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Andalucia considered the new inheritance tax “haven” in spain

Guest Article by GVA lawyers

The newpolitical change in Andalucía has brought along a huge tax reform regardinginheritance tax, which was long overdue. This new reform reduces considerablythe IHT (ISD in Spain) not only exempting those inheritances with an estatevalue under 1.000.000 euros, but will also apply a 99% reduction for those thatexceed this amount.

The run forthis reform started off with the previous governing party amending article 22 of the Legislative Decree 1/2018,of 19th June, which implemented a reduction of 1.000.000 euros tothose inheritances, within this threshold (from0 to 1.000.000 euros), in favor of theso-called Groups I and II, meaning that inheritances under thesecircumstances were not taxable.

Who areincluded in Groups I and II?

  1. Descendants: biological/adoptedchildren and grandchildren.
  2. Ascendants: biological/adoptiveparents and grandparents.
  3. Spouses and registered civilpartners.
The newest reformhas taken another step ahead by amending article33 bis of the said Legislative Decree and has established a reduction of 99% for those inheritances and gifts,still in favor of Groups I and II, that exceed the threshold of 1.000.000 euros.

This newinheritance regulation in Andalucía will only be applied to inheritances with anestate sited within the Andalusia Region and shall unfortunately not apply to inheritancesoutside Andalucía, nor when the beneficiaries are other family members(siblings, uncles/aunts, nieces, nephews) and friends, whose taxation shall begoverned by the general inheritance rules.

The requirements for the reduction to be applicableare as follows:

  1. To be a European citizen
  2. The assets that compose theinheritance must be sited in the Andalucia Region.
  3. To be an heir within the so-calledGroups I and II.

It is importantto keep in mind that this new regulation was enacted on the 9thApril 2019 and, given that it does not have a retroactive effect, it shall onlybe applied to those estates where the testator has passed away after the entryinto force of this amendment. 

As an example: Michael, a European Citizen, owns afew properties in La Costa del Sol and passes away. Before passing away hegrants a Spanish will for his assets sited in Spanish Territory where heappoints his wife Penelope as his sole heir. The net worth of his estateamounts to 1.500.000 euros.

In the scenario where Michael passes away after the 9th April2019: Given that Penelope complies with the above requirements, inheritance taxup till 1.000.000 euros will be exempted, meaning that for this amount she willnot pay any inheritance tax.  As for theremaining 500.000 euros a reduction of 99% shall apply.

In the case scenario where Michael passes away between the 1stJanuary 2018 and the 8th April 2019: The exemption of 1.000.000euros shall apply and the rest of the estate would be governed by general inheritancetaxation rules.

In the scenario where Michel passes away before the 1stJanuary 2018 Penelope would be liable to pay tax in compliance of generalinheritance tax rules.

Do you haveany questions about inheritance law in Spain? If you are seeking legal adviceregarding any issue with your will, inheritance or any other issue related to aSpanish Property, please contact our collaborators GVAlawyers for personal advice at marbella@gva-atencia.es.



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