Inheritance Tax in Andalucía

Spanish inheritance tax is a complex topic, with regional variations determining allowances that you can benefit from when inheriting assets in Spain.

Andalucía - in common with the other autonomous regions in Spain - has its own regulations regarding inheritance and gift tax. These rules apply equally to residents and non-residents who are EU citizens, following the European Court of Justice ruling and subsequent Spanish legislation.

The regional level exemptions available in Andalucía were brought into force by the Parliament of Andalucía and in their current form are laid-out in Law 5/2021.

Spanish Inheritance law first assigns beneficiaries to groups according to the degree of kinship with the deceased:          
 

1. Group I: Children, including adopted children, under the age of 21
2. Group II: All other descendants, spouses and parents
3. Group III: Close relatives such as brothers and sisters, grandparents, aunts and uncles
4. Group IV: More distant relatives

The Regional Parliament of Andalucía continues to maintain generous tax benefits for close family members, with a 99% tax relief for Groups I and II beneficiaries. These rules apply equally to residents and non-residents who are EU citizens.

1. Group I: €1,000,000
2. Group II: €1,000,000
3. Group III: €10,000

Note, when we speak of deductions, we mean that the amount you would be taxed on is deducted by a set percentage before applying the rate of tax. So, if you have inherited €100,000 and are entitled to a deduction of 95%, this means you will pay tax at whatever rate is appropriate to you - on €5,000 only.

On the other hand, when we speak of rebates, this is applied to the amount of tax you have to pay. So, if after applying any deductions you have to pay €1000 in inheritance tax, and you are entitled to a rebate of 99%, this would mean you would only have to pay €10. 

As an example, an inheritance of €10,000 (after all other deductions applied) would attract inheritance tax of €560 (tax applicable up to €8,000) + €2000 (balance up to €10,000) @ 8% = €720. 

Unlike other regions of Spain, Andalucía does not increase the amount of inheritance tax to be paid as a result of both the pre-existing wealth of the beneficiary and the proximity of their relationship to the deceased, relying solely on the latter.

To see how this works, if we take the previous example of an inheritance of €10,000, if the beneficiary is a child of the deceased, lives in Andalucía, then the tax payable is, as we saw, €720. On the other hand, if the beneficiary is a sibling of the deceased, this amount is multiplied by the coefficient of 1.5 = €1,080.

Disabled beneficiaries receive enhanced deductions regardless of their relationship to the deceased. Note that these deductions are now compatible with other reductions and no wealth requirements apply.

1. €250,000 for disability levels between 33% and 65%
2. €500,000 for disability levels of 65% or higher

1. 99% reduction for the main residence  
2. Applies to spouse, descendants, ancestors, or relatives over 65 who lived with the deceased  
   1. Must maintain ownership for 3 years 
   2. Cohabitation requirement only applies to relatives over 65
   3. No limit to the value of the property

1. 99% reduction for business transfers  
2. Available to Groups I, II, and III  
   1. Business must have been actively managed by the deceased  
   2. If deceased was retired/disabled, business must be managed by family members  
   3. 3-year maintenance period required

1. 99% reduction also available to Group IV beneficiaries if: 
   1. Have 5+ years employment history with the business 
   2. Hold management position for 3+ years 
   3. Employment contract active at time of death

1. 99% reduction for company shares  
2. Minimum 5% individual ownership or 20% family group  
   1. Must maintain ownership for 3 years  
   2. Active management requirement applies  
   3. Available to Group IV with same employment conditions as business transfers

Many expats with assets in Andalucía may consider making lifetime gifts rather than waiting for assets to pass through inheritance, particularly regarding property transfers. This strategy requires careful consideration, as the advantages and disadvantages can vary significantly depending on individual circumstances and the type of assets involved.
 

