# Inheritance Tax in Andalucia



## StevejR1 (May 21, 2013)

Hello All,

As our proposed move to Andalucia moves closer, I would like to ask a question about a thorny question which worries me a little....inheritance tax.

I've done a search on here, and on Google, but I wondered if anyone on here knows of a link to a simple explanation of the state of play in Andalucia.

From what I'm gathering, a spouse would get a €175,000 tax free amount on the estate, with a 75% reduction on the tax thereafter...is this correct? Is there a table on here, or on the Internet that shows this, and whether it is a sliding scale dependant of the estate value?

We would obviously seek proper financial advice before entering into anything concrete, but I know that you are a wealth of experience on here having dealt with it all first hand, and would appreciate any information.

I'm now getting a little more than worried that should either of us die it could have a devastating financial impact on the other.

I should point out that we are not actually married at the moment, which I'm sure complicates everything even more, but I think we will be married sooner rather than later....don't tell her yet though! 

Again, thanks for any help.


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## StevejR1 (May 21, 2013)

I forgot to ask.....is it possible to sign for the house in joint names to avoid the house element becoming part of the estate?


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## Alcalaina (Aug 6, 2010)

It's important to register on the Padrón at the town hall immediately you buy the property, because that proves municipal residency - you have to have lived in Andalusia for 2.5 years out of the past 5 years in order to benefit from certain deductions. For example if the surviving spouse continues to live in the property the allowance is 99.9%. The first €175,000 is tax-free provided (a) you are resident and (b) the heir's pre-existing wealth is less than €400k.

If you Google "inheritance tax in Andalucia" (which you've probably done already) you get a number of solicitors' websites all saying roughly the following:



> If the deceased was a resident in Andalusia and the heirs are fiscal residents in Spain, they will benefit from various tax reductions.
> 
> If the property inherited was the habitual residence of the heir at the time of death the taxable base of the property will be reduced by 99.99%, making the transmission of the property to the heir almost “tax free”.
> Exemption of inheritance tax for direct relatives or the spouse of the deceased, if the total individual assets received are not in excess of 175,000€ and if the total assets owned by the heir is less than 402,678€.
> ...


If you want to pick yourway through the law in Spanish, it is on the Junta de Andalucía website:

Impuesto sobre Sucesiones y Donaciones - ConsejerÃ­a de Hacienda y AdministraciÃ³n PÃºblica


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## Alcalaina (Aug 6, 2010)

Steve.R said:


> I forgot to ask.....is it possible to sign for the house in joint names to avoid the house element becoming part of the estate?


As I understand it, it doesn't make any difference - the inheriting spouse is automatically liable for IHT unless they meet the requirement for exemption or allowances.

But I'm not an expert, I'm sure there will be one of those along in a minute!


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## StevejR1 (May 21, 2013)

Thank you Alcalaina,

I did google that, but some of the articles were quite old, and I didn't know if things had changed.

So are you saying if the spouse continues to reside in the property they get a 99.9% reduction regardless of if the property is valued at over 175,000€?

Also, if the house were to be in joint names would the estate value of each person be deemed as half the value of the house each ie on a €200,000 house, €100,000 would be part of the spouses estate, €100,000 taxable under the inheritance tax?

I realise I'm asking a lot of technical questions and I do apologise


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## Madliz (Feb 4, 2011)

Alcalaina said:


> As I understand it, it doesn't make any difference - the inheriting spouse is automatically liable for IHT unless they meet the requirement for exemption or allowances.
> 
> But I'm not an expert, I'm sure there will be one of those along in a minute!


As I understand it, if the house is jointly owned then tax will only be payable of the 50% that is inherited. If the deceased partner owns the whole house, the inheritor will be liable for tax on 100% of the house. 

When we bought our house here, prior to relocating from the UK, my husband came to conclude the purchase in the notario's office while I stayed home with the children. As I understood it, the house was bought in our joint names. What I discovered in the notario's office, as the grieving widow, was that since *I* was not present at purchase, the house was only owned by my husband, and the children and I were liable for IHT on the whole house. There's an important lesson there.

This being Madrid, with more favourable tax rules, plus having lived in the house for many years as well as being close relatives, IHT was much less than I feared. In fact, I know several residents in Andalucía who are on the padrón in relatives' properties in Madrid for just that reason.


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## extranjero (Nov 16, 2012)

Steve R Be tankful you are in Andalucia with it's generous regional IHT allowances, and not in Murcia, where the regional allowances were abolished last year, leaving only the miserly state allowance of just under 16,000 euros. As you said the result for the remaining partner/spouse will be a devastating bill. I know I am not alone in saying that regions should not be allowed to set their own allowances for IHT which mean that a person in Madrid may pay 0, whereas a person in Murcia could pay thousands on their share of a property and assets of the deceased.
All the methods of reducing this tax have many disadvantages. Spouses and registered partners should be exempt form IHT anyway.Surely it is time for a fairer system where the state has a realistic allowance of, say, the wealth tax threshold-700,000 euros? Only the wealthy should pay this tax, not someone, who, with their partner has worked hard for years to buy a property and have enough to enjoy their retirement, and then either has their own savings plundered to pay the tax, or, not being able to pay it, gives it all to the state? 
SteveR As you say it does complicate things if you are not married, or registered as a partnership, as your partner will only have the state allowance !


