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| Inheritance Taxes |
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How the tax works |
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| What is it? |
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When a person dies and leaves property to his or her heirs, these are generally obliged to pay so-called 'Inheritance Tax'. Furthermore, when we receive a donation or gift above a certain value, we're also obliged to hand a share of it over to the State, through so-called 'Donations Tax'. |
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In practice, both taxes which, in principle, are quite different in nature, are paid through the same tax mechanism - that of Inheritance and Donations. |
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From the technical point of view, this tax is direct, personal, subjective and progressive and is levied on increases in assets obtained for gainful purpose by physical persons. |
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| The taxable event |
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| The taxable event of Inheritance and Donations Tax is constituted by: |
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The acquisition of assets and rights by inheritance or legacy, or any other right of succession.
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The acquisition of assets and rights by donation or by any other legal process, free of charge (that is, giving nothing in exchange) and "inter vivos".
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The receipt of sums by the beneficiaries of life assurance contracts, when the assured life is different from the beneficiary.
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| The passive subjects |
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| The passive subjects of this tax are: |
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- The heirs: In the case of “mortis causa” acquisitions, that is, through a person's death.
- The donatee or beneficiary: In donations and other gainful transfers “inter vivos”, i.e. between persons who are still living.
- The beneficiaries: In life assurance policies, provided that the beneficiary is a different person from the one who took out the policy.
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| The gross tax base |
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| This is constituted: |
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- In “mortis causa” transfers: by the net value of each heir's individual acquisition, that is, the actual value of the assets or rights, less charges and deductible costs.
- In donations and other gainful transfers “inter vivos”: by the net value of the assets and rights acquired; that is, the actual value of the assets and rights, less charges and deductible costs.
- In life assurance contracts: by the sums received by the beneficiary. These sums are netted by aggregating the amount received for the assurance contract and the amount of the remaining assets and rights which make up the beneficiary's share of the estate.
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| Charges, debts and deductible costs |
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| The following are deductible: |
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Any unpaid debts which the predecessor in title, i.e. the legator, left, provided that these can be confirmed by some means; these exclude any debts which the deceased may have taken on in favour of one of the beneficiaries, legatees, ancestors, descendants, or siblings even though these may give up their inheritance.
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Any amounts which the deceased may owe in taxes to the State, Autonomous Communities or Local Corporations, or to the Social Security system, and which are paid by the heirs, executors or administrators of the estate, even though they may correspond to payments remitted after the death.
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The last illness, burial and funeral expenses, as well as those derived from any litigation which may originate in relation to the estate.
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| The net tax base |
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This is obtained by applying to the gross tax base the reductions which are laid down by law and which depend on the degree of kinship and affectivity which the deceased may have had, or the donor may have, with the beneficiary. |
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The reductions to be applied depending on the degree of kinship are as follows: |
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- Group I: Descendants and adoptees under twenty-one years of age. It's possible to deduct from the resulting payment the sum of 2,271,500 Ptas. (€13,651.99), plus a further 568,000 Ptas. (€3,413.75) for each year the descendant or adoptee has left to go until he or she reaches the age of 21, with a maximum limit of 6,813,000 Ptas. (€40,946.96).
- Group II: Descendants or adoptees aged twenty-one or over, spouses, ascendants and adopters. The reduction which may be applied will be 2,271,500 Ptas. (€13,651.99).
- Group III: Collateral relatives of the second and third degree, ancestors and descendants by affinity. The reduction which may be applied will be up to 1,136,000 Ptas. (€6,827.50).
- Group IV: Collateral relatives of the fourth degree, more distant degrees and non-relatives. In these cases no reduction will be applicable.
In acquisitions by persons with a physical, mental or sensory disability or impairment, a reduction of 6,813,000 Ptas. will be applied over and above any that may operate on the basis of the degree of their kinship with the predecessor in title.
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