2Central government taxes

2.5 Inheritance and Gift Tax

Inheritance and Gift Tax applies to Spanish resident heirs, beneficiaries and donees and is charged on all assets received (located in Spain or abroad). Nonresident beneficiaries are also subject to this tax as nonresident taxpayers, and must pay the tax in Spain only on the acquisition of assets and rights (whatever their nature), that are located, exercisable or to be fulfilled in Spain.

The tax base is formed by the net value of the assets and rights acquired, deemed as the market value or as the most likely price for which an asset free of encumbrances could be sold between independent parties. In the case of real estate, for taxable events accruing after July 10, 2021, their value will be the reference value provided for in the legislation of the real estate Cadastre on the date on which the tax becomes due.

A series of reductions to the tax base are established, which include, most notably, the following:

• Reduction of 95% of the tax base deriving from a transmission mortis causa to spouses, children or adopted children or, in their absence, ascendants, foster parents or collateral relatives up to the third degree of a professional business, an individual enterprise, or interests in entities or usufructs on them of the donor or deceased which were exempt from wealth tax. The requirements are as follows:
  • The beneficiary of a transmission mortis causa must keep the assets received for at least 10 years.
  • The beneficiary cannot carry out transactions that result in a substantial diminution in the value of the assets.
• Reduction of 95% of the tax base for inter vivos transfers of interests in an individual enterprise, professional business or in entities belonging to the donor which are exempt from wealth tax (or which meet the requirements for such exemption) to spouses, descendants or adopted children provided moreover that (i) the donor is at least 65 years old or has a permanent disability, and (ii) if the donor had been discharging management duties, he/she must discontinue them and stop receiving remuneration in that connection.

The tax is calculated by adjusting a tax scale of progressive rates (depending on the value of the estate or gift) with a coefficient that takes into account the previous net worth and the degree of kinship with the donor.

As with other taxes devolved to the autonomous community governments, inheritance and gift tax legislation has been adapted to recognize the legislative power of those governments to approve reductions in the tax base and rates and in the coefficients for adjusting the tax payable, based on the taxpayer’s previous net worth. However, Law 22/2009, of December 18, establishes the reductions, rates and coefficients to be applied if the autonomous community in question has not assumed the powers devolved, or where it has not yet made any regulations, in that connection.

The tax rates and adjustment coefficients applicable for 2020 (in the absence of rates and coefficients specifically approved by the relevant autonomous community) are the following:

Some autonomous communities, however, have established reductions which result in a tax payable of zero (or close to zero). This applies to inheritances and/or gifts, depending on the autonomous community, in the case of “close” heirs or donees (children, grandchildren, spouses, ascendants).

With regard to the place where the tax must be settled, a distinction must be made, in general, between transmissions mortis causa and inter vivos:

• Transmissions mortis causa: As a general rule, in the autonomous community in which the deceased was habitually resident.
• Transfers inter vivos: As a general rule, in the autonomous community where the acquirer is habitually resident, except in the case of real estate for which the place will be the autonomous community where the property is located.

These general location rules were applicable until recently to taxpayers resident in Spain; non-residents had to be taxed under State legislation in any event (which on many occasions caused discrimination because, as indicated, some autonomous communities have implemented significant rebates). Following the CJEU’S judgment of 3 September 2014 (Case C-127/12), specific connection points have been established for taxpayers resident in the EU or in the EEA that were extended, for taxable events accruing after July 10, 2021, for the residents of third States⁴⁵.

Accordingly:

1. When the decedent was a nonresident, the taxpayer will be entitled to apply the regulations approved by the autonomous community in which the largest portion of the value of the assets and rights forming the decedent’s estate is located in Spain. If there are no assets or rights located in Spain, each taxpayer will be subject to the regulations of the autonomous community in which the taxpayer resides.
2. When the decedent was a resident in an autonomous community and the taxpayer is not a resident, the taxpayer will be entitled to apply the regulations approved by that autonomous community.
3. In the event of the acquisition of real estate located in Spain by donation or any other inter vivos legal transfer for no consideration, non-resident taxpayers will be entitled to apply the legislation approved in the autonomous community in which the real estate is located.
4. In the event of the acquisition of real estate located abroad, by donation or any other inter vivos legal transfer for no consideration, taxpayers resident in Spain will be entitled to apply the legislation approved in the autonomous community in which they reside.
5. In the event of the acquisition of moveable property located in Spain by donation or any other inter vivos legal transfer for no consideration, non-resident taxpayers will be entitled to apply the legislation approved in the autonomous community in which the moveable property has been located for the highest number of days during the immediately previous five-year period, counted from date to date, ending on the day prior to the accrual of the tax.

Specific rules are provided to calculate tax payable in the case of donations in which, in a single document, the same donor donates different assets or rights to the same donee and the regulations of different autonomous communities are applicable in accordance with the rules explained above.