Welcome to our Spanish Inheritance Tax, Wills and Inheritance Law SECTION, in which you will find important information about Spanish Inheritance Tax Wills, International Inheritance, UK Probate, Intestacy, etc.
Our team of specialists has prepared for you the following guide with information in matters as why to make a Spanish will?, what are the taxes to pay for my inheritance?; what is the law which regulates my inheritance?, etc…
In the moment in which the person died, in Spain, or not, all the assets and possessions must be transferred to his inheritors.
For this purpose, there are determinate steps to follow:
FIRST.- Identify the assets of the Inheritance.
It is very important to identify all the assets which were into the deceased’s name, such as bank accounts, real estates, life insurance, shares, cars, etc.
Sometimes this is one of the most difficult issues for British citizens, since, in Spain, the Spanish citizens only have one passport number for life, and women do not change their surnames when they get married. You know that in UK this is totally the opposite, so, it is very common to find problems to identify assets, when is even more difficult to identify the owner!.
SECOND.- Which Law regulates the Inheritance? Spanish Inheritance Law? UK Law?.
The Spanish law recognizes that, in the case of a British citizen, British laws are the ones to regulate the inheritance.
So, in theory, the position should be relatively simple: UK inheritance law regulates inheritance from a UK national who dies owning property in Spain.
The complication arrives when UK inheritance law actually provides that the disposal of immovable property (land and buildings, household and personal goods) abroad is governed by the law of the country where the property is situated (other rules apply to other types of assets such as bank accounts and investments). So UK law actually says that Spanish law should regulate the Inheritance over a Spanish property!
But, WHY IS SO IMPORTANT TO IDENTIFY WHICH LAW REGULATES THE INHERITANCE?.-
Because there are big differences between the Spanish and the UK laws regarding the inheritance. The most important difference is that the Spanish have the figure of the “Compulsory” or “Obligatory Heirs” (Herederos Forzosos), which means that the testator cannot dispose from the full inheritance freely, and in whatever circumstances, he must leave the 66% of his inheritance for determinate persons called Obligatory Heirs (mainly descendants and spouses). This is totally different from the UK Inheritance law which allows the free disposal of assets, transferring will total freedom the inheritance set at the entire wish of the person.
In this situation, could happen that an UK citizen, with two sons, and with a property in Spain, can make a Spanish Will leaving his/her property to his/her friend, and that this last Will cannot be executed because, if Spanish laws are applied, then the 66 % of that property should be transferred to his sons, and only the remaining 33 % to be inherited by the testator’s friend.
Usually, in Spain, when an UK citizen dies, UK law is applied automatically to regulate the inheritance. So, as in UK there is free disposal of assets, the Spanish institutions will pass the Spanish assets to whoever appears as inheritor in the Wills. And this happens in the 99 % of the cases.
The problem arrives when regulations of the UK Inheritance law say that for REAL ESTATES the law in application will be the one in which the real estate is. So, if the real estate is in Spain, then Spanish law should be called to regulate who are the inheritors. And, if Spain considers rights to “obligatory heirs” (like sons and daughters) who have not had their rights considered in the Wills, then, they can claim their rights to be respected. Technically, this sending back of the law to a country is called “Renvoi”, or ”Revolving”.
Thus, Will be the UK or the Spanish Law the law to regulate my inheritance?:
GENERAL RULE: Spanish law helps to avoid any problems in the majority of cases by providing in Article 9 of the Spanish Civil Code that, when a foreign property owner dies, having made a will in either in Spain or in his country of nationality, the disposal of any assets he owns in Spain will be governed by his own national law (in this case the UK one), not Spanish law. If his own law permits free disposal of the assets, this frees him from the Spanish inheritance law [but not from Spanish inheritance tax].
The reason from which the Spanish authorities will call the national law from the testator is to respect the “Unity of Assets” or “Unity of Wealth” concept. This concept confirms that always when there are assets which could be regulated with different laws, to try to regulate them with the same criteria and with the same law. Application of this concept will result in try to not treat different to elements of the deceased’s wealth.
