Inheriting in Spain while living abroad: inheritance tax for non-residents

If your habitual residence is not in Spain, you are taxed by obligación real (limited tax liability): only on the assets and rights located in Spanish territory. That is what article 7 of Ley 29/1987 (the Spanish Inheritance and Gift Tax Act) says. An account with a Spanish bank, a flat on the coast, shares in a Spanish company or a vehicle registered here all go into the taxable base. The rest of the deceased's estate, wherever it is, does not.

The tax is paid by the person who inherits, not by the estate as a whole. Each heir settles their own share separately and files their own return. If there are 3 siblings, there are 3 different self-assessments, each with its own base and its own tax liability.

No comunidad autónoma handles this. When the deceased or the heir do not live in Spain, the revenue is not transferred to the regions and the file is processed by the AEAT National Tax Management Office. This is the first thing that confuses almost everybody: you file with the central State, even if the flat is in Alicante or in Málaga.

The deadline is 6 months counted from the day of the deceased's death, or from the day on which the declaration of death becomes final. It is a deadline for filing and for payment at the same time: within that period you have to declare and pay.

An extension for an equal period is available, another 6 months. It is applied for within the first 5 months of the filing period, not later. Extending is not free: it accrues late payment interest from the end of the ordinary deadline, and that interest is worked out by the person concerned in the self-assessment.

For gifts the timetable is much shorter: 30 working days counted from the day after the deed or contract is entered into, using modelo 651. It is the most expensive date mistake we see in this procedure.

How much you pay has no single answer, and that is where the problem lies. Under State rules, a base liquidable (net taxable base) of €284,043.13 produces a tax liability of €51,397.81. With a regional 99% credit on that same liability, it comes down to €513.98. The amount does not depend on where you live: it depends on which set of rules ends up applying.

The second additional provision (disposición adicional segunda) of Ley 29/1987 does not let you pick the comunidad autónoma that suits you best. It assigns you one, under fixed rules, and from there you choose between those regional rules and the State ones. That is the decision that moves the bill.

If the deceased did not live in Spain, the applicable rules are those of the comunidad autónoma where the greatest value of the estate's assets and rights located in Spain lies. If the deceased did live in Spain and the heir does not, the rules are those of the region where the deceased lived. If the deceased did not live in Spain and the heir does, and there are no assets in Spain, the region of the heir's residence is taken.

For gifts the rule changes. For a property, the region where the property is located governs. For all other assets and rights, the region where they have been located for the greatest number of days in the 5 immediately preceding years.

There is one exception worth bearing in mind from the start: amounts received by life insurance beneficiaries that are not added to the rest of the estate are taxed by the State and only accept State rules. There is no choice available there.

It is the number one question from people who inherit while living in the United States, the United Kingdom, Switzerland, Mexico or Argentina. The short answer is yes, you can apply them.

It started with the Court of Justice of the European Union judgment of 3 September 2014, case C-127/12, which ruled against Spain for treating non-residents worse. The reform that implemented it drafted the second additional provision with only the European Union and the European Economic Area in mind, and left the rest of the world out.

The Tribunal Supremo (the Spanish Supreme Court) closed that gap. In judgments of February and March 2018, among them 242/2018 of 19 February, it held that the free movement of capital under article 63 of the Treaty on the Functioning of the European Union also protects residents of third countries, and ordered the State to compensate a person resident in Canada for the difference between what was paid under State rules and what was due under regional rules.

The Dirección General de Tributos (the Spanish tax rulings directorate) adopted that position in binding ruling V3193-18 of 14 December 2018. Today the frequently asked questions on the AEAT sede electrónica (its online office) say it plainly: both residents of the European Union and the European Economic Area and residents of third countries can opt for State or regional rules.

For deaths occurring from 1 January 2022, the taxable base for property is not what you think the flat is worth, nor what an estate agent tells you. Article 9 of Ley 29/1987, as worded by Ley 11/2021, sets the value as the valor de referencia (reference value) of the Catastro Inmobiliario, Spain's property cadastre, at the date the tax accrues.

If the value declared by the parties is higher than the reference value, the declared one is taken. Never the lower of the two. Declaring below the reference value means a supplementary assessment is practically certain.

The reference value is checked at the Sede Electrónica del Catastro and is not the same as the valor catastral (rateable value) shown on the IBI bill, the annual Spanish council property tax. Mixing them up distorts the tax liability in both directions, and both are a problem.

For all other assets, market value at the date of death applies: a bank certificate of balances for accounts, quoted price or book value for shareholdings, and a specific valuation for vehicles and insurance policies.

The AEAT requires documents issued by foreign officials or authorities to be provided with the Hague Apostille and a sworn translation into Spanish. A British death certificate or a United States will without an apostille is not accepted.

An authenticated copy of the European Certificate of Succession is accepted as an alternative, with a translation if it is not in Spanish. Where one exists, it saves weeks of paperwork.

Every heir needs a Spanish tax identification number, in practice the NIE (the identification number Spain gives to foreigners). The only exception the sede electrónica allows is that of a deceased person who never had a NIF assigned, in which case identifying them by name and surname is accepted when filing on paper.

If you live outside the European Union and the European Economic Area, the AEAT also requires you to appoint an individual or a company resident in Spain to represent you before the tax authorities. We take on that representation inside your file: it is not something you have to sort out on your own before starting.

If you file late but before Hacienda (the Spanish tax office) formally asks you for it, the surcharge under article 27 of the Ley General Tributaria (the Spanish General Tax Act), as worded by Ley 11/2021, applies: 1%, plus a further 1% for each full month of delay. After 12 months, the surcharge is 15% and late payment interest is added.

That surcharge is reduced by 25% if the requirements of paragraph 5 of the same article are met. Even arriving late, there is room to limit the damage if you act before the formal request.

If it is the Administration that finds you first, there is no longer a surcharge: there is an assessment and a penalty procedure. In medium-sized estates the difference between regularising on your own initiative and waiting for the formal request runs into thousands of euros.

There is an added practical reason not to let it drift. Without proof that the tax has been filed, the bank does not release the balances and the Registro de la Propiedad (the Spanish land registry) does not register the property in your name. Article 8 of Ley 29/1987 makes the entities that hand over funds or securities without that proof subsidiarily liable, and that is why they never do it.