Congratulations to Valencia for their big reduction to inheritance tax / Better late than never.
If you are going to leave your assets in the Valencia region to your Spouse or your children living in Valencia or back in the U.K. , Ireland , U.S.A. or Australia they will pay almost NO inheritance tax . The reason is that you will be able to claim the generous regional exemptions (99% discount on final bill ) , much more generous than those offered at the national lever.
INHERITANCE TAX VALENCIA
If you are a resident of the Valencia Region inheriting anywhere in Spain , or are a non-resident of Spain inheriting an estate where most of the assets are in the Valencia region you will be the entitled to claim the very generous Valencia Region. If you are a non-resident, regardless of what you see online ( as the situation has changed very times in the last few years ) you will be able to claim the regional exemption even though you will be presenting your tax clearance documents to the national tax office and not the regional one. ( I am used to seeing clients very confused about this )
The Valencia region has created extra inheritance tax exemptions not available in other regions of Spain. In our “most favourable region of Spain inheritance map” that we have published each year for ex-pats since 2010 (Excellent, good , bad, terrible) the region has now jumped from Average to Excellent. ( This article includes the new exemptions made available in 2023 and valid for deaths after the 28th of May of 2023
This favourable taxation is also available if you live in the E.U. and inherit in the region of Valencia and more importantly ( U.K. resident in mind ) even if you are resident in a non E.U. country. (this was not the case in the past )
In other words since 2018 if you are resident in U.S.A., Canada, Australia and now U.K. you will now also be able to claim the generous exemption rates available in the Valencia Region.
U.K. residents inheriting in the Valencia region after Brexit:
Beneficiaries that are resident in a non-E.U. country inheriting in the Valencia Region can also claim these exemptions. This is an extremely important issue now due the enormous amount of beneficiaries resident in the U.K. We have experience claiming the exemptions for Canadian and U.S.A. residents based on various sentences of the Spanish Supreme courts and will now be doing the same for U.K. residents. Spanish supreme court has said that the Valencia and other autonomous regions high inheritance tax exemptions for spouse and children can now also be claimed by residents of non E.U.countries.
Since last year the Spanish law has changed and now follows what the sentences above stated . If the death was before the law was changed you can still in my opinion claim the exemptions on the basis of the sentences
Where the heirs live in Spain can make a big difference to Spanish Inheritance tax.
Beneficiaries of Spanish estates ( Spanish nationals and residents in Spain) pay a different level of inheritance tax depending on what region of Spain they live in as each regional government has created extra exemptions for those living in their region.
Since the sentence of the ECJ of 3rd of September of 2014 non residents of the European Union who inherit assets in Spain will be entitled to claim the exemptions of the regional government that offers the closest connexion to the estate if this is in their benefit. (this is because the European Court of Justice considered that non residents where being discriminated). There have been varios sentence of the Spanish Supreme court that now extends this to residents of non E.U. countries also. Since last year it has been established by law also .
VERY VERY IMPORTANT: It is very easy to overpay and not claim the correct exemptions because non-residents are required to declare by self assessment their inheritance tas to the national tax office (where the rates are terrible ) , but they are allowed to claim the exemptions of the region of Spain where the majority of the assets are if the exemptions of that region are more favourable. In our “inheritance from hell” you tube series quite a few cases refer to clients not claiming the regional exemptions they are entitled to.
We are known experts in the field of inheritance tax in Spain for international clients . For a full explanation of our inheritance services please click.
How long do you have in Spain to pay inheritance tax ?
6 months from the date of death, unless you request an extension within the first 5 months.
Who needs to present inheritance tax returns ?
Spanish inheritance tax forms need to be presented alway if the heir is resident in Spain . If the heir is non resident in Spain he or she will only declare the assets situated in Spain at the date of death (the exception to this is life insurance payment made by a foreign life insurance company that operates and contracts in Spain with Spanish residents).
In Spain tax is calculated and paid by each heir and not by the estate. There is a general level of inheritance tax in Spain which is ver high but each regional government has created extra exemptions which can greatly reduce of do away completely with inheritance tax.
