Inheritance tax in Spain for foreigners depends on two questions that families often confuse: which country’s law governs the succession, and which tax rules apply to the heirs. The first is a matter of private international law; the second is a matter of Spanish tax law. Raso Investments advises foreign families with property in Mallorca and elsewhere in Spain on both, helping them plan transfers during their lifetime and handling the tax returns when a death occurs.
Spanish inheritance and gift tax (Impuesto sobre Sucesiones y Donaciones) is a state tax whose rates, reductions and allowances are largely set by the autonomous communities. As a result, the tax on the same inheritance can vary considerably depending on which region’s rules apply. This page explains the framework; the amounts depend on each case and on the regulations in force, and are reviewed individually.
Who pays inheritance tax in Spain
Unlike some other systems, the Spanish tax is paid by the person who receives the assets, not by the estate.
- Heirs resident in Spain are taxed on everything they inherit, wherever the assets are located.
- Heirs not resident in Spain are taxed only on assets located in Spain or rights that can be exercised in Spain, such as a villa in Mallorca or a Spanish bank account.
For many years, non-residents were taxed under the state rules, which were often less favourable than the regional ones. Following a 2014 judgment of the Court of Justice of the European Union and later Spanish legislation and case law, non-residents can now generally apply the rules of the relevant autonomous community. For an inheritance that includes property in Mallorca, this usually means that the Balearic rules can be applied, which in many cases include significant reductions for close family members. Whether and to what extent they apply depends on the relationship with the deceased, the assets and the rules in force at the date of death.
Gift tax
Lifetime gifts of Spanish property, or gifts to Spanish residents, are subject to gift tax, paid by the recipient. The Balearic Islands also provides reductions for gifts between close relatives in certain circumstances, often linked to formal requirements such as a public deed. A gift of property may also trigger tax for the donor on any capital gain and the municipal plusvalía, so the overall cost must be calculated before deciding. See our page on capital gains tax on property in Spain.
Deadlines and procedure
Inheritance tax must generally be declared within six months of the date of death, a period that can be extended if requested within the first five months. Gifts have a much shorter filing period. Late filing results in surcharges and interest. Before the heirs can register the property in their names or sell it, the tax must have been declared and the inheritance formally accepted, usually before a notary. That process is explained on our page on Spanish wills and probate for foreigners.
What we review
- The residence of the deceased or donor and of each heir or recipient.
- The location and value of the assets in Spain.
- The family relationship, which affects reductions and coefficients.
- Which regional rules can be applied, and whether more favourable treatment is available.
- Double taxation: whether the heirs’ country of residence also taxes the inheritance and how credit is given for Spanish tax.
- Lifetime planning options and their effect on income tax and wealth tax.
How we work
For planning, we analyse the family’s assets and objectives and compare scenarios, such as gifts during lifetime, the use of usufruct and bare ownership, or keeping the property until death. When a death has occurred, we obtain the certificates, determine the applicable law, value the assets, calculate and file the returns for each heir, and complete the acceptance and registration. Our existing page on estate planning describes our broader approach.
Common mistakes
- Assuming that because there is no inheritance tax in the heir’s country, none is due in Spain.
- Missing the six-month deadline while dealing with the estate abroad.
- Gifting property without calculating the donor’s capital gains tax.
- Undervaluing the property in the return, which can lead to an assessment and also affects the future capital gain on sale.
- Not keeping evidence of the relationship and residence required to apply reductions.
Families with members living in different countries face particular challenges. The heirs may be resident in different states, each with its own inheritance tax rules, and the same asset may be taxed in more than one country. Some double tax treaties cover inheritance tax, but many do not, and in those cases relief depends on the domestic rules of each country. We coordinate with advisers abroad where needed so that the Spanish returns and the foreign filings are consistent, and so that the tax paid in Spain can be credited where the other country allows it.
Finally, the inheritance tax return and the deed of acceptance should be prepared together, because the values declared, the allocation of assets among the heirs and the reductions claimed must be consistent across both documents.
Frequently asked questions
My parents live in the United Kingdom and own a villa in Mallorca. Will I pay Spanish inheritance tax?
The villa is located in Spain, so Spanish inheritance tax may apply to it. Non-resident heirs can generally apply the Balearic rules, but the result depends on the case.
Does Spain tax inheritances between spouses?
Transfers between spouses are taxable, although regional rules often provide substantial reductions. The specific treatment depends on the regulations in force.
Can we reduce inheritance tax by gifting the property now?
Sometimes, but gifts have their own taxes, including possible tax for the donor. A comparison of both scenarios is needed.
Who values the property?
The heirs declare a value, but the authorities may verify it against official reference values or their own assessments.
Next steps
For advice on inheritance or gift tax in Spain, write to info@raso.law describing the transaction and the property: the assets in Spain, the family relationship, the residence of each person involved and, if applicable, the date of death. We will review your case individually and reply in writing. You may also consult our page on private client services.