So, a UK national who owns a property in Spain, but has another property in UK, banks accounts in UK, pensions, shares, insurances, etc., must have the security that the law for his/her inheritance will be regulated by the UK Law, even for the Spanish property.
This is the General rule, but, as all General rules, there could be exceptions:
– What will be the case of UK nationals that they have sold all their assets and moved to Spain, when the sole assets they have are the Spanish ones?.
– Or the case in which a UK national has properties in Spain but lives permanently in other country like France, or Italy?.
These are cases in which the Spanish jurisprudence has applied the “renvoi” concept. We mean that the Spanish law has been called, introducing the Spanish limitations to the Freedom Testamentary Disposition, mainly the “Obligatory Heirs”.
Thus, what will be law to regulate the inheritance in these cases, the Spanish?, the UK one?, the one for the other country?.
At this point, we enter in technical considerations subject of particular study of the case, considering the individual situation of the case, and the personal consideration about residency, domicile, etc. So, this must be studied carefully with your Solicitor, because, it will depend on how many assets has the person, and where, where he/she has the domicile, how it is the domicile considered, in order to define what law is in application.
THIRD.- Is there a Will or not. Executing a Spanish Will
The next step is to identify whether there is a will or not, in order to executing the Spanish will. In fact there may be two or more wills – each covering a different jurisdiction. There may be an English will covering the English assets and a Spanish will covering the Spanish assets.
A) There is a Spanish will.- Then, the inheritance can go ahead in accordance with its contect, and proceed to executing the Spanish will.
To be valid in Spain, and to execute it in Spain, a will has to be registered at the Spanish Registrar of Wills (Registro Central de Ultima Voluntad). When registering a Will, a foreigner has to sign a declaration under Article 9 that his own national law is ruled by the principle of free disposal of property by testament (i.e. that in the UK you can dispose of your property as you wish in your will) and that there is no equivalent to the Spanish Law of Obligatory Heirs (Ley de Herederos Forzosos) in the UK. This is the case in the UK for properties situated in the UK, and as a result the Spanish Registrar of Wills (Registro Central de Ultima Voluntad) has so far accepted this declaration for UK nationals.
Providing this interpretation does not change, there is in practice only one major difficulty. If a person who would have benefited under the Spanish Law of Obligatory Heirs (Ley de Herederos Forzosos) challenges in the Spanish courts a Will from a UK national based on the Article 9 declaration providing for the free disposal of property, the Spanish Courts will first look at the UK law, find that it applies Spanish law to regulate the disposal of property, and so apply Spanish law. In this case, if Spanish Law applied, Obligatory Heirs rules will be executed, and the 66 % from the Inheritance must go to the Obligatory Heirs.
If therefore there is any possibility that you might make a Will which disposes of your Spanish property in a way which could be challenged, it is definitely necessary to consult a lawyer with specialist expertise in this area.
B) There is not Spanish will, but there is an UK will.- The English Will must be translated into Spanish – often at a cost which is more than if the deceased had made a Spanish will in the first place.
The Grant of Probate also needs to be obtained along with the Death Certificate and sometimes a Birth Certificate and Marriage Certificate. This on the face of it doesn’t sound too bad – but you have to remember that if the inheritance taxes in Spain are not paid within 6 months of the date of death then fines are imposed for late payment. Obtaining the Grant of Probate before anything can happen in Spain can severely eat into this time frame – as can getting all these documents together, translated and legalised.
C) Spansih – UK Intestacy. There is not any will at all – If a foreign owner of property in Spain dies without making a will, in Spain or anywhere, whether resident or not, there is no dispute: his property will be disposed of in accordance with Spanish inheritance rules.
In some areas, Spanish Notaries can request to make the Intestacy in UK first, and then, to execute the order in Spain. It means that the eventual inheritors, must go to UK, make the intestacy there, and, once obtained, bring it to Spain to execute it over the Spanish assets.
