2018 Inheritance Tax reform in Andalucía
25 Sep 2017
PSOE and Ciudadanos have signed last Wednesday 20 an agreement to reform the inheritance tax in Andalucia, a condition imposed by Ciudadanos to guarantee the approval of the Regional Budget for 2018.
In case that such agreement materializes in a Law, spouses, descendants and ascendants inheriting less than 1 million euro individually will pay no tax as from next 1st of January, provided that their pre-existing wealth is lower than 1 million as well.
Only 200 persons paid taxes for inheritance above 1 million in 2016 in AndalucÃa so this measure practically means the elimination of the tax.
WHO CAN BENEFIT?
The tax exemption applies to closer relatives, that is: spouses, children, grandchildren, parents and grandparents.
Brothers and sisters, nephews, uncles and cousins will not benefit so they will be taxed as usual.
HOW DOES THE ONE MILLION APPLY?
The one million euro allowance computes for each individual and not for the value of the estate. Thus, a father leaving 2 million to two or more children, none of the heirs will pay inheritance tax.
Unlikely previous reductions, this is a threshold meaning that someone inheriting 1.000.001 euros, for example, will be free of tax on 1 million but taxed on 1 euro.
The wealth of the heir at the time of inheriting cannot exceed 1 million euro as to benefit from this allowance.
WHAT ABOUT GIFTS?
The agreement also affects to Gift Tax but only for direct relatives (parents and children) up to 1 million euro provided that the full amount is allocated to set up or improve an individual company or family business. However, the gift has to be formalized in a Public Deed and the company or business must be kept for 5 years as from the date of the Deed, unless the recipient deceases within said period.
The agreement has no retroactive effect so it does not affect to any inheritance or gift occurred prior to 1 January 2018.
We have to wait for the final text of the Budget once approved as to know all the details and understand the consequences and opportunities that this change may bring.