The tax rates for gifts are the same as listed above for inheritance, though gifts have some special rules to lower the gift tax payable in certain cases:

99% reduction for money gifted where the purpose of the gift is to help the donee buy a home, if:

1. The recipient is under 35, disabled, or victim of domestic violence
2. The property is located in Andalucia, but need not be their first home purchase
3. Recipient's pre-existing wealth below €402,678.11
4. Maximum gift value the reduction applies to: €150,000 (€250,000 for disabled)
5. Must purchase within 1 month of the gift being formalised
6. The recipient must maintain the property for at least a 3-year period

1. 99% reduction for money donated to start/expand business
2. Maximum reduction: €1,000,000
3. Must be formalised within 6 months
4. Business must be managed in Andalucía
5. 3-year maintenance period required

Tax residents of Andalucia inheriting foreign assets face unique considerations in Spain's decentralized tax system. With Andalucia's growing international community, understanding these obligations is vital.

The application of Andalucian tax benefits to foreign inheritances can bring substantial savings compared to state-level regulations. For instance, Andalucia's generous 99% tax relief for immediate family members extends to foreign assets, potentially reducing the tax burden on inherited overseas properties or investments. 

Key considerations for foreign inheritances:

Regional vs State Rules

1. Andalucian tax benefits apply to worldwide assets
2. Must use Andalucian calculations and deductions
3. Benefits include business asset reductions and main residence reliefs

International Tax Treaties

1. Spain maintains double taxation agreements with several countries
2. Each treaty has specific provisions for inheritance
3. Primary taxing rights vary by asset type and location

Reporting Requirements foreign Inheritances

1. Mandatory declaration on Form 720 for foreign assets
2. Strict compliance deadlines apply
3. Severe penalties for non-disclosure
4. Independent of inheritance tax obligations

Cross-Border Complexities

1. Multiple jurisdictions may claim taxing rights
2. Asset valuation methods may differ
3. Currency conversion considerations
4. Different legal systems to navigate

Expert guidance is essential for cross-border inheritances, especially regarding:

1. Application of Andalucian tax benefits to foreign assets
2. Interaction with international tax treaties
3. Compliance with both Spanish and foreign regulations
4. Optimal structuring of international estates

Handling an inheritance in Andalucía requires careful attention to legal procedures and deadlines. The process can be complex, with significant financial penalties for missed deadlines or incorrect filings. Below we list the essential steps you will need to take:

Death Certificate (Certificado de Defunción)

1. Obtain from Civil Registry Office
2. Multiple copies recommended
3. Required for all subsequent procedures

Last Will Certificate (Certificado de Últimas Voluntades)

1. Request from Ministry of Justice
2. Available 15 days after death
3. Shows existence of any wills in Spain

Will Location and Verification

1. Obtain from notary where last will was signed
2. Check for any previous versions
3. Verify validity under Andalucian law

Documentation Gathering

1. Property deeds and registrations
2. Bank account statements
3. Life insurance policies
4. Vehicle documentation
5. Business ownership records

NIE Processing

1. Foreign heirs must obtain Spanish tax number
2. Apply through Spanish consulate or in Spain
3. Required before inheritance acceptance

Legal Assessment

1. Review applicable Andalucian inheritance laws
2. Determine qualification for 99% tax relief
3. Evaluate regional tax benefits

Inheritance Deed (Escritura de Aceptación de Herencia)

1. Prepare with Spanish notary
2. Include all inherited assets
3. Must be signed by all heirs

Tax Obligations

1. File inheritance tax return within 6 months
2. Apply for any available extensions
3. Calculate tax using Andalucian rates
4. Pay or claim applicable reliefs

Municipal Tax (Plusvalía)

1. Pay at town hall where property located
2. Strict local deadlines apply
3. Rates vary by municipality

Property Registration

1. Register inherited properties
2. Update vehicle ownership
3. Transfer business registrations

Important Time Limits

1. 6 months to file inheritance tax declaration
2. 30 days for Plusvalía payment in most municipalities
3. Possible 6-month extension if requested properly

Given Andalucia's specific regulations and generous tax benefits, professional assistance is strongly recommended to:

1. Ensure compliance with regional requirements
2. Maximize available tax reliefs
3. Meet all deadlines
4. Handle complex asset transfers
5. Navigate international aspects if applicable