TAXES FOR INHERITANCES RECEIVED ABROAD SPAIN
What taxes must be paid on an inheritance when it comes from abroad?
In the event that a tax resident in Spain receives assets or money from inheritances located abroad, said assets, money, insurance premiums, bank accounts, etc. must be declared. in Spain. To do this, you must proceed as follows:
The following persons are subject to SPANISH INHERITANCE TAX:
– By ” personal obligation” – People who are residents in Spanish territory according to Spanish law.
– By “real obligation” – People who, without being residents in Spanish territory, receive assets inherited that are located in Spain, including properties, bank accounts, movable assets or life insurance premiums issued by Spanish insurers.
Therefore:
1.- THE HEIR/INHERITOR MUST BE A TAX RESIDENT IN SPAIN
That is, you must have your habitual and fiscal residence in Spain.
Therefore, you must meet the following criteria established in the Personal Income Tax regulations , which establishes the following:
When is it considered that a natural or physical person has his habitual residence in Spain?
There are several criteria to determine when a person is a tax resident in Spain:
- General criteria – Stay in Spain for more than 6 months
A person who remains in Spanish territory for more than 183 days during a calendar year is considered a resident in Spain.
For the calculation of time, temporary trips or stays abroad that do not involve a change of residence are not taken into account. In other words, only those stays abroad that involve a real change of residence will be considered “absences” for these purposes.
In this way, a round trip abroad , whether for vacations, health, family visits, leisure, etc., will not count as “absence”, and the time involved in the trip will count as “stay in Spain”. .
Case of tax havens : For these purposes, a residence certificate issued by a Tax Haven will not be valid.
However, if there is a “real” change of residence of the taxpayer to a Tax Haven, once said change has been verified for more than 6 months and one day, for FOUR YEARS he will continue to pay taxes in Spain as a tax resident.
For Spain, a “tax haven” ceases to be one when Agreements are signed to avoid double taxation, with obligations to exchange information between the two countries.
As an example, Spain has been signing this type of agreement with the following countries:
- malt
- United Arab Emirates
- Jamaica
- Trinidad and Tobago
- Luxembourg
- Panama
- barbados
- Singapore
- MAIN economic activity criterion
Using this criterion, any person who has economic activities or interests with their main nucleus or base in Spain is considered a tax resident in Spain.
In the event that the taxpayer does not wish to be considered a resident in Spain based on this criterion, he must prove that he has the base or main core of his activity outside of Spain.
- Family nucleus criterion
A person is considered a resident in Spain in the event that the non-separated spouse or minor children of the natural person reside in Spain.
- Immigrant regime
Those workers who remain in Spain solely and exclusively for work reasons will be exempt and will not be taxed by the Personal Income Tax, but by the NON-RESIDENT Income Tax (which is lower than the Resident Tax).
For this exemption to be fulfilled, these people must prove:
- That they have an employment contract that obliges them to remain in Spain
- That they have not been residents in Spain during the last 10 years
The objective of this regime is the reception of qualified labor in Spain, since the income is not subject to personal income tax, which reaches rates close to 50%, it allows taxing this income to the IRNR (Non-Resident Income Tax) , with a fixed rate of 19% for nationals of the European Union and 24% for the rest.
- Revenue Allocation Regime
In addition to “individuals” or “individuals”, there are several cases that are also subject to tax:
- civil societies
- Communities of owners
- recumbent inheritances – “Herencias Yacentes“
In these cases, the income obtained by these entities is attributed to the members that make them up, so the entity itself is not taxed by personal income tax or corporate income tax.
The way to attribute the income obtained by these entities to their members or participants is as follows:
- In the event that the members of the entity are taxpayers of Corporation Tax, they will pay this tax.
- In the event that the members are natural or physical persons, they will pay the personal income tax.
2.- THAT THE RESIDENT IS CONSIDERED HEIR ACCORDING TO THE LAW GOVERNING SUCCESSION ABROAD
It is important that the resident be considered an “heir” by the foreign law that regulates inheritance.
3.- TAX OBLIGATIONS:
a.- PRESENTATION OF THE INHERITANCE DOCUMENTS AT THE SPANISH TAX AGENCY:
– Acts of notarial and registry succession of the inheritance stating the assets to be inherited, and their value
– Death certificate of the deceased
– Identification document (passport, identity card, etc. ) of the deceased
These documents must be provided translated and apostilled.
The documentation will be presented:
- If the deceased had other assets in Spain, in the region or autonomous community where the majority of said assets are located.
- If the deceased had no other assets in Spain, in the region or community where the heir permanently resides.
b.- INHERITANCE TAX DECLARATION
Once the documentation is presented, the corresponding tax declaration related to the inheritance must be made, and the eventual Spanish Inheritance Tax must be paid. It is noteworthy here that most of the regions and autonomous communities offer extensive benefits and tax reductions in this area, and that they will be applicable to the amount obtained in the succession if the requirements established for this purpose are met.
In addition, the taxes that, in turn, the heir has paid in the country where the inheritance has been executed, must be taken into account, since said taxes can be applied in Spain and deduct the amount to be paid in our country. This will be possible in many cases since Spain usually has tax agreements signed with a large number of countries to avoid double taxation, and that the heir can use the tax paid abroad to reduce the one he has to pay in Spain.
c.- MODEL 720 MUST BE DECLARED
The law establishes that, for information purposes only, the inheritance received from abroad must be declared on Form 720.
Penalties for non-presentation can reach EUR 30,000.
d.- IS THERE A TIME TO MAKE THE DECLARATION OF INHERITANCE IN SPAIN?
Yes, the declaration period is 6 months from the date of death. Although said period can be extended for another 6 months if the heir requests it from the Tax Agency before the fifth month from the date of death.
After said term, the administration may apply surcharges and penalties for delay.
4.- SHOULD IT BE DECLARED IN THE INCOME STATEMENT (IRPF)?
The answer is no. Assets received in inheritance are not considered as “income” for income tax purposes.
5.- SHOULD THEY BE DECLARED FOR WEALTH TAX PURPOSES?
The answer is yes. Spanish tax residents are obliged to declare the assets they own in Spain or abroad. Therefore, in the event that the inherited assets fall within the assumptions included in the law that regulates this tax, they must be declared and subject to said tax.