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Home arrow Finance arrow Andalucía’s succession tax and estate planning benefits
Andalucía’s succession tax and estate planning benefits
Tuesday, 24 May 2022
 There are so many benefits to living in Southern Spain, but, as with anywhere, there are both pros and cons. Many people find Spain’s succession regime to be complex and costly, and expatriates need to understand how Spanish succession tax and law works and affects their family. The good news is that over recent years the local Andalucía government has reduced succession tax liabilities for residents, making it one of the most tax attractive regions to live in.

Spanish succession and gift tax (SSGT) key facts:

 

1) SSGT applies to both inheritances and lifetime gifts.

 

2) It is charged on each recipient, including spouses.

 

3) It is due when:

 

a) the beneficiary is resident in Spain, or

b) the asset being gifted or inherited is a Spanish asset (Spanish property, bank account etc).

 

4) Beneficiaries are divided into groups:

 

  • Group I - children and other descendants under 21
  • Group II - descendants over 21, parents and other ascendants, spouses
  • Group III - siblings, cousins, aunts/uncles, nieces/nephews, in-laws, stepchildren
  • Group IV - everyone else, including unmarried partners even if registered as a pareja de hecho unless the region grants them the same rights as spouses (Andalucía does)

 

5) The tax rates and allowances are determined by the state each year, but the regions can make them more beneficial for local residents.

 

6) UK nationals can be liable to both Spanish and UK inheritance tax since UK inheritance tax is based on domicile not residence, but a credit is given in Spain for tax paid in the UK to avoid double taxation.

 

Andalucía succession tax rates and allowances

 

The local SSGT rates for 2022 start at 7% for inheritances/gifts under €8,000 and rise progressively to 26% for amounts over €800,000 (remember, this is per beneficiary, not the whole estate). This is a significant reduction from last year's 36.5% and compares very favourably with the state rates which currently range from 7.65% to 34%.

 

The Spanish tax regime also applies multipliers, which in some cases can significantly increase the tax rates. This is usually based on both the pre-existing wealth of the beneficiary and their degree of kinship, but in Andalucía is now only based on kinship. There is no increase for Group I and II beneficiaries, Group III multiply by 1.5 and Group IV by 1.9.

 

Andalucía taxpayers can benefit from high personal reductions. For inheritances (not gifts), descendants, ascendants and spouses receive up to €1 million tax free (under state rules this allowance is only €15,957), as well as a 99% tax relief. Group III receive a reduction of €10,000.

Additionally, in Andalucía, the main home is now reduced by 99% for inheritances received by close family, with no maximum cap, provided:

1. The beneficiary is a spouse, civil partner, ascendant, descendant, or other relative over 65 who lived with the deceased the previous two years.

2. The property is retained for three years.

 

When it comes to gifts, a 99% reduction on lifetime gifts on the main home is available in Andalucía if the recipient is below 35 years or qualifies as disabled or a victim of domestic violence or terrorism, their pre-existing wealth does not exceed €402,678, and they use the property as their main home and retain it for three years (stated in the public deed of gift).

 

Estate planning

 

You also need to be aware of how Spain's succession law imposes ‘forced heirship'. In general terms, children are entitled to receive two thirds of an estate's assets, so under Spanish law you cannot, for example, leave everything to your spouse. This applies to foreign nationals living in Spain by default.

 

You can however use the European Succession Regulation ‘Brussels IV' to opt for the succession law of your country of nationality to apply on your death. You need to specifically state this in your will. This applies to all foreign nationals living in the EU, it is not restricted to EU citizens.

 

Every family is different. Take personalised advice, based on your situation and objectives, to help ensure your estate is divided as you wish and with as little tax and bureaucracy as possible. You can take steps now to make life easier for your family when you're gone.

 

David Bowern, Partner, Blevins Franks

+34 952 809 212

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Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

 

Blevins Franks Wealth Management Limited (BFWML) is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial

Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists. Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of trusts, retirement schemes and companies. This promotion has been approved and issued by BFWML.

You can find other financial advisory articles by visiting our website here


 

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