Few questions generate as much anxiety among foreigners with assets in Spain as this one: how much of my inheritance will the Tax Agency keep? The reputation of Spanish inheritance tax is terrible, and partly unfair: the state rate can in theory reach 34% (and beyond with the multiplier coefficients), but the reality is that most autonomous communities have hollowed out the tax for spouses and children with allowances of 99% or 100%, so that the same inheritance can cost 200 euros in Madrid and tens of thousands in Catalonia. Inheritance tax isn’t one: it’s seventeen, and knowing which one applies to you (and why) is the difference between a formality and a shock.
This guide explains how the tax works for foreigners and non-residents: the mechanics of the tax and its kinship groups, the real regional map with its allowances, the case-law turn that ended the discrimination against non-residents (which many international heirs still don’t know about), the legal optimization strategies decided while alive, and the deadlines you shouldn’t let slip.
Do you want a expert consultation? Contact us and we will help you.
What Is the Inheritance and Gift Tax in Spain?
The Inheritance and Gift Tax, regulated in Law 29/1987, taxes what each heir receives by inheritance or legacy (and lifetime gifts, which share the same law). It’s paid by each heir on their portion, not by the estate as a block, and its amount depends on four variables: the value of what’s received, the kinship with the deceased, the heir’s prior wealth and, decisively, the applicable regional rules, because the tax is ceded to the autonomous communities, which legislate their own reductions and allowances.
Kinship sorts heirs into four groups that condition everything: Group I (descendants under 21) and Group II (descendants of 21 or over, spouse, and ascendants) concentrate almost all the tax benefits; Group III (siblings, aunts, uncles, nieces, and nephews) has historically been the great loser, although several communities are starting to grant it allowances; and Group IV (cousins and unrelated persons) is taxed with no shelter, with coefficients that can double the liability.
For the international reader there’s a preliminary distinction that governs everything else. Tax residents in Spain are taxed under personal liability: they pay the tax on everything they inherit, wherever the deceased’s assets are located. Non-residents are taxed under real liability: only on assets and rights located in Spain (the apartment on the coast, the Spanish bank account, the S.L.’s quota shares). That boundary defines who pays, on what assets, and before whom.
Differences by Autonomous Community: Comparison Table
The snapshot of the tax for the case that concentrates the vast majority of inheritances, the transfer between spouses, parents, and children (Groups I and II):
| Treatment for spouse and children | Communities |
|---|---|
| 100% allowance. | Balearic Islands and Cantabria. |
| 99% allowance or higher, with no relevant limit. | Madrid, Canary Islands (99.9%), Murcia, La Rioja, Extremadura, Castilla y León, Aragón, and Valencia. |
| 99% allowance up to 1 million euros per heir. | Andalusia. |
| Reduction of 1 million euros per heir and a reduced own rate. | Galicia. |
| Decreasing allowances by amount (from 100% to 80%). | Castilla-La Mancha. |
| First 300,000 € free; the excess, with no general allowance. | Asturias. |
| Own decreasing system: 99% for the spouse, descending scales for children by base. | Catalonia. |
| Provincial regimes: exemption up to 400,000 € and 1.5% on the excess (Basque Country); minimum rates with the first 250,000 € free for the spouse (Navarre). | Basque Country and Navarre. |
Two essential readings of the table. The first: the heir doesn’t choose the territory. In the inheritances of residents, the rule is the community where the deceased had their habitual residence for the longest time in the last five years, wherever the heir lives. The second: the real differences shoot up with the amount. In an inheritance from parent to child of 200,000 euros, almost all of Spain comes out at symbolic amounts; in one of 800,000, the gap between Madrid and Catalonia is measured in tens of thousands of euros. And a methodological warning: these rules are tweaked almost every year (the Group III allowances are the current wave: Madrid already applies 50% and Valencia has started its calendar for siblings and nephews), so the exact figure is always verified against the rules in force on the date of death, which is the one that crystallizes the applicable regime.
