Inheriting assets in Spain while not being a resident in the country can be a complex process, with significant implications for tax obligations. Failure to address these obligations promptly can result in penalties. Here’s what you need to know:
Tax Obligations and Regions:
Spain’s inheritance tax system varies across its administrative regions, such as Andalucía, Region de Murcia, and Comunidad Valenciana. While each region sets its own inheritance tax rates for residents, non-residents are subject to the national law of inheritance, which often entails higher taxes.
European Union Citizens’ Rights:
In 2014, a ruling by the European Courts of Justice (EU court ruling C-127/12 of September 3, 2014) challenged Spain’s inheritance tax laws, finding them discriminatory against EU citizens. Subsequently, the law was amended to allow EU citizens not residing in Spain to request application of regional inheritance laws in certain circumstances.
Criteria for EU Citizens:
- For inheritance of fixed assets (e.g., property) from a deceased who resided in another EU member state, heirs can apply the law of the region where the assets are located.
- For inheritance of other assets from a deceased who resided in Spain, heirs who are EU or EEA citizens/residents can apply the law of the region where the deceased lived.
Residency Determination:
Residency is determined based on where the deceased spent the majority of their time in the five years preceding their death. This prevents last-minute residency changes to exploit tax advantages.
Non-EU/EEA Residents:
Non-EU/EEA residents inheriting in Spain are subject to the default tax rates set by national law.
Handling Wills:
If the deceased had a Spanish will, the process is generally smoother. However, validating a foreign will in Spain can be complicated and costly. Proper planning and drafting of wills can facilitate the process for heirs.
Legalization of Foreign Wills:
Heirs are responsible for legalizing a foreign will in Spain, which involves identifying beneficiaries, translating the will into Spanish (or an official co-language), and apostilling the will under the Hague convention. This must be completed within six months of the deceased’s passing to meet tax filing deadlines.
Assistance and Consultation:
If you’ve inherited assets in Spain and are unsure of the next steps, seeking professional advice is crucial. Cervantes Alarcón Consulting can assess your situation and recommend the best course of action to minimize tax liabilities. Remember, timely filing is essential to avoid penalties.
Contact Us:
Contact us for assistance. Cervantes Alarcón Consulting will guide you through the process and ensure compliance with legal requirements. Don’t delay, as failure to act within the specified timeframe can result in financial penalties.