendant or adopted child and is under the age of 21, usually only symbolic amounts are paid. In La Rioja, payment is only made if the inheritance exceeds €400,000, and regions such as Aragon, Catalonia, Castilla-La Mancha and so far Valencia have discounts and reductions. 

If the asset recipient is the spouse, descendant or ancestor and is over the age of 21, there is also virtually no inheritance and gift tax paid in Andalucia, Madrid, Cantabria, Castile and León, Extremadura and Murcia. 

Whereas, other areas such as La Rioja, Asturias, Galicia, Catalonia, Canary Islands, Aragon and Valencia apply different discounts. If the heir is another family member, the discounts in the Canary Islands are almost 100% and in Madrid up to 25%. 

Also read: What should you know if a family member dies in Spain? 

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