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| Inheritance Taxes |
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Inheritance and donation tax |
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In Spain the management of this tax has been devolved to the Autonomous Communities, hence it will be governed by the regulatory framework of each Autonomous Community. The Autonomous Communities' wide regulatory powers over a state tax create major divergences because, depending on the Community, the amount payable may very a great deal. |
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For example, to date the Basque Country, Navarre and Cantabria feature practically total exemption from inheritance tax for inheritance between parents, children and spouses, and hence the governments of the neighbouring regions such as La Rioja or Aragon are faced with the choice of either revamping the tax and following in the footsteps of those other communities, or running the risk of many of the locals migrating across the border. |
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These territorial divergences in Spain, combined with the international debate as to whether this tax should continue or not, have created a growing tendency to do away with this tax or cut it considerably. |
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An international debate |
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Discussions about the continuance of the tax aren't limited to Spain. The debate has been unleashed in most of the countries surrounding ours and has gained strength both in Germany, and in France and the United States, where its abolition is being advocated. As in Spain, the arguments against it point to the fact that the tax runs counter to the heirs' ability to pay it, and threatens the principle of equality for all citizens in Treasury matters. |
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French objectors to the tax also join their Spanish counterparts in criticising the poor potential for collecting the tax, the partial way in which it acts and the confusion surrounding the tax benefits it brings. It is said that this tax is unsatisfactory from the technical point of view, and runs counter to the basic postulates of fiscal justice. |
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And so the central issue in all countries is to reform it or do away with it. There's full agreement that this tax shouldn't carry on working as it's doing at present. |
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Reforms which took effect on 01-01-2007 |
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| The reform has done away with the 40% Personal Income Tax relief when the benefits of the plans are paid out in one go. Thus, an heir who receives the capital of the plans from 01 January 2007 will find him- or herself in the difficult situation of seeing the Tax Office make off with up to 43% (maximum marginal rate of Personal Income Tax) of all his or her benefits. |
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Whereas, if the estate contains funds, money, accounts, deposits, or other savings products, the outcome will be the opposite: no taxes will be paid - neither Inheritance Tax in those communities which have done away with this, nor Personal Income Tax, with the exception of any land appreciation tax at the due time. Furthermore, land appreciation tax, if any, would be levied at only 18% - less than half of the percentage that would have been levied on a plan received directly as capital. |
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The aim of doing away with the 40% relief was to stimulate benefits in the form of an income for life. |
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