In Spain, the Inheritance and Gift Tax is undergoing a significant change. This tax, which applies to the acquisition of assets and rights through inheritance or donation, is reduced.
However, it is up to the autonomous regions to what extent and on what grounds the tax is reduced. This makes it more advantageous for residents of certain regions to inherit or receive property as a gift.
More about the Inheritance and Gift Tax in Spain
As determined by tax law, inheritance and gift taxes are progressive (the greater the amount inherited, the higher the tax rate); personal (the person who receives the inheritance pays); and direct (charged from the taxpayer’s wealth, not from consumption).
Also read: Wealth and Inheritance Tax very unevenly distributed in Spain
Inheritance taxes are taxed in the autonomous community where the deceased lived. This also applies if their property was located in another community. For donations, payment is made where the person receiving the goods lives, and not at the place where the goods are delivered. With real estate, the place where it is located applies.
Variation per autonomous community
Following these clarifications, the inheritance and gift tax varies depending on the autonomous community and based on various factors. Consider the amount of the inheritance or the age of the beneficiary. In the case of descendants under 21 years of age, no or symbolic taxes are paid in:
Andalucia
Asturias
The Balearic Islands
The Canary Islands
Castilla y Leon
Galicia
Extremadura
Madrid
Basque Country
Navarre
Murcia
The Valencian Community
Regional tax adjustments
The Inheritance and Gift Tax will be further adjusted in 2024. It has traditionally been a topic of debate due to the varying rates by region. Regions such as Andalucia, Balearic Islands, Canary Islands, Cantabria, Castilla y León, Extremadura, Madrid, La Rioja and Murcia have already taken steps in 2023 to reduce the tax burden for surviving relatives and gift recipients.
Specific regulations per region
Each autonomous region in Spain has its own rules and exemptions for Inheritance and Gift Tax. This results in a diverse landscape of tax burdens. Here is an overview of the Inheritance and Gift Tax per Spanish region:
Asturias
Heirs under the age of 21, both biological and adopted, as well as older heirs who are spouses, ancestors or adoptive parents, are exempt from this tax up to an amount of €300,000.
La Rioja
In 2024, La Rioja restored the 99% exemption on inheritance and gift tax for ancestors, descendants and spouses. This applies to an inheritance with a taxable basis of more than €400,000 for each heir.
Navarre
For spouses, a rate of 0% applies up to €250,000. Above that, the rate is 0.8%. For direct blood relatives such as ancestors and descendants, the rates vary between 2% and 16%.
Castilla-La Mancha
Descendants under the age of 21, the spouse, older descendants and ancestors receive a 100% exemption. If the amount is more than €300,000, the exemption is reduced to 80%.
Castilla y Leon
There is a 99% exemption from Inheritance Tax for immediate family members (spouse, descendant or adoptee, ancestor or adoptive parent of the deceased).
Andalucia
There is a reduction of up to one million euros for descendants, spouses and ancestors, and €250,000 for relatives of the second degree (brothers and sisters) and third degree (cousins, uncles) and descendants and ancestors by marriage, as well as for relatives of the fourth degree (cousins) and other relationships.
Aragon
There is a 65% exemption for inheritances that do not exceed €100,000; otherwise, the corresponding tax must be paid. In Aragon, there is a 100% reduction to €3 million.
Extremadura
There is a 99% exemption from Inheritance Tax for descendants under the age of 21 and immediate family members (spouse, descendant or adoptee, ancestor or adoptive parent of the deceased).
Catalonia
Descendants under the age of 21 can receive up to €100,000 without paying this tax, but can only benefit from €12,000 per year until they turn 21. For the spouse or partner of the deceased, the limit is €100,000, for grandchildren €50,000 and in the case of a parent or grandparent €30,000.
Galicia
Since 2020, the Inheritance and Gift Tax on direct inheritances has been free up to €1million. In addition, it offers a reduction of €400,000 for ancestors, descendants and spouses with rates ranging from 5% to 18%, while people with disabilities in groups 3 and 4 receive a reduction of €300,000.
Comunidad Valenciana
Retroactively from May 28, 2023, a 99% exemption will apply to inheritances between spouses, ancestors and descendants, and the same exemption applies to gifts.
Islas Baleares
Since July 18, 2023, inheritances between ancestors, descendants and spouses are completely exempt from tax thanks to a 100% tax exemption. There is also a general 25% tax exemption for inheritances between siblings, uncles and cousins, which rises to 50% if the deceased had no descendants or had disinherited them.
Cantabria
Descendants, ancestors and spouses benefit from a reduction ranging between 99% and 90%. This percentage can increase to 100% if the taxable base does not exceed €100,000. In 2024, it is planned to rebate 50% of the tax on inheritances between siblings.
Community of Madrid
There is a 99% exemption for descendants, ancestors and spouses, and a maximum 25% exemption on Inheritance and Gift Tax between siblings, uncles and cousins.
Community of Murcia
There is a 99% exemption for ancestors, descendants and spouses. The regulations also include other reductions for the rest of the heirs, depending on the inheritance and the good or right received.
Pais Vasco
In the case of inheritances, when the degree of kinship is between descendants, ancestors spouses or registered partners, inheritances with an amount of less than €400,000 are exempt from tax. A tax rate of 1.5% applies for amounts above €400,000.
Islas Canarias
Since September 6, 2023, inheritances between ancestors, descendants, spouses, siblings, cousins and uncles have been almost completely exempt from tax. This is due to applying a 99.9% exemption on the tax. The tax on gifts between spouses, ancestors and descendants has also been improved. Now with an exemption of 99.9%.
The importance of the changes
These regional adjustments are a response to the call to reduce the tax burden. The complexity of the Inheritance and Gift Tax must also be reduced. By reducing this tax in certain cases or offering exemptions, the regions recognise the need to accommodate citizens when transferring assets within families. This policy reflects a shift towards a more flexible and family-friendly tax approach. This will ease the financial burden for many Spaniards.
Also read: Spanish lawyer files complaint with Europe against Inheritance Tax