In Spain we has a general system of exemptions and then each region has applied extra exemptions on top of this. Careful attention needs to be made by your solicitor to determine if he is allowed in your case to apply the extra exemptions available in Valencia to your estate. If the beneficiary is a resident of Valencia there is no doubt, if the beneficiary is a non resident of Spain but a resident in the E.U. and the estate is in Valencia then no doubt thanks to Sentence of the European Court of Justice, later in virtue of various sentence os the Spanish supreme court the beneficiary is a non resident of Spain but that is also non resident of the E.U. Finally all of these sentences have been recognised by the Spanish law.
Where do you pay your inheritance tax in Spain ?
If you are a non resident beneficiary you pay to the Agencia Tributaria, (in Madrid )while if you are a resident beneficiary you pay to the regional government (tax office of the Comunidad Valenciana) . It is done by self assessment . Since the sentence of the E.C.J. we have a crazy situation where if you are a non-resident you have to present to the national tax office (Agencia Tributaria ), but applying the extra exemptions offered by the corresponding regional government, in this case Valencia.) .The trouble with this is the forms are by self assessment so the solicitor will need to take care in claiming the extra exemption offered by the regional government ).
If on a single estate you have one beneficiary resident in Calpe (Valencia )and one in London, they will have to present one declaration in Madrid and one in the Comunidad Valenciana. Get this wrong and you are looking at a problem of biblical proportion.
How much inheritance tax do you pay in the Valencia Region?
The amount payable by each heir depends on a number of factors such as:
• Value of assets inherited
• Relationship between deceased and beneficiary
• Pre-existing wealth of the beneficiary
Guideline of how inheritance tax is calculated in the Valencia Region:
1. We determine the value of what each heir is going to inherit. (Please read the article on benchmarks regarding valuation of property). If you are the Spouse or children and you lived in the same home as the deceased at least 2 years before the death you can reduce the value of the house or part of it by 95% with a maximum reduction of 150000 euro .
2. We establish the exempt amount which will depend on the family relationship with the deceased:
- Group I – Children & adopted children of less than 21 years of age exempt amount in Valencia Region :100000 euro to 156000 euro. (depending on age)
- Group II – Children & adopted children of more than 21 years of age, spouse, parents, grandparents [exempt amount Valencia Region 100000 euro.
- Group III – Brothers, sisters, aunts, uncles, nieces, nephews & step children (not adopted) [deduction EUR7,993.46]
- Group IV– more distant relatives and strangers. (No deduction).
3. We apply the sliding scale to what each heir receives: This is a sliding scale that starts at 7% and goes up to 36,5%.
4. We apply a multiplier to the final amount which will depend on the relationship of the beneficiary with the deceased.
- Group I and II: Multiply the amount by I.
- Group III : Multiply the amount by 1,5882
- Group IV: Multiply the amount by 2.
If the pre-existing wealth of the heir is over 402678 euro then the multiplier can be higher still.
You need to present your self assessment of tax within six months
In the Valencia Region (a particularly favourable jurisdiction for inheritance tax ) if we are in Group I or II we finally reduce the resulting tax bill by 75% if the estate is received by the children of the deceased and are under 21 years of age. If the estate is received by children over 21 or by the spouse the deduction is 50%. In other words not only do we have an exempt amount but the final tax bill has a generous 50 to 75% discount if we are inherit from spouse or parent.
VERY IMPORTANT : DUE TO THE RECENT CHANGES THIS YEAR IF THE DEATH HAS HAPPENED AFTER THE 28TH of May of 2023 then the reduction to apply is not 75% or 50%. From that date onwards the reduction to the final tax bill for children, grandchildren , parents and spouse in the VALENCIA REGION is 99%
If you would like to read a little more about the services we offer as Lawyers specialised in international inheritance please click, or simply contact us now and we will explain.
If you would like to discuss Spanish wills , or you have been called to inherit assets in Spain book a consultation over ZOOM now and we can discuss.
Many clients over the years have asked me what needs to be done and who do they need to call if someone dies in Spain . If this is a question you have asked yourself the you may find this other post of ours of interest.
What do I do and who do I call when someone dies in Spain?
Contact me now if If you need help with:
An inheritance anywhere in Spain.
You may already have a will and simply need a consultation to run through everything to make sure things are in good order ( we can discuss and go through existing wills, powers of attorney, living wills, deeds etc. and make suggestions where needed ). From experience I can say that on occasions this consultation has saved a lot of money and problems. For fees and availability for a Spanish will and inheritance check up simply e-mail Ms Maria Alonso on maria@daviessolicitors.com . This can be done at one of our offices or over Zoom.
