The Spanish regulations are usually a puzzle that foreigners residing in the peninsula often give up on trying to understand, and inheritance law is not an exception. Nevertheless we are going to give in this article a clear insight about how successions work in our country so that expats already living here or those planning to come can have a basic knowledge.
- What is inheritance?
An inheritance consists of all the assets (pecuniary, realty…) that an individual (heir or beneficiary) recieves as a result of the death of a third person (the testator). The recipients can be determined via a last will, but where the Spanish law applies there are compulsory rules that cannot be avoided. Thus, the inheritance is divided in 3 parts: the first third corresponds to all surviving children in equal proportions, the second one for surviving children however the testator wishes, and the last third is entirely of free disposition.
With this we can see an important question arising that leads us to the next section.
2. When does Spanish law apply?
The Spanish law for successions applies any time that either the assets to be inherited are located in Spain or the heir is resident in the country (in absence of a will – intestacy). The only other option here is that where both the assets and the heirs are not located in Spain, in which case it would be unreasonable to even think that Spanish law has anything to say.
However, this general rule does not apply when there is a last will that clearly states that the deceased wants a different national law to govern the inheritance.
3. What are the tax implications of inheriting in Spain?
Of course the limitations to your choice of jurisdiction and the restricted disposal of your assets are important, but taxes are easily the most relevant factor to bear in mind, especially if they are higher in Spain than in your home country.
Inheritance taxes in Spain are based mainly on two things: your relation with the deceased and the region you are located in. The former one consists of 4 different groups of individuals classified according to their closeness to the dead; the closer you are (by family ties), the higher your allowance and the lower your tax rate. As for the latter, it establishes completely different rates for the 17 Autonomous Communities (our regions).
In some regions, this tax can be de facto inexistent. In others, you can be subject to a 34% fee for the top marginal rate of your sum (the tax follows a progressive scale, so the bigger the amount, the higher the tax rate). This is a consequence of the federal structure of the nation, which has often led to interregional competitions for foreigners and national residents. To know specifically the rates you would face, we must tell you that you need the information from every region in the country.
However, when no particular region can be chosen as residency of the individual or the assets, the general Spanish law applies, which is found in the Spanish Civil Code.
4. Are there different regulations for Spanish nationals and foreigners?
The short answer is no. The application of the Spanish law (and everything it implies for restrictions and taxes) is decided upon the residency, not the nationality. A foreign national living in, for example, Andalusia for more than 5 years (therefore becoming resident) will be subject to the Andalusian regulations just like any other inhabitant there. And another foreigner who has not even stepped foot in Spain will also be taxed if the sums inherited come from there.
This is how it works: 1) resident heir and deceased in Spain – you apply the tax regulations in the region where you live; 2) non-resident heir and resident deceased – you apply the tax regulations in the region where the deceased was resident; 3) non-resident heir and deceased – you apply the regulations in the region where the asset with the highest value is located. For instance, if the non-resident deceased owned a property in Andalusia valued at €100,000 and another in the Balearics worth €250,000, the Balearic regulations would apply.
However, as we advanced before, what can actually be different for foreigners is the possibility to choose a different applicable law: the one of the nationality or the country of residence. This should be clearly stated in a will that is legally valid and recognizable in Spain.
In this article we have provided a general idea about how inheritances work in Spain. This topic is much harder in reality, and there are lots of reductions, deductions, regulations and other concepts that interact and make of every particular case a different adventure. If you need legal help in succession matters or you have any questions regarding this topic, feel free to contact us.
