In Spain, IHT or “Death Duties” apply whenever a deceased leaves an estate to be passed to his/her beneficiaries. It is a very unpopular tax, and in many regions of Spain, different governments have passed laws to minimise the amount of tax that their resident citizens must pay.
It is vital to understand that the tax treatment differs if the Deceased and/or his/her Beneficiaries are Resident or Non Resident in Spain, for tax purposes.
If the Deceased and Beneficiaries are Tax Resident in Spain, they can take advantage of several Allowances that can help reduce the tax burden on death. Unfortunately, the same does not apply to those who are not Tax Resident. It is important to emphasise that Residents must declare all of their assets for IHT purposes, wherever those are located in the world, whereas non-residents are required to pay Spanish IHT solely on their spanish assets. Other assets are then subject to the IHT regulations that apply in their own country.
In general terms, IHT is calculated on a sliding scale, based on the value of the estate. Other percentages are then applied, subject to whom the estate is bequeathed and if the deceased and beneficiaries are residents or not. This is because Spanish IHT law differentiates between close relatives and certain acquaintances, and anyone else. For example, if a beneficiary is a surviving spouse or child of the deceased, for example, he or she can apply for an allowance of around 16,000 euros before IHT is calculated. However, this allowance does not apply to friends or even to a deceased person’s partner if they were not married.
Also, in Spain, any beneficiary of a deceased person who is not directly related faces an additional penalty because the tax payable is doubled!
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