Understanding Taxes When Inheriting Assets in Spain

Inheriting property in Spain can present a range of tax obligations. From inheritance tax to non-resident taxes such as imputed income and capital gains tax, it is essential to understand these requirements for effective estate management. This guide provides non-resident property owners with the necessary information to navigate these responsibilities confidently.

Inheritance and Gift Tax

Inheritance and Gift Tax in Spain applies to the transfer of assets, including real estate, from a deceased person to their heirs. This progressive tax increases with the value of the inheritance and varies across Spain's regions. EU residents can choose to apply either regional or state tax rates, while non-EU residents must use the state tax rate.

The Inheritance Tax must be filed within six months from the date of death. An extension of six additional months can be requested before the initial deadline expires.

Imputed Income Tax (Non-Resident Tax)

When inheriting property in Spain, heirs are liable for imputed income tax from the date of the deceased’s death.

Calculation: Imputed income tax is calculated as 1.1% or 2% of the property's cadastral value, taxed at a rate of 19% for EU residents and 24% for non-EU residents. For instance, if the cadastral value is €300,000 and the property is inherited on March 1, the imputed income tax for the year is calculated for the period from March 1 to December 15 (290 days).

Filing: This tax must be declared via the Modelo 210 tax form and paid by December 31st of the following year. For property inherited on March 1st, 2024, the imputed income tax filing deadline would be December 31st, 2025.

Capital Gains Tax (Non-Resident Tax)

If the heir decides to sell the inherited property, capital gains tax applies to the difference between the property's declared value in the inheritance tax and the transfer (sale) value.

Calculation: Capital gains tax is calculated by subtracting the acquisition value (value declared in the inheritance tax) from the sales value. The tax rate is 19% for EU residents and 24% for non-EU residents. For example, if the property was inherited at a value of €500,000 and sold for €600,000 on December 15th, 2024, the capital gain would be €100,000.

Deductible Expenses: Certain expenses related to the acquisition and sale, such as notary fees, legal fees, and improvements made to the property, can be deducted from the capital gain.

Payment and Filing: The capital gains tax must be paid and filed via the Modelo 210 tax form within four months from the sale date. For a sale on December 15th, 2024, the filing deadline would be April 15th, 2025. Additionally, the buyer must withhold 3% of the purchase price as an advance payment towards the seller’s capital gains tax.

Plusvalía Municipal (Municipal Capital Gains Tax)

Plusvalía Municipal is a local tax applied to the increase in land value from the date the deceased acquired the property to the date of death, and again at the time of sale.

Calculation: This tax is based on the cadastral value of the land and the number of years it has been owned. The tax rates and calculation methods vary by municipality.

Filing: For inheritance, the Plusvalía Municipal tax must be paid within six months from the date of death. For property sale, it must be paid within 30 days of the sale.

Local Taxes

Property Tax (IBI): Impuesto sobre Bienes Inmuebles (IBI) is an annual property tax based on the cadastral value of the property. It is paid to the local municipality and is due from the date of acquisition (the date of the deceased’s death). 

Rubbish Collection Tax: This local tax covers the cost of waste collection services and is typically billed annually. The exact amount and payment schedule depend on the municipality.

An Example Situation

An EU resident who inherits a property in the Balearic Islands, valued at €500,000 on March 1st 2024, and sells it on December 15th, 2024: 

Inheritance Tax: This tax must be filed by September 1st, 2024. Assume a regional inheritance tax rate of 15% after allowances.

Imputed Income Tax: The cadastral value of the property is €300,000. Imputed income tax is calculated for 290 days (March 1st to December 15th) at 1.1% of €300,000, taxed at 19% for EU residents:

Imputed Income = 1.1% × 300,000€ = 3,300 × 290/365 = 2,617€

Tax Payable = 19% × 2,617€ = 497€

This must be filed by December 31st, 2025.

Capital Gains Tax: If the property is sold for 600,000 € the gain is 100,000€. However, deductible expenses may reduce this amount. The tax payable is:

19% × 100,000€ = 19,000€

This must be filed and paid by April 15th, 2025.

Plusvalía Municipal: This is calculated based on the increase in the cadastral value of the land from the date the deceased acquired the property to March 1st, 2024 (the date of death), and again at the time of sale. The inheritance Plusvalía Municipal must be paid by September 1st, 2024, and the sale Plusvalía Municipal must be paid by January 14th, 2025 (30 days after the sale).

Local Taxes: The heir must also pay the IBI and rubbish collection tax from the date of inheritance.

Simplify Your Tax Obligations with IberianTax

Finding your way through the intricacies of Spanish tax laws when inheriting property can be daunting, but there’s no need to worry when you have IberianTax on your side. Our expertise and tailored services ensure that non-resident property owners stay compliant with all tax requirements, minimising the risk of penalties and maximising peace of mind. 

Why Choose IberianTax?

• Expert Guidance: Our experienced team of tax professionals is well-versed in Spanish tax law and dedicated to providing you with accurate, up-to-date information.
• Streamlined Process: We simplify the tax filing process, making it easy for you to meet all deadlines and requirements without the usual stress and confusion.
• Comprehensive Support: From inheritance tax to imputed income and capital gains tax, we cover all aspects of your tax obligations, offering personalised advice and assistance.
• User-Friendly Platform: Our online platform is designed to be intuitive and accessible, ensuring you can manage your taxes efficiently, even from abroad.
• Multilingual Assistance: We offer support in multiple languages, including English, German, and French, to cater to our diverse clientele.

Don’t let the complexities of tax laws overwhelm you. Reach out to IberianTax today and let us handle your tax obligations with professionalism and care. Whether you have inherited property or need assistance with other non-resident tax matters, we are here to help.