In other cases, if the Spanish Notary knows the British Intestacy system, it is not necessary to make the Intestacy in UK.
So, to the fact to make the Intestacy in UK will depend on the Notary used in Spain for the Inheritance.
Executing a Will in Spain. Executing a Spanish Will
The actual acceptance of inheritance in Spain is done by formal deed in front of a Notary Public. The beneficiaries (or their representatives through a Power of Attorney) will turn up at the Notary at the appointed time and he will run through the Escritura (the deed of acceptance of inheritance) at a huge rate of knots and then ask the beneficiaries to sign at the bottom.
This Escritura will contain the inventory of the Spanish assets (properties, bank accounts, shares, bounds, cars, etc.), the Inheritors who, following the law of application (Spanish or British), have rights over the Spanish assets, and the percentage over those items (or the individual items obtained from each inheritor).
Regarding properties, after the signing of the title deeds, properties need to be registered at the appropriate Land Registry, updating the land registry records with the new inheritor’s names, and the relevant inheritance taxes should be paid then.
FOURTH.- Spanish inheritance tax
Spanish Inheritance Tax requires specialist legal advice for your own situation. Because the estate will not be released by the Spanish authorities until the Spanish Inheritance Tax has been paid, our simple advice is to make sure that you have enough life cover to cover not only the mortgage, but also the estimated Spanish inheritance tax bill.
Whatever provision you make in your Will, Spanish Inheritance Tax is due on any property situated in Spain, whether the owners are resident or not, and there are no exceptions to this (unless the property is owned by a company).
The Spanish inheritance tax is charged on the recipient, not on the estate. Non-residents must prove their world-wide wealth to the Spanish tax authorities, and pay the appropriate rate of tax.
Spanish Inheritance Tax is governed by the 1988 Ley del Impuesto sobre Sucesiones y Donaciones (Inheritance Tax Law). This provides that non-residents who own property or rights in Spain, of whatever nature, are automatically subject to Spanish inheritance tax. It also creates some important exemptions which reduce the tax for smaller inheritances, and “multiplication coefficients” which increase it for larger inheritances, and for inheritances received by non-relatives or wealthy inheritors. This makes it a very complex subject, as the tax not only depends on the value of the estate, but on the wealth of the recipient.
Spanish inheritance tax for Spanish residents and for non-residents:
In theory, Spanish inheritance tax for non residents follows the same rules as for residents: the valuation of property, the availability of allowances and charges or costs which may be deducted, the ability to accumulate transfers previously made, reductions in the tax base for “hereditary acquisitions” (adquisiciones hereditarias), and provisions for the authorities to check the values, and determine the tax due.
The sole difference between residents and non residents will be the following:
Non residents will not have the Spanish Inheritance tax benefits and reductions whcih are specially applied to residents.
For inheritance tax purposes, property is valued at the higher of the market price, valor catastral, or the value set by Hacienda for Wealth Tax purposes. In most cases it will be today’s market value.
Since 1997, official residents leaving their Spanish property to an officially resident spouse or children have a 95% exemption in the tax base up to a maximum of around EUR120,000. It is also available if the property is left to a sibling who is over 65 years of age and who has been living in the property for at least 2 years. This exemption is not available to non-residents. Also, it only applies to the family home, not to other assets. The inheritor must keep the property for at least 10 years, otherwise he will have to pay the tax which would have originally been due on the amount of the exemption. However this exemption will remove many inheritances from the scope of tax.
Remember also that in the case of a jointly owned property, where one owner dies, it is only half the value which is included in the estate.
The tax base is then further reduced by any debts owing by the deceased, mortgages, and the expenses of the last illness and the funeral costs.
The rules for calculating the amount of Spanish inheritance tax due are very complicated, and depend largely on the value of the estate and a “multiplication coefficient” (coeficiente multiplicador), and in addition have changed considerably in recent years. Here we provide, purely for illustration purposes, a very simplified overview, based on the law and tax rates applicable in 1999. As these may have changed, it is important that you take professional advice in all cases.
