Inheritance tax in Spain for non-residents

Inheriting property in Spain from abroad used to be considerably more expensive than inheriting as a resident. That changed, and many families still do not know it — which means some of them are paying more than they should, or worse, quietly missing a refund they are entitled to.

The discrimination that was struck down

Spanish inheritance tax is state law, but each autonomous region can apply its own reliefs, and those reliefs are generous. For years, non-residents were denied access to them and taxed under the far harsher state rules.

The Court of Justice of the European Union ruled that this breached the free movement of capital, and Spanish law was amended accordingly. Spanish case law has since extended the same treatment to residents of non-EU countries. The practical consequence today is straightforward: a non-resident heir can generally apply the regional reliefs of the region connected to the estate.

What that means in Madrid

It matters enormously, because the Community of Madrid applies a 99% relief on the tax due for Group I and II heirs — children, spouses, parents. A non-resident child inheriting a Madrid property can therefore end up paying roughly 1% of what the state rules would have demanded.

The relief is much smaller, or non-existent, for siblings, nephews, nieces and unrelated beneficiaries, who are also subject to multiplying coefficients. If you fall into that group, planning ahead is where the real saving lies.

Which region's rules apply to you

This is the question that decides the bill:

• If the deceased was resident in Spain, the rules of their region of habitual residence generally apply.
• If the deceased was non-resident, the heir may generally apply the rules of the region where the highest-value assets are located.

Which is why two apparently identical inheritances can produce completely different tax outcomes.

The deadline nobody should miss

Spanish inheritance tax must be self-assessed within six months of the date of death, extendable by a further six if the extension is requested within the first five months.

Because the tax is often minimal after reliefs, families assume the filing is optional. It is not: late filing can trigger surcharges and interest, and can complicate the application of the reliefs themselves. File on time even if the amount payable is small.

The practical steps from abroad

1. Obtain a Spanish NIE for every heir. Nothing can be filed or registered without it.
2. Gather the documents: death certificate, Spanish will or the certificate from the central wills registry, title deeds, bank certificates.
3. Value the assets. Property is valued using the Cadastral reference value unless the declared value is higher.
4. File the tax and pay any amount due within the deadline.
5. Register the property in the heirs' names at the Land Registry.

All of this can be handled through a power of attorney, so heirs do not need to travel to Spain.

Don't forget the second tax

If the estate includes urban property there is also the plusvalía municipal, a local tax on the increase in land value, payable to the town hall with its own deadlines and rules. Since the 2021 reform you can choose the more favourable calculation method, and no tax is due where there was no real increase in value.

Frequently asked questions

In general, yes. Spanish case law has extended equal treatment to residents of non-EU countries, so the applicable regional reliefs can be claimed. Each case should be checked, but the days of automatic exclusion are over.

Possibly, depending on when it was paid and the limitation periods involved. Many non-residents overpaid under the old rules and never claimed a refund. It is worth having the file reviewed.

No. The whole process can be handled by a Spanish lawyer under a power of attorney granted before a notary in your country, duly apostilled and translated.

Yes. You may renounce outright, or accept under benefit of inventory, which limits your liability to the value of what you inherit. Take advice before doing anything that could count as tacit acceptance.

We handle Spanish estates for families living abroad, entirely in English. Inheritance at FH Abogados: 633 023 832.