Inheritance Tax in Spain

How is Spanish inheritance tax calculated?

The inheritance tax calculation you owe is determined by several factors:

The value of the assets inherited

The higher the value of the inheritance, the higher the tax rate you will have to pay. Spain applies a progressive tax system, meaning that large inheritances are taxed at a higher rate than smaller ones. The tax rates range from 7.65% to 34%, but they can be modified by regional governments.

Your relationship to the deceased

Spain categorizes heirs into different groups, and closer family members benefit from lower tax rates and higher allowances. The four main inheritance groups are:

Group 1: Children under 21 years old (lowest tax rate, highest deductions)

Group 2: Children over 21, spouses, parents, and grandparents (moderate tax rates)

Group 3: Siblings, nephews, nieces, aunts, uncles, in-laws (higher tax rates)

Group 4: Distant relatives and non-family members (highest tax rates, fewest exemptions)

For example, a child inheriting from a parent in Madrid might pay little to no tax, while a friend inheriting from a friend could face a much higher tax burden.

Who has to pay inheritance tax in Spain?

Heirs must pay inheritance tax in Spain under the following circumstances:

- You inherit assets located in Spain: Even if you live abroad, Spanish inheritance tax applies to properties, bank accounts, and other assets physically located in Spain.

- You are a tax resident in Spain: If you live in Spain and inherit assets from someone (even from outside Spain), you may be taxed on your worldwide inheritance.

- You inherit from a Spanish resident: If the deceased was a tax resident in Spain, inheritance tax may still apply, even if the heir lives abroad.

However, some international tax treaties (such as between Spain and the UK or the USA) may affect how and where the inheritance is taxed. Heirs should always check whether their home country has a double taxation agreement with Spain to avoid paying tax twice.

By understanding how inheritance tax is calculated and how different factors impact the final amount, heirs can better prepare and take advantage of possible reductions.

What happens if you don’t pay inheritance tax in Spain?

The Spanish tax authorities (Hacienda) require heirs to declare and pay inheritance tax within six months of the date of death. If you don’t pay:

Interest and penalties may apply.

The Spanish government can place a tax lien on inherited property, making it impossible to sell or transfer ownership. Banks can freeze inherited bank accounts until tax is settled. It’s crucial to start the process early and seek a professional tax advisor if needed.