Having first applied the above exemption and deductions, the first EUR16,000 in the hands of each adult inheriting relative is exempt from tax. Inheriting relatives under the age of 13 receive an exemption of EUR 48,000. Between the ages of 13 and 21, there is a sliding scale of EUR4,000 a year. So an inheritor aged 20 receives an exemption of EUR20,000. This exemption applies to direct relations – parents, spouses, children and siblings. The exemption is halved for uncles, cousins and nephews. For more distant relatives, or non-relations, there is no exemption.
To illustrate this, let’s assume that you are a resident, your only asset in Spain is your home, and this is worth, say, EUR300,000, and is in joint names, and will be left to your spouse and, say, two adult children, all of whom are resident:
(1) Only half the value is owned by each owner and would go into the estate: EUR150,000.
(2) EUR120,000 is exempt, leaving only EUR30,000, or EUR10,000 taxable for each inheritor.
(3) Each inheritor has an exemption of EUR16,000, which means that they pay no tax at all.
So for most small and medium sized inheritances (the EUR300,000 in this example is around £210,000) there will be very small tax to pay. But if the inheritance is larger, or if it is received by non-relatives or wealthy people, the situation becomes more complicated and expensive.
So far as the UK tax position is concerned, if you are domiciled in the UK (which as explained above, most people will be unless they have severed all links with the UK and made Spain their permanent home with no intention of ever returning to the UK), you will be liable to UK inheritance tax on your world-wide assets. There is no double tax treaty with Spain for inheritance tax, but the Inland Revenue currently grants “unilateral relief” against your UK tax liability of an amount up to the amount paid in Spain. If the tax charged in Spain is more than that due under UK tax the relief is limited to the amount of the UK tax.
If you are concerned about Spanish inheritance tax implications in the UK, the Capital Taxes Office operates a helpline on 0115-974-2400, or you can order booklet IHT18 on inheritance tax aspects for non-residents on 0115-974-2982, or fax your request to 0845-234-1010.
-Special Spanish inheritance tax reductions for Valencia, Murcia, Andalucia, and Catalonia regions, for spouse and decendants residents:
From January 2007, there are special reductions for Spanish residents in this regions for spouses, descendants, and ascendants.
In Valencia, and Murcia, for example, these reductions are the following:
– Reduction of the base of the tax (the valuation of the inheritance assets), up to 40.000 EUR, for descendants, ascendants, and the living spouse who were Spanish residents in the Valencia region at the time of the death.
– Reduction of the base of the tax (the valuation of the inheritance assets), up to 96.000 EUR, for descendants younger of 21 years old, who were Spanish residents in the Valencia region at the time of the death.
– Reduction of the tax rate up to 99 % for the descendants, ascendants, and the living spouse who were Spanish residents in the Valencia region at the time of the death.
FIFTH.- Spanish inheritance law
Spanish law provides rules for inheritance (known as the Law of Obligatory Heirs or “Forced Inheritance Rules”- Ley de Herederos Forzosos,).
The following explanation is based on the law in force in 1999, and is provided solely for illustration. The law may have changed since then, and you should not therefore rely on its accuracy (please refer to the disclaimer the legal notice in the site). If you are concerned about inheritance matters, you must take specialised legal advice.
The law provides that a spouse keeps half of all property acquired during marriage, so if the property is owned jointly, it is only half which goes into the estate. The law then provides that, in dealing with the property in the estate:
(1) a spouse is entitled to a life interest (usufructo vitalicio) in one-third but ownership of this third must be willed to surviving children – the testator (the person making the will) can choose how this is divided, and the children do not inherit outright until the spouse dies;
(2) outright ownership of another one-third must go to the surviving children in equal shares; and
(3) the remaining one-third can be disposed of freely.
(4) if there are no children, then surviving parents have a right to one-third if there is a surviving spouse, and one-half if not.
So for a married couple with children, if we assume that one spouse would probably want to will as much as possible to their partner, the best achievable situation would be:
(1) a spouse would keep his/her own 50%;
(2) they could then inherit one-third of the other half under free disposal;
(3) they would have a life tenancy in another third of the other half.