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## StevejR1 (May 21, 2013)

extranjero said:


> Steve R Be tankful you are in Andalucia with it's generous regional IHT allowances, and not in Murcia, where the regional allowances were abolished last year, leaving only the miserly state allowance of just under 16,000 euros. As you said the result for the remaining partner/spouse will be a devastating bill. I know I am not alone in saying that regions should not be allowed to set their own allowances for IHT which mean that a person in Madrid may pay 0, whereas a person in Murcia could pay thousands on their share of a property and assets of the deceased.
> All the methods of reducing this tax have many disadvantages. Spouses and registered partners should be exempt form IHT anyway.Surely it is time for a fairer system where the state has a realistic allowance of, say, the wealth tax threshold-700,000 euros? Only the wealthy should pay this tax, not someone, who, with their partner has worked hard for years to buy a property and have enough to enjoy their retirement, and then either has their own savings plundered to pay the tax, or, not being able to pay it, gives it all to the state?
> SteveR As you say it does complicate things if you are not married, or registered as a partnership, as your partner will only have the state allowance !



It seems a draconian tax to me....to have to pay thousands to 'buy' your own home after the death of your husband, wife, or partner must be devastating!

I must admit that when I first started to hear about this tax I became very worried. I was then relieved that I was looking in Andalucia.....but what really worries me is that taxation can change, and anywhere, so I'm hoping the benefits aren't abolished in Andalucia!


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## Alcalaina (Aug 6, 2010)

From one of those lawyers' websites:



> The Spanish Supreme Court declared last May that current local Inheritance Tax regulations are against the Spanish Constitution, as it discriminates Spaniards. The fact that someone living in Madrid will not pay Inheritance Tax or someone in Valencia will get a 75% discount (99% previously) compared to other Regions in Spain violates the principle of equality under the Law.
> 
> Previously, the European Commission referred Spain to the EU´s Court of Justice for discriminatory rules on inheritance and gift tax that require non-resident to pay higher taxes than residents.
> 
> Recently, the Spanish Government has announced a “comprehensive and complete” tax reform that will be tackled in 2014, aimed at making our tax system “comparable with our peer countries”. Therefore, we expect changes in the Inheritance Tax legislation in the near future.


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## extranjero (Nov 16, 2012)

Alcalaina said:


> From one of those lawyers' websites:


Can' t come soon enough!


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## StevejR1 (May 21, 2013)

Am I to assume that the law changes after the review would be more likely to repeal the current laws in favour of the rules followed in Andalucia, rather than the Andalucian ones being abolished?


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## extranjero (Nov 16, 2012)

I think it' s obvious they are not going to abolish allowances in andalucia !
I hope Spain realises a massive reform of the IHT is due, to make It fairer for all.
Hopefully they will exempt spouses, set a realistic state allowance, and take away the power for regions to set their own allowances. Hopefully!


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## Alcalaina (Aug 6, 2010)

The tax is paid to the region though, not central government. So naturally they want the power to set their own allowances.

I think most regions exempt spouses and children as long as they have lived there at least 5 years? And some of them allow_ parejas de hecho_ to be treated as spouses.

This page gives the details the OP was asking about, in English.


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## extranjero (Nov 16, 2012)

Alcalaina said:


> The tax is paid to the region though, not central government. So naturally they want the power to set their own allowances.
> 
> I think most regions exempt spouses and children as long as they have lived there at least 5 years? And some of them allow_ parejas de hecho_ to be treated as spouses.
> 
> This page gives the details the OP was asking about, in English.


I have never heard about spouses being exempt from IHT, no matter how long they have lived in spain.where did you get that from?

The whole system of different regions setting their own allowances is very flawed an unfair.How can it be right that someone in Madrid pays nothing, while another in Murcia pays thousands
This is one of the things being debated in the EU. I t's about time this anachronistic law was eradicated, and many Spanish, including the legal profession agree. It's time to stop plundering the hard earned savings of bereaved spouses.
If regional governments are hard up, then they should be rounding up those not paying their taxes- not punishing those who are.
Do you live in Murcia, where your only IHT allowance will be. Pitiful 16, 000 euros


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## Alcalaina (Aug 6, 2010)

extranjero said:


> I have never heard about spouses being exempt from IHT, no matter how long they have lived in spain.where did you get that from?


I live in Andalucia and needed to know! My or my surviving spouse's allowance would be 99.99% which is effectively an exemption. (We are never likely to live in a house worth more than €175,000, especially as prices are still falling.)


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## extranjero (Nov 16, 2012)

Alcalaina said:


> I live in Andalucia and needed to know! My or my surviving spouse's allowance would be 99.99% which is effectively an exemption. (We are never likely to live in a house worth more than €175,000, especially as prices are still falling.)


Lucky you
Are you referring to the 99 PC reduction if the spouse keeps the house 10 years?
If so it is a poisoned chalice
In reality a spouse will often go back to the UK, move ,downsize.keeping the house means maintenance bills,taxes etc. If she/ he is then living in the uk when it is sold, CGT!


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## superslim (Feb 14, 2014)

Could someone clarify the following for me please:-
* Regarding the 175k euro allowance on Spanish main residence, is this based on a) the Cadastral Value, on b) the declared price as shown in the escritura, on c) an open market valuation at the point the liability arises, or on d) something different (please advise)!


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## mrypg9 (Apr 26, 2008)

Another reason why we decided to rent. Our assets are held ooutside Spain and arranged so as to be exempt from Spanish IHT.


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## superslim (Feb 14, 2014)

mrypg9 said:


> Another reason why we decided to rent. Our assets are held ooutside Spain and arranged so as to be exempt from Spanish IHT.


Yes, good point! We are just going through that very consideration ourselves


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