Spanish Inheritance Tax Information

There is a main legal body which governs the application of tax (Ley de Impuesto de
Sucesiones – Inheritance Tax Act) and a number of specific deductions depending on where the inheritors are residents for tax purposes and their age. Basically, IHT is calculated on the basis of a number of variables, namely value of assets being transferred, family relationship between giver and receiver and pre-existing wealth of the latter. Deductions are based on the age and residency for tax purposes status of the inheritors, on the consideration of habitual residence of the property inherited (between spouses) and also miscellaneous expenses (funeral etc.).
Depending on several factors, it is extremely important to find a legal method to minimise IHT with as little cost as possible thus making it worthwhile.

Option 1: Buy jointly with future inheritors

This option has the advantage that it does not require any special arrangements to be in place prior to completing, making it a straight purchase, and IHT is reduced in the proportion of the ownership share.

Option 2: Sell the Property to Future Inheritors

If the property is already owned directly by the person wishing to mitigate IHT, they can sell the property to the potential inheritors, either fully or partly. Costs: 7% Transfer Tax on the value of the share transferred, and 35% Capital Gains Tax, if a profit is declared on the deeds. In any event, 5% of the share value sold will have to be lodged with the tax office on account of CGT, but can be claimed back if there is no profit.

Option 3 : Take a mortgage on the property

This option is interesting in that it allows a reduction on the value of the property for tax purposes, mitigating the liability accordingly. Such an operation requires that the equity released from the property is placed in some form of tax haven in order to avoid it being taxed. Apply for your mortgage offer online at

Option 4: Buying or owning through a Spanish Limited Company

This is becoming a very attractive form of minimising the effects of IHT if certain steps are taken. By virtue of article 108 of the LMV (Ley de Mercados de Valores) Act, compa ny shares can be transferred with no transfer tax associated to it provided that none of those acquirers take control of the company (no more than 50% of the shares) and that one year has passed from the act of incorporation of the company or the transfer of the property to the company if this happens after the act of incorporation.

Option 5: Buying or owning through a EU company

This option is also interesting in that the transfer of the shares after death takes place in the country where the company is domiciled, thus preventing the Spanish authorities from obtaining this information. IHT may be, however, an issue in the country where the company is domiciled and therefore it will be necessary to clarify the tax position in the country.

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