Allowances and Reductions for Spouse, Children, and Ascendants
Besides the regional allowances on the tax liability we’ve just seen, the tax is built with reductions on the base that are worth knowing because they stack:
- Reduction for kinship: the state one is around 16,000 euros for Groups I and II (with an improvement for each year the minor under 21 is short of reaching it), and many communities raise it drastically: the 300,000 euros of Asturias or the million of Galicia are, technically, this piece.
- Deceased’s main residence: a 95% reduction of its value (improved by several communities to 99% or with higher limits) for spouse, ascendants, and descendants, conditional on keeping the residence for the period the applicable rules set.
- Family business: a 95% reduction (99% in several communities) of the value of the sole proprietorship, professional business, or shares to which the regime applies, with requirements of exercising management functions and subsequent maintenance. It’s the piece that lets a business group change generations without decapitalizing.
- Life insurance: a specific state reduction for the amounts received by spouse, ascendants, and descendants, improved regionally.
The order of application matters: first the reductions draw the taxable base, on it the progressive rate and the coefficient for kinship and prior wealth are applied, and only at the end does the regional allowance cut the liability. That’s why the same 99% allowance can mean very different things depending on which reductions operated before.
Do you want a expert consultation? Contact us and we will help you.
Non-Residents and Inheritance Tax: What the CJEU Judgment Says
Here’s the chapter every international heir must know, because for years Spain kept an openly discriminatory system: non-residents were taxed under the pure state rules, with no access to the regional allowances, so that two siblings inheriting the same could pay radically different amounts depending on where they lived. The Court of Justice of the EU declared it contrary to the free movement of capital in its judgment of September 3, 2014 (case C-127/12), forcing Spain to reform the law for residents in the EU and the EEA. The Supreme Court finished the job in 2018 by extending the doctrine to residents of third countries, and Law 11/2021 definitively consolidated in the legal text what was already settled doctrine.
The result in force: all non-residents, whether from the EU or any other country, have the right to apply the rules of the autonomous community with which the inheritance has the connection the law sets. The essential connection rules: if the deceased resided in Spain, the rules of their community; if the deceased wasn’t a resident but leaves assets in Spain, those of the community where the greatest value of those assets is located. The handling, though, isn’t done before the regional tax authority but before the National Tax Management Office of the AEAT in Madrid, which assesses applying the corresponding regional rules. In practice, the typical case we handle (a non-resident foreign heir receiving the Spanish property of their parents, also non-residents) is taxed today with the allowances of the community where the property is located, a radically better scenario than a decade ago and one that connects with the obligations we already explained in the guide on buying property in Spain: what’s bought is, one day, inherited.
Legal Optimization Strategies Before Death
Inheritance tax is optimized while alive; afterward it’s only settled. The legal levers we review in any serious planning:
- Spanish will for the assets in Spain: it doesn’t reduce the tax by itself, but it avoids months of international procedures and costs of validating foreign documents. How to execute it, in our guide on how to make a will in Spain.
- Choice of succession law: the European Succession Regulation lets the foreigner choose in their will that their inheritance be governed by their national law instead of the law of their habitual residence. For nationals of systems with testamentary freedom, that one-line clause dodges the Spanish forced heirship shares, whose workings we explain when detailing how to calculate the forced share of an inheritance.
- Planned lifetime gifts: many communities also grant a 99% allowance on gifts to children and spouse, which lets you bring transfers forward at minimal cost. It requires doing it right: a public document, justification of the origin of the funds when the rules require it, and attention to the donor’s personal income tax, because the gift of appreciated assets surfaces its capital gain.
- Structuring the business assets so the shares meet the requirements of the family business reduction, the largest quantitative lever in the system.
- Usufruct and bare ownership: transferring the bare ownership while reserving the usufruct splits the tax burden and keeps control and income in the transferor.
- Well-designated life insurance, which adds its own reduction and immediate liquidity to pay the tax itself without selling assets off cheaply.
- The deceased’s residence as a conscious variable: those who split their life between territories should know that their last five years decide the rules of their entire succession.
The usual warning: these pieces interact with each other and with the taxation of the heir’s country of origin, and Spain only has specific inheritance treaties with a handful of countries, so double taxation is managed with the domestic deductions and documentary order. The optimal combination is a bespoke suit, not a recipe.
