Spanish inheritance tax: what foreign heirs get wrong

The advice sounds reassuring. Under the European succession regulation you can choose the law of your own nationality to govern your estate, so your Spanish property passes the way it would at home, free of Spanish forced heirship. That part is correct.

What follows it is usually wrong. That choice does nothing whatsoever to the tax. Article 1 of Regulation (EU) 650/2012 says the regulation does not apply to revenue matters, and recital 10 spells out that national law continues to decide any succession tax payable by the estate or the beneficiaries. Choosing English or Irish law changes who inherits and in what shares. The bill from the Spanish tax office is fixed by the location of the house and by Ley 29/1987, and no choice of law reaches it.

Two questions, two different systems

Keep them apart and the rest of this becomes manageable.

Who inherits is decided by the law that governs the succession. The default is the law of the country where the deceased was habitually resident at death, under article 21. Article 22 lets a person choose instead the law of a country of their nationality, but the choice has to be express in a will or demonstrated by its terms. A note in a letter or a file does not do it.

Who pays what is decided by Spanish tax law. A non-resident heir is taxed under article 7 of Ley 29/1987 on assets situated in Spain. The heir is the taxpayer, not the estate, and each heir is assessed separately on their own share.

Three countries were never part of the regulation

This trips up a great many families. Ireland and Denmark are not bound by the succession regulation, and neither was the United Kingdom, which never opted in even before Brexit. That is set out in recitals 82 and 83.

For an heir it matters in a practical way. The European Certificate of Succession, created by article 62 and expressly accepted by the Spanish land registry, is issued by authorities in participating member states. A family administering an English or Irish estate cannot obtain one and has to prove its entitlement to the Spanish registry with its own national documents instead. It is workable, but it is a different and slower route, and it is worth knowing before rather than after.

One more date: the regulation applies to deaths on or after 17 August 2015. Older estates sit outside it entirely.

Six months, and an extension you have to ask for in five

The Spanish return is due within six months of the date of death. A further six months can be granted, and this is where published guidance is routinely wrong.

The extension must be applied for within the first five months of that period. Article 68 of the regulation to the act is explicit: no extension will be granted where the request is made after the first five months have passed. Miss that window and the deadline is simply the original six months. The extension is also not free, because interest runs from the end of the original period.

Filing late without being chased carries a surcharge of one per cent plus one per cent for each full month of delay, rising to fifteen per cent plus interest beyond a year. If the tax office gets there first, the surcharge regime no longer applies and it becomes a penalty matter.

There is a quieter trap for anyone administering the estate abroad. Where the deed is executed before a foreign notary, the limitation period does not start at the death: it starts when the document is presented to a Spanish authority. An estate that sat untouched for years is not safe simply because time has passed.

The regional rules are open to you, but you have to claim them

Spanish inheritance tax has a state scale and then seventeen regional regimes, and the regional ones are far more generous. For years non-residents were shut out of them. The Court of Justice ended that in 2014, and since a change made in July 2021 the right extends to everyone, including residents of countries outside the EU and the EEA.

Two details decide how it works in practice.

Where the deceased was not resident in Spain, the heir applies the rules of the autonomous community in which the greatest value of the Spanish estate is located. A flat in Alicante and a smaller one in Almería means the Valencian rules, not the Andalusian ones.

And the filing still goes to the state tax agency rather than to the region, because regional collection follows the residence of the taxpayer. The regional rules are a right to be claimed in that return, not something applied automatically to a non-resident file.

What that is worth on the coast, for children, spouses and parents:

• Andalucía: a 99 per cent reduction of the tax due, on top of a kinship allowance of one million euros each.
• Comunitat Valenciana: 99 per cent, but only on the part of the tax that corresponds to assets the heir actually declared, in time or at least before being chased. A late, prompted filing can lose the relief on the undeclared part.
• Región de Murcia: 99 per cent, and on death it is confined to those same close relatives.
• Illes Balears: 100 per cent, subject to a condition aimed straight at property. The deed must state a value no lower than the official reference value, allowing a margin of twenty per cent above it.
• Canarias: 99.9 per cent, and uniquely it reaches siblings, nieces and nephews as well.

