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TAXES

What are the Spanish tax rules on inheritance from abroad?

Inheritance tax is a complex issue, particularly if you're a foreign resident in Spain and you're inheriting money or property from abroad. Here's what you need to know about it.

Published: 28 May 2024 14:45 CEST
Updated: 2 June 2024 05:30 CEST
What are the Spanish tax rules on inheritance from abroad?
Spain's rules for an overseas inheritances are more complicated than for Spanish ones. Photo: Pavel Danilyuk/Pexels

If you’re a foreigner living in Spain, chances are that not all of your family will be living in the same country as you.

You’ll likely have parents, grandparents, aunts and uncles living back home or even in another country entirely.

If you’re a tax resident in Spain, meaning you live here for more than 183 days of the year, or the majority of your interests are in Spain (like your property and your immediate family), then you’ll have to adhere to the tax laws and regulations here.

Article 6 of the Inheritance and Donation Tax law states that taxpayers with habitual residence in Spain are subject to inheritance tax as a “personal obligation”, regardless of where the inherited assets or rights are located. 

This means that even if you receive your inheritance, which could be in the form of money or property, from abroad, you will be liable to pay tax on it here, simply because you live here.

It’s important to keep in mind, however, that the process of inheriting from abroad is much more complex than for national inheritance.

Each country has its own inheritance regulations, so you must be clear, not only the rules in Spain, but also the regulations of the country the deceased was resident.

READ ALSO: When should you turn down an inheritance in Spain?

According to AGM Abogados law firm, Spain currently has international treaties on inheritance with three countries – these are France, Greece and Sweden. It’s worth keeping in mind that these treaties refer only to inheritance, not gifts.

For example, if you have a parent who lives in France and you inherit a property from them when they die, you will not have to pay Spanish inheritance tax on it, you will only pay this in France.

If your family member lives in another EU country, the regulations are also easier (with exception of those in Denmark and Ireland). In this case, the law will be governed by the European Regulation of International Successions.

According to this law, a person who resides abroad can choose the law that applies to them in their will, whether that is their country of origin or that of their habitual residence. This means, however, that your relative will have to have been prepared and have to have factored in the fact that you live in Spain in their will.

READ ALSO – Inheritance tax in Spain: Should you pass your property on to your children or sell it to them?

In the event that there is no will or the person hasn’t decided, the legislation of the country where the assets to be inherited are located, will apply.

If your family member doesn’t live in the EU or they live in Denmark or Ireland, most likely Private International Law will be followed, which determines which rules are applied to inheritance.

If Spanish law is applied, Article 23 of the Tax on Inheritance and Donations states that the taxpayer may deduct the amount paid in tax abroad.

This means the taxable base is determined by taking into account all the assets and rights inherited, subtracting any deductible charges and debts, as well as any tax paid in the country of the deceased.

The succession tax rates will differ depending on how much is inherited, but it is generally progressive ranging from 7.65 percent on the first €7,933 up to 34 percent on €797,555+, but several bonuses can be applied to these rates. 

It’s also worth keeping in mind that there are different inheritance tax rates and rules in each of the different regions in Spain, so what you pay will also depend on where you live in the country.

The regions with the highest inheritance tax rates in 2024 are Asturias, Catalonia and Castilla-La Mancha, while they are more favourable in Valencia, Aragón, La Rioja, Balearic Islands, Madrid and Galicia. 

READ ALSO: Where are the best and worst places for inheritance tax in Spain?

Madrid for example offers a 99 percent reduction for all direct descendants and spouses, while other regions offer a lot less.

The amount you pay will also depend on your relationship with the deceased – for example, if you’re a child, a grandchild, a niece or nephew or sibling, different deductions and bonuses will apply.

Remember that if after you inherit, your assets outside of Spain come to more than €50,000, such as a property, you will have to complete form 720 in order in inform the Spanish tax authorities of your assets held abroad. 

As the laws surrounding inheritance are so complicated and can depend on so many different factors, the most important thing to do is to make sure you contact a lawyer specialising in these matters. 

They will be able to advise you on what exactly you’ll be obliged to pay and if there is anything you can legally do in order to minimise payments. 

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For members

WORKING IN SPAIN

What’s the law on having two jobs in Spain?

With the current cost of living crisis, working more than one job is becoming more and more common, but what are the rules on working multiple contracted jobs in Spain and the tax implications of this?

Published: 25 June 2024 13:24 CEST
What's the law on having two jobs in Spain?

Often it’s necessary to have more than one job at a time, particularly if they don’t pay well and you’re struggling to make ends meet.

In fact, historically that is part of the reason why establishments stay open so late and why siestas were so common – because people would have one job in the morning and then go home for a rest before starting their second.

This is still commonplace today and is in fact becoming more and more popular, with the rise in the cost of living, driving an increasing number of people to take up a second job.

Whatever your reasons for having two jobs or more – to save up more money or gain extra experience and work your way up, there are some financial implications you should be aware of.

What does the law say?

Currently in Spain, there is no restriction that prevents a person from having a second job, with two contracts in two different companies, for 80 hours a week.

According to data from the first quarter of this year from the Active Population Survey (EPA) prepared by the National Institute of Statistics (INE), the number of people with a second job in Spain stands at 591,300, although according to affiliation data of Social Security, some 800,000 people have more than one position.

This trend has been seen in each quarter of the EPA since 2022 and, right now, is close to a historic number.

Categories you should be aware of

There are two types of categories when you work in multiple jobs in Spain – these are pluriempleo and pluriactividad. Pluriempleo literally means multiple employment. This is understood as a person who works as an employee in two or more companies under the same Social Security regime.

In this way, it differs from pluriactividad or multiple activities, which is when people work for others and have their own business at the same time or their second job is under a different social security regime.

For example, if you work as a hotel receptionist in the morning and then in a restaurant at night, these positions are considered to be part of the same regime, but if you work in a hotel in the morning and then as a nurse in a hospital at night, these are two different careers and therefore social security regimes.

If you’re self-employed as well as having a contract job, this is a slightly different situation. To find out more, read our guide below. 

READ ALSO – Self-employed in Spain: What are the tax rules if you do two or more jobs?

What are the tax and social security implications?

If you have two separate jobs, you are required by law to report your situation to Social Security, and to each of the companies you’re employed by.

When it comes to the Tax Agency, it’s important to note that you are obliged to submit your yearly Income Tax return (Renta), when you are paid by more than one employer and your income exceeds €22,000 per year.

READ ALSO – EXPLAINED: The key changes to Spain’s 2023/2024 annual tax return

In 2024, the maximum social security contribution base for employees has been set at €4,720.50 per month. This means, that regardless of whether your income from two positions exceeds this amount, the social security base will not be more than this.

The amount of IRPF (Personal Income Tax) must also be taken into account. If you are combining two contracts, it’s important to calculate the withholding tax.

This is because companies calculate personal income tax based on your annual compensation expectations. They do not take into account the existence of another job, so they apply the discount depending on what they are paying you only.

This means that they will keep less than what they should and when you’re filling out your Renta yearly income tax return, you will most likely have to pay the extra to make up the difference. 

In this case, you should request that both companies calculate personal income tax according to your earnings, so that you can get a good idea of the amount you have to pay working two positions.

You may also consider hiring a gestor or accountant to file your yearly tax return for you if you have a particularly complicated situation and work three or more jobs for example. 

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