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Spanish Inheritance Tax...

Impuesto Sobre Sucesiones y Donaciones (ISD)


 

Impuesto Sobre Sucesiones y Donaciones (ISD) is the Spanish equivalent of the UK’s Inheritance Tax system.  However, they are very different in the way charged and if you are resident in Spain, or own assets such as property in Spain, you should be aware of how ISD may affect you. 

  • ISD is charged to the heir or legatee and not the estate of the deceased as in the UK.

  • If you are a Spanish tax resident ISD is chargeable on “world-wide” assets. Non-Spanish tax residents are only charged on assets situated in Spain. (eg Property, car, bank account etc etc) Note that nationality has no effect whatsoever. The only two questions are: (i) Where are you tax resident?  (ii) Where are the assets situated?

  • Although ISD is not covered by the double taxation treaty between the UK and Spain, the Inland Revenue make a practice of crediting any ISD payments made in Spain against UK Inheritance Tax due in respect of the same assets.

  • The amount of ISD charged is calculated based on the net market value of each heir or legatee’s inheritance.  This is the gross value of their share less any liabilities e.g. mortgage.

  • Normally, 3% of the net value of the inheritance is added to this figure to take account of personal chattels, such as contents of a holiday home, unless a higher or lower value is proven.

  • Basic ISD rates depend on the net value of the inheritance and increase on a sliding scale from 7.65% to a top rate of 34%.

  • Additional surcharges apply based on:(i) The heir or legatee’s relationship to the deceased and, (ii) the heir or legatee’s pre-existing wealth. The more distant the relationship and the wealthier the heir or legatee, the greater the rate of surcharge.

  • Unlike the UK, there is no inter-spousal exemption.  This means that, for example, a married couple jointly owning a property in Spain, may be charged ISD on first death on the inherited half of the property.

  • Tax is payable within six months from the date of death and if not settled within this period, interest will be charged and possible additional penalties.

How Much ISD is Payable?

The calculation of ISD is done in four stages:

 

  1. Value the asset.  This is normally the full open-market valuation less any liability, such as a mortgage.

  2. Determine the relationship between the deceased and the recipient.  There are four groups – see TABLE A.  Based on the relationship, calculate the personal allowance.  Remember that this is per recipient and that there is no allowance for lifetime gifts – only on inheritances.

  3. Deduct any allowance available from the net value of the asset and calculate the standard tax due by reference to TABLE B.  Note that tax is payable on each “slice” at the rates shown.  e.g.  A taxable inheritance of €20,000, after allowances, will attract tax at 7.65% on the first €7,993.46, 8.5% on the next €7,987.45 and 9.35% on the balance above €15,980.91.

  4. Apply any surcharge that may be applicable, in TABLE C, by multiplying the standard tax calculated in stage 3 by the appropriate factor.

TABLE A

ALLOWANCE

Group 1

Natural and adopted children, grandchildren and so forth in direct line of decent who are under the age of 21.

€15,956.87 plus €3,990.72 for each year under 21. (max allowance = €47,858.59)

Group 2

Same as group 1 but 21+ AND spouses, parents, adoptive parents, grandparents and further direct ascendants.

€15,956.87

Group 3

Siblings, cousins, nieces, nephews, uncles, aunts, step-parents, step-children and other 2nd and 3rd degree relatives.

€7,993.46

Group 4

All other relatives and unrelated persons.  Unrelated persons include un-adopted stepchildren and common-law spouses.

NIL

        

TABLE B

BAND UP TO

Tax Rate on Band

%

Cumulative Tax

 

BAND UP TO

Tax Rate on Band

%

Cumulative Tax

7993.4

7.65

611.5

 

71,893.07

14.45

7,943.98

15,980.91

8.50

1,290.43

 

79,880.52

15.30

9,166.06

23968.36

9.35

2,037.26

 

119,757.67

16.15

15,606.22

31,955.81

10.20

2,851.98

 

159,634.83

18.70

23,063.25

39,943.26

11.05

3,734.59

 

239,389.13

21.25

40,011.04

47,930.72

11.90

4,685.10

 

398,777.54

25.50

80,665.08

55,918.17

12.75

5,705.50

 

797,555.08

29.75

199,291.40

63,905.62

13.60

6,789.79

 

EXCESS

34.00

 

           

TABLE C

Group

Pre-existing net wealth

1 & 2

3

4

Nil up to 402,678.11

1.0000

1.5882

2.0000

402,678.11 – 2,007,380.43

1.0500

1.6676

2.1000

2,007,380.43 – 4,020,770.98

1.1000

1.7471

2.2000

In excess of  4,020,770.98

1.2000

1.9059

2.4000

IMPORTANT

This document is to be considered a guide only to Spanish ISD.  The information is given in good faith and is believed to be correct at the time of printing.  However, Blacktower Financial Management International Ltd, it’s agents and any associated company, cannot be held responsible for the accuracy of the information. 

Always consult your tax adviser.  

  

 

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29630 Benalmádena Costa

 
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