What is the inheritance tax Valencia Region 2020? Firstly, if you have assets in Spain, it is important to understand the regulations in Spain. Before making a Will, as it has an impact on the amount that your heirs may have to pay in Inheritance Tax.
Spanish Wills
We recommend making a Spanish Will as otherwise looking to an Irish or British Will in Spain will only incur additional expense and delays to your beneficiaries. Each area independently dictates their tax, and we must stress that this can change at any time in the future.
How is Inheritance Tax Valencia region 2020 calculated?
The tax is calculated by adding up the assets of the person who has died (property, bank accounts, cars, investments etc). Then 1) Calculating the heirs´ tax free allowances (this differs for residents of Spain or non residents). 2) Then calculating the percentage tax applicable to the Inheritance 3) Finally calculating the final amount of tax an heir will pay.
Tax Allowances
Depending on the relationship between the deceased and the inheritor, there is a scale of tax allowances. There are four groups;
Group 1: Non Residents and Residents of Valencia Community. Children and grandchildren under 21 years of age –100,000€ to 156,000€ depending on age of the inheritor
Group 2: Then Non Residents and Residents of Valencia Community. Children and grandchildren over 21, Spouses: Each gets a tax allowance of 100,000€.
Further Allowances
If the property was the permanent residence of the deceased, and the inheritors (who have to be close relatives) use the property as their permanent residence for at least 5 years. Then there is a reduction on the tax base of 95% of the property value (only on the family home). With a maximum of 150,000€.
There is a final further reduction of 75% if the inheritor is a surviving spouse, child or parent. But then not on the family home, only on the balance in bank accounts, cars, or other assets, even another property.
Groups 3 and 4
These large reductions are only applicable to Group 1 and 2. Thus for the following groups the tax allowances are much smaller:-
For Group 3: Non Residents and Residents of Valencia Community. Other relatives e.g. brother, sister, uncle, step-children, nephew, and niece: Each gets an allowance of 7,993,46€.
Group 4: Non Residents and Residents of Valencia Community . Remote family and unrelated persons, including common law partners. Nil
Worst Spanish Inheritance Tax Cases
The worst Spanish inheritance tax cases are usually large estates to distant relatives or non-family members. These are the cases that may need some type of tax mitigation planning in advance and advice. But very few cases justify the cost of setting up corporate structures.
So how do you work out how much tax might be payable at the present time? The amount of tax allowance per kinship group is deducted from the sum to be received. (Which will have had allowable deductions and reliefs taken off).And the remaining figure is that which is subject to tax.
2) The current scale of national tax payable is detailed below. Each bracket carries a fixed amount of tax to be paid.
| Up To | Fixed | Remainder Up to | Percentage |
| Amount | |||
0 | 7.993,46 | 7.65 | |
7.993,46 | 611,5 | 7.987,45 | 8,5 |
15.980,91 | 1.290,43 | 7.987,45 | 9.35 |
23.968,36 | 2.037,26 | 7.987,45 | 10.20 |
31.955,81 | 2.851,98 | 7.987,45 | 11,05 |
39.943,26 | 3.734,59 | 7.987,46 | 11,9 |
47.930,72 | 4.685,10 | 7.987,45 | 12,75 |
55.918,17 | 5.703,50 | 7.987,45 | 13,6 |
63.905,62 | 6.789,79 | 7.987,45 | 14,45 |
71.893,07 | 7.943,98 | 7.987,45 | 15,3 |
79.880,52 | 9.166,06 | 39.877,15 | 16,15 |
119.757,67 | 15.606,22 | 39.877,16 | 18,7 |
159.634,83 | 23.063,25 | 79.754,30 | 21,25 |
239.389,13 | 40.011,04 | 159.388,41 | 25,5 |
398.777,54 | 80.655,08 | 398.777,54 | 29.75 |
797.555,08 | 199.291,40 | And so on.. | 34 |
Other Costs
On top of any inheritance tax would be the lawyer fees, Notary and other fees and minor taxes. As you can see a more tax efficient Will may read (but it does depend on circumstances). That on death a spouse or children should inherit, so that there are higher tax free allowances. In Spain, unlike the UK or Ireland, the transfer of a property to the beneficiary always has to be done at the Notary.
3) The final calculation.
If the beneficiary’s existing net wealth is up to €2,000,000 now in the Valencia Community the tax liability is multiplied by the figure below based on the Groups above:
Group I & II: 1.0000
Group III: 1.5882
Group IV: 2.0000
One thing to mention is that heirs have 6 months from the time of death to pay the taxes. After the 6 months the tax office has 4 years to claim for the money. Then after 4 and half years it is possible for the heirs to transfer the property into their own names without paying inheritance tax. But we are not advocating this as it may lead to problems.
Summary
We suggest a meeting with us to discuss the possible inheritance tax payable by your beneficiaries and how best to write your Will. Please contact us with questions especially at the current time we are suggesting urgent donations as we expect inheritance tax to change very soon in the Valencian Region as at August 2020.