It is inevitable that the estates of both Spanish residents and non-residents will become subject to Spanish inheritance tax upon death. Unlike in the UK however, Spanish inheritance tax is paid by the beneficiaries (e.g. a surviving spouse or son/daughter) rather than the deceased’s estate. This can cause very real problems for the beneficiaries, particularly since the assets (the largest part of which is most commonly a house) cannot be sold in order to raise the money to pay the tax due.

The amount of inheritance tax payable is calculated according to the relationship between the deceased and the recipient. It is not possible to set out the various different bands in this article. A tax return has to be completed and sent to the Spanish tax office and the necessary taxes paid. Failure to pay the amount due within six months of the date of the death will (subject to very limited exceptions) result in additional taxes and interest being charged.

Some people have asked me whether by altering the distribution of their Spanish assets (eg by leaving assets to various persons rather than simply their spouse) they can make their Will more tax effective. Whilst this may be possible in certain limited circumstances, my advice is generally that you should concentrate on ensuring that the beneficiaries are those you would want, rather than structuring everything to minimise the tax payable.

Another question I am often asked is whether lifetime gifts can be made in order to reduce Inheritance tax payable. In the UK the basic rule is that a lifetime gift can be made and, provided the giver survives seven years from the date of the gift, the recipient will not be required to pay UK Inheritance tax on the amount received. Unfortunately this is not the case in Spain, and a lifetime gift attracts Spanish Gift tax.

Spanish inheritance tax is a complex subject and the amount due ranges from 7% up to 34% of the amount received. Professional advice should be taken at an early stage to ensure that your affairs are in order, and the taxes kept to a minimum wherever possible. To quote the now famous words of Benjamin Franklin, ‘But in this world nothing is certain but death and taxes’. Mr Franklin is now dead, and given that he was the tenth son of a man who fathered 17 children, he probably knew from an early age that both death and taxes would become regular features during his lifetime.

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Information courtesy of Marc White LL.B. (English Solicitor) - Visit homepage

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