Since 2015, EU citizens also have clear advantages when they inherit a property with a residence that is not in Spain. They can thus benefit from the special regulations of the respective autonomous region with regard to inheritance taxes Spain and enjoy the same rights as the residents. The Balearic Islands, including Mallorca, again bring some special features compared to the rest of Spain in the inheritance tax.
NEPTUNUS INTERNATIONAL will tell you everything you need to know about inheritance tax in Spain in the following article.
What is the inheritance tax Spain for real estate?
The Spanish Inheritance Tax is also called impuesto sobre sucesiones and results from the Spanish Inheritance Tax Law or del Impuesto sobre Sucesiones y Donaciones. This concerns natural person according to the conditions from art. 1 of the Spanish Inheritance Tax Law when inheriting a property. A legal entity, on the other hand, is not affected by inheritance tax in Spain, although corporate income tax may apply here.
In principle, each autonomous region in Spain has its own legislative powers with regard to inheritance taxes Spain as well as gift taxes. In fact, most of them also make use of this, so that, for example, the exemption amounts of inheritance taxes Spain vary from region to region. In addition, the Balearic Islands, including Mallorca, have separate guidelines for Spain inheritance tax.
What is there to consider when it comes to inheritance tax in Mallorca?
Inheritance, also known as acquisition upon death of a person, is subject to inheritance tax in Mallorca. The unlimited tax liability applies if the acquirer or recipient of the inheritance has his habitual residence on the island at the time.
If you are a non-resident legatee, i.e. your usual place of residence is not on the island, you are only subject to limited tax liability in the context of inheritance taxes in Spain. Real estate is also subject to Spanish inheritance tax. With the new regulation of inheritance taxes Spain after 01.01.2015, the following rights apply to you as an heir:
- If the testator was resident in Mallorca for tax purposes, you can choose Mallorcan law.
- If, on the other hand, the decedent was resident in Germany, you can have the law of the autonomous region in which the property is located applied.
- Otherwise, if the decedent has no habitual residence and no assets in Spain, the law of the autonomous region in which the heir was resident at the time of acquisition applies.
What applies to inheritance tax in Spain for Germans?
Basically, the § 2 (1) ErbStG, if the testator at the time of death or you as an heir at the time of the collection of an unlimited tax liability exists, the full inheritance tax in Spain. Sometimes, in addition to the inheritance tax Spain for Germans, the inheritance tax in Germany is also due, provided that the heir or the testator is a resident at the time.
Spain and Germany have not concluded a double taxation agreement on inheritance tax. Therefore, there is a risk that you will have to pay German and Spanish inheritance tax on real estate in Mallorca. Partially a tax credit is possible. Movable assets, such as a yacht or shares, are not creditable, should the testator have had a habitual residence on the island.
Is it possible to avoid inheritance tax in Spain by donating the property during my lifetime?
Keep in mind that when you donate a property in Mallorca, you will be subject to gift tax or impuesto donaciones. This amounts to 7% of the value of the gift in tax class I and II. In addition, a profit tax is due. To what extent you are more favorable compared to the inheritance tax Spain, you should clarify with an expert for taxes and law in advance.
How high are the inheritance taxes Spain and are there exemptions for the inheritance tax in Spain?
The amount of inheritance tax in Spain depends on the relationship between the testator and the heir. It can range from 1% to over 80%.
Inheritance tax Spain also allows for an allowance. Since 2016, heirs in tax class I with children under 21 years of age and tax class II with children receive
over 21 years of age, as well as spouses and ancestors, benefits. These are around €25,000. Siblings or side relatives have an allowance of €8,000 for inheritance tax Spain.
Do you have to declare your inheritance to the tax office in Germany?
Yes. If you have inherited, you are obliged under Section 30 ErbStG to notify the German inheritance tax office within 3 months of becoming aware of this.
We will be happy to assist you with all legal questions concerning inheritance tax Spain on real estate and to put you in touch with a competent expert. Please feel free to contact us!
