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Inheritance and Gift Tax in Andalucía

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21 Feb 2018

Law 5/2017 published on 15 December has introduced relevant changes on Inheritance and Gift Tax for the Autonomous Region of Andalucía, with effect as from 1 January 2018.

Inheritance and Gift tax is payable by the heir/beneficiary/receiver and not by the estate.

Inheritance Tax

Closer relatives (group I & II: spouses, children, grandchildren, parents and grandparents), inheriting less than 1 million euro individually will pay no tax provided that their pre-existing wealth is also less than 1 million euro.

The one million euro allowance computes for each individual and not for the value of the estate. Thus, in case of 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. The pre-existing wealth has to be valued according to the rules of Wealth Tax. Non-residents have to consider only Spanish assets. Therefore, a foreign couple owning a house in Spain of value 3 million euro so the surviving spouse is inheriting 1,5 million will not benefit from the 1 million allowance because her pre-existing wealth in Spain exceeds 1 million.

Brothers and sisters, nephews, uncles and cousins (group III & IV) will not benefit so they will be taxed as usual.

Disabled people (with a handicap of 33% or more) of group I & II will benefit of the 1 million allowance independently of their pre-existing wealth. Those of group III & IV with a pre-existing wealth lower than 1 million will be entitled to an allowance up to 250.000 euros.

Gift Tax

A 99% reduction of the taxable base with the limit of 180.000 euros will apply to disabled descendants who receive a house as gift, to be the habitual residence with the compromise to keep it 3 years as from the date of donation, provided that the pre-existing wealth of the receiver is less than 402.678,11 euros.

A gift of money to relatives for setting up or upgrading the professional or personal business will be free of gift tax up to 1 million euro. Money should be spent in 6 months as from the date of donation, the business cannot be a holding company nor asset management and it must be kept for at least 5 years. The business or company must be domiciled in Andalucía and the receiver has to be resident of Andalucía. A kinship relation and no limit on pre-existing wealth is required.

A 99% reduction of the taxable base with the limit of 120.000 euros for receivers under 35 years old or 180.000 euros for disabled people will apply for money gifted to descendants for the acquisition of the main home, provided that their pre-existing wealth is lower than 402.678,11 euros. The house must be purchased within 30 days as from the date of donation, it has to be located in Andalucía, the receiver must have been resident of Andalucía during the last 5 years prior to donation. This money can be used to buy the parents house (but gifting the house directly is taxed).

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