Deadline to File the Inheritance Tax Return
The calendar is strict and starts running on the day of death: 6 months to self-assess (form 650), with the possibility of requesting a 6-month extension if asked for within the first five, with late-payment interest. Filing late without an extension adds surcharges that increase with the delay. And there’s a practical consequence that surprises international heirs: until the tax is settled, the banks don’t release the deceased’s accounts and the Registry doesn’t record the properties in the heirs’ names. The tax isn’t the end of the paperwork: it’s the key to everything else. For non-residents, the file is submitted before the National Tax Management Office with the death documentation translated and apostilled where appropriate, the Spanish certificates (last wills, insurance), and the valuation of the assets.
Spanish inheritance tax is, looked at properly, a tax of geography and calendar: where the deceased resided, where the assets are, what rules crystallize on the date of death, and what was planned beforehand. For the foreigner with assets or family in Spain, the difference between an expensive succession and an almost free one is rarely in tricks: it’s in knowing the map, choosing the correct succession law in the will, using the reductions that already exist, and settling on time before the competent body.
At ILLAY Legal we handle inheritances with an international component fully online: lifetime succession planning, wills with choice of law, settlement of the tax before the AEAT or the competent community through our personal tax returns in Spain service, and complete wealth design with our tax planning service. Tell us your family and wealth situation and we’ll tell you exactly how much your inheritance would pay today and how much it could pay with well-done planning.
Frequently Asked Questions About Inheritance Tax in Spain for Foreigners
I live in Spain and I’m going to inherit from a relative in my country of origin: do I pay here?
Yes. As a tax resident in Spain you’re taxed under personal liability: the tax reaches everything you inherit anywhere in the world, even if the assets and the deceased are outside Spain. To avoid paying twice, Spanish law allows deducting the inheritance tax paid abroad on those assets, with limits, and specific inheritance treaties only exist with France, Greece, and Sweden. The applicable rules will be those of your community of residence, so an heir residing in Madrid or Andalusia can receive an international inheritance at minimal cost, while the same case in another community deserves a prior calculation.
Can I renounce an inheritance in Spain to avoid paying the tax?
Yes, through a pure, simple, and free renunciation before a notary: the renouncer acquires nothing and isn’t taxed, and the inheritance passes to whoever corresponds under the will or the law (who will be taxed according to their own kinship with the deceased). Watch out for the trap variant: renouncing in favor of a specific person isn’t renouncing, it’s accepting and gifting, and it generates two taxes. Renunciation is also the rational way out in inheritances with more debts than assets, along with acceptance under benefit of inventory, which limits liability to what’s inherited.
Do I need an NIE to inherit in Spain?
Yes. Every foreign heir needs an NIE to settle the tax, and without settlement there’s no access to accounts or recording of properties. It can be obtained from abroad through the consulate or through a representative in Spain with power of attorney, which is how we usually handle non-residents’ inheritances: power of attorney, NIE, settlement, and recordings without the heir having to travel.
Besides inheritance tax, is anything else paid when inheriting a property?
Yes, the municipal capital gains tax (the local tax on the increase in land value), which is settled at the town hall where the property is located within the same extendable 6-month deadline. Its amount depends on the municipality, the years of ownership, and the real increase in value, and after the reform of the tax it can be avoided by proving there was no gain. From there, keeping the property generates the annual obligations of the non-resident owner (property tax and imputed income or the taxation of the rental), the package we review in the guide on Spanish taxes for foreigners.
Is a will made in my country valid in Spain?
As a rule, yes: Spain recognizes wills validly executed under the law of the place, and the European Certificate of Succession also facilitates the circulation of inheritances within the EU. The problem isn’t the validity, it’s the logistics: translating, apostilling, and proving a foreign succession title before Spanish notaries, banks, and registries adds months and costs to the succession. That’s why the recommended practice for those with assets in Spain is the coordinated double will: one in the country of origin for the assets there and a Spanish one, with choice of law if convenient, for the assets here. Two cheap documents that become, when the day comes, the difference between weeks and years.
