Inheritance Tax DeductionsIn Madrid

This presentation has been updated and is valid for 2014.

Inheritance Law in Madrid

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There are special regional tax deductions and exemptions

passed by the local government in Madrid that only apply to

those beneficiaries who have been resident in the region.

Inheritance Law in Madrid

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If you have NOT been resident in Madrid then, when

determining your inheritance tax liability, you may only apply

the deductions and exemptions approved by the CENTRAL

government.

Inheritance Law in Madrid

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The central government exemptions and deductions are not

as generous as the regional exemptions.

This has caused complaints that the inheritance tax laws in

Spain are discriminatory against non-residents.

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Inheritance Law in Madrid

The regional level deductions available in Madrid were

enacted by the parliament in Madrid and in their current form

are specified in Legislative Decree 1/2010.

The most important changes to State laws can be

summarised as follows:

Inheritance Tax Law in the Madrid

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Spanish Inheritance law first assigns beneficiaries to groups according to the degree of kinship with the deceased:

Group I Children, including adopted children, under the age of 21

Group II All other descendants, spouses and parents

Group III Close relatives such as brothers and sisters, grandparents,

aunts and uncles

Group IV More distant relatives

Personal Exemptions

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These are the personal deductions as amended by regional law in Madrid. They are in addition to state exemptions:

Personal Exemptions

  Deduction

Group IDeduction of €16,000 plus €4,000 for each year under

the age of 21 up to a max. of €48,000

Group II Deduction of €16,000

Group III Deduction of €8,000

Group IV No deductions available

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Spouse, descendants and parents of the deceased

A special discount of 99% on any tax payable on account of

any inheritance applies to those beneficiaries in Groups I or

II.

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If the beneficiary is disabled:

If the disability is classified as > 33% then an additional

deduction of €55,000 may be applied

If the disability is classified as > 65% then a deduction of

€153,000 may be applied

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Income Derived from Life Insurance Policies

A 100% deduction on amounts up to €9,200 where the

beneficiary is the:

• Spouse

• Child/Adopted Child

• Parent

This deduction applied independently of other deductions.11

Deductions in transfer of Family Business

Tax deduction of 95% of the value of the business

The deductions applies to sole trader entities and

participations held in other businesses

The business or participation should be maintained for a

period of at least 5 years

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Inheritance of the Family Home

If the main, habitual family home is inherited there is a deduction

of 95% up to the value of €123,000 per beneficiary.

This applies to beneficiaries that are the spouse, child or parent

of the deceased.

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The property may not be sold for a further 5 years after the

inheritance.

More distant relatives over the age of 65 may also benefit but

must have been living with the deceased in the property for a

period of at least two years prior to the date of death.

Inheritance of the Family Home cntd

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Inheritance of Special Awards

For inheritance of special indemnities paid to victims of

toxic shock syndrome or victims of terrorism those awards

may be reduced by 99%

The reduction applies where such indemnities are not

subject to Income Tax

Other Deductions:

As a general rule the following deductions may be made on any estate:

Funeral Expenses

Final Medical Expenses of the Deceased

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Other Deductions Cntd:

Debts held be the deceased that are evidenced by public

documents e.g. a mortgage

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Tax Rates in Madrid

Taxable Sum (€)Tax Payable On This

SumAny Remainder Up

To Applicable Rate on

Remainder (%)

0,00 0,00 8,313.20 7,65

8,313.20 635,96 7.688,15 8,50

16.001,35 1.289,45 8.000,66 9,35

24.002,01 2.037,51 8.000,69 10,20

32.002,70 2.853,58 8.000,66 11,05

40.003,36 3.737,66 8.000,68 11,90

48.004,04 4.689,74 8.000,67 12,75

56.004,71 5.709,82 8.000,68 13,60

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Tax Rates in Madrid Cntd

Taxable Sum (€) Tax Payable On This Sum

Any Remainder Up To

Applicable Rate on Remainder (%)

64.005,39 6.797,92 8.000,66 14,45

72.006,05 7.954,01 8.000,68 15,30

80.006,73 9.178,12 39.940,85 16,15

119.947,58 15.628,56 39.940,87 18,70

159.888,45 23.097,51 79.881,71 21,25

239.770,16 40.072,37 159.638,43 25,50

399.408,59 80.780,17 399.408,61 29,75

798.817,20 199.604,23 En adelante 34,00

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Existing Wealth

Once the relevant tax rate has been applied the result is multiplied by a coefficient determined by the existing wealth of the beneficiary as well as the group to which they belong:

  Group/Coefficient

Existing Wealth (€) I & II III IV

0 to 402.700 1 1.5882 2

402,700 to 2,007,400 1.05 1.6676 2.1

2,007,400 to 4,020,800 1.1 1.7471 2.2

Over 4,080,000 1.2 1.9059 2.4

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Existing Wealth

The Groups referred to consist of the following beneficiaries:

Group I Children, including adopted children, under the age of 21

Group II All other descendants, spouses and parents

Group III Close relatives such as brothers and sisters, grandparents,

aunts and uncles

Group IV More distant relatives

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Each year in Spain thousands of expats pay more

tax on inheritance than they should – simply

because they fail to follow some simple rules.

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To find out how to get expert advice, in English, about how to

reduce your liability for inheritance tax, go to:

Expert Probate Services in Madrid

Expert Probate Services in Madrid

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