None of these makes the return optional. The relief removes the tax, not the filing.

Where it becomes expensive

The state scale runs from 7.65 per cent to 34 per cent on amounts above roughly €797,000. That figure is not the end of the calculation. A multiplier is then applied according to how closely the heir was related to the deceased and how much wealth the heir already has, and for a distant relative or an unrelated heir it reaches 2.4.

The result is that the same house can pass almost free of tax to a daughter and attract a very large bill for a nephew, a friend or a partner the couple never married. Spanish state law lists spouses among the close group; an unmarried partner is not named there. Several regions correct this, and Andalucía and Murcia both treat a registered partner as a spouse for these purposes, but the registration has to exist. This is the single strongest argument for planning while there is still time to plan.

Two reliefs are often assumed to apply and do not. The 95 per cent relief on the family home, capped at €122,606.47 per heir, is for the deceased's habitual residence. A holiday home is not that. The family business relief has its own conditions and does not attach to a private property.

The property itself

The town hall levies its own tax on the land value, and on an inheritance the heir owes it. It is due within six months of the death, extendable to a year on request, subject to the local ordinance. If no increase in land value has occurred there is nothing to pay, but the transfer still has to be declared with both sets of deeds.

Heirs regularly ask whether they can simply sell and settle everything from the proceeds. They can sign a sale, but the buyer cannot register it while the sellers' own title is unregistered. The inheritance has to go on the register first. Note also that the local land value tax then falls due a second time on that sale, and this time on the seller. Selling is covered in selling a property in Spain.

What every heir needs before anything can be signed

A NIE for each heir. For a foreign individual the tax number and the NIE are the same thing, and the land registry will not complete a registration unless the number of every person appearing in the deed is in the document. It is the first thing to start and the one most often left too late: see what a NIE number is and who needs one.

A certificate from the central register of wills, which can only be requested once fifteen days have passed since the death, and whose content the registry requires. A notarial deed of acceptance, in the ordinary case where assets are divided between several heirs. A sole heir with no forced heirs is the exception and can register on a private application.

Heirs who cannot travel can act through a representative under a power of attorney, which is the usual way these files are run from abroad: see the Spanish power of attorney.

Frequently asked questions

I chose the law of my nationality in my will. Does that avoid Spanish inheritance tax?
No. It decides who inherits, not who is taxed. The regulation expressly excludes revenue matters.

Does a foreign will work in Spain?
As a matter of law, yes. A foreign will is an admissible title. In practice a Spanish will is easier: it appears in the Spanish register of wills, it needs no translation or foreign formalities, and it is the natural place to record a choice of national law. It also keeps the six-month clock from being spent on paperwork abroad.

The estate is small. Do we still have to file?
Yes. Regional relief that reduces the tax to almost nothing does not remove the obligation to file, and in the Valencian Community late filing can cost the relief itself.

Can we get the deadline extended?
Only if the request is made within the first five months, and interest then runs on the extra time.

Which region's rules apply to us?
Where the deceased was not resident in Spain, the region holding the greatest value of the Spanish assets.

We are several heirs in different countries. Does everyone have to come to Spain?
No, but everyone needs a NIE and either has to sign or be properly represented.

Why Buenaley?

Buenaley is a Spanish law firm working with international clients. On an inherited property there are two things we take off the family's hands, and both have to start early because of the six-month clock.

The first is the NIE. Every heir needs one before anything can be signed, and it is the step that holds most files up. We apply for all of them at once through our NIE service, wherever the heirs live.

The second is the property: the deed of acceptance, the registration in the heirs' names, and the sale that usually follows. Until the inheritance is on the register the house cannot be transferred to a buyer, so this is the part that decides how soon the family can actually do something with it.

• NIE applications for every heir, started on day one
• The deed of acceptance and the registration of the property in the heirs' names
• The sale afterwards, including the three per cent withholding and the local land value tax
• The whole file run under power of attorney where the family cannot travel
• Fixed price, agreed in advance

Inherited a property in Spain, or expecting to? Send us the details of the house and who the heirs are, and you will hear what has to happen and in what order. Or start with the NIE application, because nothing else can be signed without it.