Important Changes to Inheritance Taxes in Andalusia
Inheritance taxes are one of the main concerns of foreigners who buy property in Spain and at Andalusian Lawyers we regularly receive requests for advice on this matter. Inheritance taxes in Spain are regulated by the autonomous regions, some of which have abolished inheritance tax completely. This is not the case in Andalusia, although after public pressure and intense negotiations, the regional government has finally introduced some important changes. These changes have greatly reduced the tax burden for both resident and non-resident foreigners in the region. This blog post examines recent changes to inheritance taxes in Andalusia expected to come into effect during 2017.
Higher Exemption Limit
The main change in inheritance taxes in Andalusia affects the tax-exempt amount. Under the previous law this was €175,000 per individual. In 2017, this will be increased to €250,000 per individual heir. This means that an heir inheriting assets valued at less than €250,000 will not be liable for inheritance taxes in Andalusia.
Another major change involves the tax exemption for inheritances valued between €250,000 and €350,000. In this case, the exemption is set at €200,000 and tax is levied on the excess amount between €200,000 and €350,000. So, for example, if an individual heir is due to inherit assets worth €290,000, tax is levied on €90,000 (€290,000-€200,000).
This is no exemption for inheritances of assets valued at over €350,000. In this case, inheritance taxes in Andalusia are levied in a sliding scale (starting at 15 per cent) and their exact amount depends on the value of the inheritance and the relationship between the heirs and the deceased. For a value of 350.000 (individually, not the complete value of the assets) the amount to pay would be around 18% or 64.000 euros approx. For more details you should contact your lawyer or your fiscal advisor.
Primary Residence for Inheritance Tax Purposes
Another major change in inheritance taxes in Andalusia concerns the regulations regarding primary residences, i.e. when someone inherits the property they live in permanently. According to the changes expected in the law, the tax liability for the inheritance of primary residences practically disappears or becomes negligible depending on the value of the home:
Properties valued up to €242,000: the tax-exempt amount ranges between 96 and 100 per cent of the value of the home.
Properties valued over €242,000: tax exemptions go up to 95 per cent of the value of the home.
To qualify for this tax exemption, especially regarding the concept of primary residence, you must fulfill the following conditions:
- Be a direct relative (child, spouse or parent). If you’re a sibling, cousin or grandparent of the deceased you must be over 65.
- Have lived with the deceased for two years before his/her death.
- Own the property for three years after you inherit it.
Setting a Value on Spanish Assets
For the purpose of inheritance taxes assets in Spain (property, vehicles, bank balances etc) are valued according to their fiscal value. This is determined by the tax authorities and generally lies below the real market value of the asset.
In the case of properties in Spain, the fiscal value is often 1.5 times the cadastral value (valor catastral). This value is stated on the annual council tax bill (known as IBI). However, to calculate the exact value of Spanish assets for inheritance purposes, it’s best to take expert legal advice to avoid over or undervaluation.
Making a Will in Spain
These changes in the regulations for inheritance taxes in Andalusia do not affect wills; they only affect how much inheritance tax your heirs will have to pay. It’s still very important to make a Spanish will to ensure your assets in Spain are disposed of as you wish and according to the law in your home country.
Andalusian Lawyers offers advice on making a will in Spain. We also have a free guide that you can download here.
For personalised advice regarding inheritance taxes in Andalusia please contact us here.