Lawyer Raymond Nesbitt explains the landmark tax change in Spanish Inheritance Tax (IHT) in the region of Andalusia.
By Raymundo Larraín Nesbitt
Lawyer – Abogado
21st of September 2017
Senior Andalusian politicians agreed last night to significantly reduce Spanish Inheritance Tax (IHT) in the autonomous region of Andalusia. This landmark tax reform is without a shadow of a doubt the most important tax milestone in the autonomous region of Andalusia in the last 35 years (since its inception in 1982).
The change will mean 95% of inheritors in Andalusia will no longer need to pay inheritance tax on inheriting assets from their parents or spouse which is a welcome respite. These fiscal changes are in addition to those approved last year which I already reviewed in my article Inheritance Tax Novelties in Andalusia. FAQ on IHT.
This bold move allows Andalusia to finally jump onto the band wagon of other autonomous regions in Spain which are applying reductions on IHT to such an extent which in practice translates to almost suppressing it i.e. Madrid, Basque Country, La Rioja, Navarre, Catalonia, Valencia, Balearic, Canary Islands and now Andalusia as well.
As I had pointed out in previous articles of mine relating to Spanish Inheritance Tax, there was an ongoing trend throughout Spain over the last decade to supress or greatly reduce inheritance tax to the point of negating it. Andalusia finally joined the trend yesterday. Better late than never. Notwithstanding yesterday’s agreement, there are still political forces vying to completely abolish it (Partido Popular).
Mrs Susana Sanchez (PSOE) and Juan Marin (Ciudadanos) agreed that as from the first of January 2018 these changes would come into effect. No law has been enacted yet with these changes.
To benefit from the new tax allowances, taxpayers must be EEA/EU-residents.
In a nutshell, the changes are:
Spanish Inheritance Tax
- Inheritances equal to or below €1,000,000 will go untaxed (per inheritor).
- Pre-existing wealth nil-rate band of inheritor raised to €1,000,000.
- Gifts between parents and children of up to €1,000,000 will also go untaxed provided certain criteria is met (gift for the purpose of job creation or to set up a company). Exact details to be specified by further regulation.
- Natural and adopted children.
- Surviving spouse.
On average, every day 19 inheritors turn down their inheritances in Andalusia in order to avoid paying steep inheritance taxes. Following this new regulation, this will no longer be the case. 95% of taxpayers will benefit from this change as from next year.
The Autonomous region of Madrid had attracted last year alone the residence of over 2,000 HNWI (with average estates of 9mn) escaping other less lenient inheritance tax regions such as Andalusia. This new measure was also necessary to avoid wealthy individuals bailing out to other communities in Spain with the consequent loss of wealth and jobs this resulted in.
For once, I’m happy to commend politicians on adopting a sensible tax measure that benefits so many and contributes towards dynamising the Andalusian economy. Kudos to them!
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- New EU Regulation to be Passed on Succession and Wills –18th May 2010
- Non-residents: Six Advantages of Making a Will in Spain – 8th August 2012
- Buying and Owning Spanish Property through Companies: Pros and Cons – 7th March 2014
- Taxes on Selling Spanish Property – 8th December 2014
- Spanish Wills and Probate Law in Light of European Regulation 650/2012 – 8th January 2015
- Changes to Spain’s Inheritance and Gift Tax Law – 21st February 2015
- Dispelling Spanish Inheritance Tax Myths – 8th August 2015
- Spanish Inheritance Tax for Non-Residents (Part I) – 21st February 2016
- Spanish Inheritance Tax for Non-Residents (Part II) – 8th March 2016
- Inheritance Tax Novelties in Andalusia. FAQ on IHT – 8th September 2016
- Which beneficiaries are hit worst by Spanish Inheritance Tax (IHT)? – 2nd June 2017
- Non-Resident: Why you need to make a Spanish will – 24th June 2017
- Non-resident: careful on making a will in Spain – 30th August 2017
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