How to calculate the Inheritance tax in Spain for non-residents

Tulips Quite often I am asked how much is the tax payable on a Spanish estate. My first answer to that question is that the tax is not paid by the estate but is paid by each beneficiary on the basis of what he or she inherits. My second reply is that the Inheritance tax is calculated on a sliding scale where some coeficients are applied depending on the value of the asset inherited. It is therefore quite difficult to give a quick estimate without having the calculation rates next to me. Rather than using this post to talk about all the intricacies of Spanish Inheritance taxes, I think it would be useful to set up a case study with some imaginary names which would give the reader a taste of how the tax is calculated in Spain.  

Paul Herbert, British national, resident in Manchester dies in the UK on the 18th March 2012. He was divorced and had one daughter. He had assets in the UK and in Spain. There was a Spanish Will dealing with the Spanish assets and a Will dealing with the UK assets.

He left all his Spanish assets to his daughter, Isabel, who is 40 years old and lives in Birmingham. The funeral took place in the UK. The estate comprises a property in Marbella worth 295,000 euros and a bank account with 5,000 Euros. The property had no mortgage.

The house did not have any valuable assets, just the usual furniture for a house of this type.

The daughter is British and has never lived in Spain.

INHERITANCE TAX CALCULATION RATES (€)

 

Tax Base 
up to (€)

Tax liability
euros

Remaining Tax base up to
(€)

Applicable Rate

 

0.00

7,993.46

7.65

7,993.46

611.50

7,987.45

8.50

15,980.91

1,290.43

7,987.45

9.35

23,968.36

2,037.26

7,987.45

10.20

31,955.81

2,851.98

7,987.45

11.05

39,943.26

3,734.59

7,987.46

11.90

47,930.72

4,685.10

7,987.45

12.75

55,918.17

5,703.50

7,987.45

13.60

63,905.62

6,789.79

7,987.45

14.45

71,893.07

7,943.98

7,987.45

15.30

79,880.52

9,166.06

39,877.15

16.15

119,757.67

15,606.22

39,877.16

18.70

159,634.83

23,063.25

79,754.30

21.25

239,389.13

40,011.04

159,388.41

25.50

398,777.54

80,655.08

398,777.54

29.75

797,555.08

199,291.40

onwards

34.00

 

We know that the property was worth 295,000 Euro and that there was 5,000 Euro in the Spanish bank. The tax calculation would be as follows:

 

Real value

300,000

Chattels

9,000 (300,000 x 3%)

Gross Estate

309,000

Expenses  

0

Net Estate

309,000

Taxable Base

309,000

Allowances

Kinship (descendants)

15,956.87

Final taxable Base

293,043.13

Tax liability

 

Up to 239,389.13
Rest up to 293,043.13 (53,654) x 25.50%

Total

  40,011.04
                                                13,681.77

53,692.81

Multiplying rate

1.00 (She has no pre-existent estate in Spain and is the daughter of the deceased)

 

Inheritance tax

 

53,692.81

 How did we get this figure?

The real value is 300,000 € and this includes the value of the property (295,000 €) and the balance in the bank account (5,000 €). When there are no relevant chattels Spanish laws consider that the value of the chattels is 3% of the real value. That is why we have this amount of 9,000 € shown as chattels (300,000 € x 3%).

The funeral expenses were incurred in the UK and therefore cannot be deducted as an expense. We are then left with a Net Estate of 309,000 € which will be used as the Taxable base to which the necessary bases and percentages apply. But before applying any bases or percentages we need to apply the necessary allowance which will vary depending on the kinship. Children have an allowance of 15,956.87 € and therefore the final taxable base will be 293,043.13 € (Taxable base – Allowances).

It will then be a case of applying the tax base and percentages indicated in the table at the beginning of this document. This is done in two stages:

–       Up to 239,389.13 € the amount to pay will be 40,011.04 €.

–       The rest up to 293,043.13 € (in particular 53,654 €, which is the difference between 293,043.13 € and 239,389.13 €) will be calculated applying the appropriate percentage which is 25.50% leaving a second amount of 13,681.77 € to pay.

The tax liability will be the sum of both amounts (40,011.04 € + 13,681.77 €) = 53,692.81€.

Finally, a multiplying rate has to be applied depending on two factors: kinship and the value of the previous estate of the beneficiary in Spain. If the latter is less than 402,678.81 € then the multiplying rate will be 1 (which is the case of the daughter as she has no previous assets in Spain)

The Inheritance tax to be paid by Isabel will be the tax liability (53,692.81Euro) multiplied by the multiplying rate 1 = 53,692.81

Tax to pay is 53,692.81 €

The IHT paid in Spain can be offset in the UK to avoid double taxation.

 

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