That means that ownership of only one-third of one-half (i.e. one-sixth or 16.6% of the total) need actually pass directly to children. So if this suits your intentions, you have no problem and you can go ahead and make a Spanish will in accordance with the Law of Obligatory Heirs. Other clauses can be written into a Spanish will to further help the position of the spouse.
There are specific rules governing the contents and form of a Will in Spain, so you must see your lawyer to prepare this. The will must be drawn up in two columns, one in Spanish and the other in English. It must then be notarised, when it becomes known as a testamento abierto (an open will), which is the usual form. The notary keeps the original, gives the testator an authorised copy, and registers it at the Registro Central de Ultima Voluntad. If you wish to keep the provisions of your will secret, it is possible to make a testamento cerrado (closed will).
Finally, do make sure that your Spanish will deals only with your real property in Spain, and that your “foreign” will expressly excludes this.
Spanish law also states that any foreigner officially resident in Spain is subject to Spanish inheritance law on his world-wide estate. But again in practice, the authorities do not ask whether the testator is an official resident or not. They accept as valid the Spanish Will disposing of only the Spanish property. The only requirement is the payment of Spanish inheritance tax on assets located in Spain.
– Why make a Spanish will to regulate your inheritance ?
So if you are happy to proceed with a will providing for free disposal of your Spanish property, it may at first sight seem easier if this Will was made in the UK. But there are several problems with this.
First of all, you can only make a UK will if you are still regarded as officially domiciled in the UK. Domicile is usually very difficult to change, so this should normally not be a problem. But a person who has lived for most of their life in Spain, has severed all ties with the UK, has no assets or income in the UK, has truly made Spain their permanent and only home, and has no plans to return to the UK in old age, is likely to be regarded as domiciled in Spain, and may have a problem in making a valid UK will. But “domicile” is a general law concept, so is not strictly defined, and this is certainly an area which needs specialist legal advice.
Second, in order to legalise a UK will for Spain and be able to execute it (to be able to transfer the property ownership, make a new escritura, register the change, and eventually sell it), there are several steps that must be taken:
1. A certified copy of the grant of probate must be legalised by the Spanish Consul in the UK.
2. A Spanish translation of this certified copy must be prepared and validated by the Consul.
3. A Spanish lawyer must be empowered to prepare a list of the assets in Spain, and to execute the will, and pay the inheritance taxes.
4. The Spanish Consul must prepare a certificado de ley (certificate of legal compliance), which confirms that the testator had the legal capacity to make a will; that the will is valid; that the Spanish Law of Obligatory Heirs does not exist in the UK; that the will has been duly proven; and that the trustees named have the legal powers to administer the estate. It declares your will effective to be executed in Spain, and authorises your lawyer to carry this out.
Due to all the above complicate process to execute a foreign Will in Spain, with tall he mentioned steps, and expenses, it is recommendable to make a Spanish Will in Spain. It will safe your inheritors time and money.
– Important recommendations when make a Spanish will:
- Ask for previous advice to a specialist in International Inheritance. Not all the Lawyers and legal advisers have the necessary qualification to deal with international inheritance.
- Coordinate UK Will with Spanish Will. Inform your Solicitor about your UK Will, if any, in order to elaborate the Spanish Will in accordance with he UK one. It will avoid contradictory disposals which could create serious problems to your inheritors.
- Make the Spanish Will ONLY FOR SPAIN. Make sure that your Solicitor considers in the Will just the Spanish assets, in order to do not enter in conflict with other Wills made in other countries.
- Take into consideration the “Renvoi” or “Revolving” of laws. Ask your Solicitor to infom you about the eventual possibilities to be regulated by Spanish or UK inheritance laws.
- Ask to you Solicitor to name an “Executor” if convenient.
More?…. Would you like to know the validity of the different ways to avoid Spanish Inheritance Tax?. Just visit our section: Ways to avoid or reduce Spanish Inheritance Tax