Broadly speaking, the taxable base of the IHT is the net asset’s value of the estate of the deceased. In case of non residents, the net asset value is determined by subtracting from the fair market value of the assets located in Spain the debts linked to these assets (for instance, the loans incurred to finance the acquisition, outstanding bills or taxes and the like). No other deductions are allowed.
There is an exempt threshold depending on the relationship between the deceased and the heir (s). The closer is the relationship, the higher is the threshold. For instance, in 2013 the exempt threshold for spouses is EUR 15.956,87. Note that this threshold is applied to each heir, because the tax payers of this tax are the heirs, considered individually.
Once determined the chargeable taxable base, a table is applied to ascertain the tax due. For non residents, the table is the one established in the State’s Inheritance Tax Act, nor the ones of the Region where the property is located. The tax rates range from 7,65 % to 34 %.
The tax due is then ascertained by multiplying the result of the table by a coefficient. This one increases the amount to be paid considering two factors:
- The personal relationship between the deceased and the heir
- The wealth of the heir
The application of this coefficient can increase dramatically the tax to be paid. For instance, if the heir is not a relative of the deceased, and is wealthy (more than EUR 4 Millions of net estate), then the coefficient is as high as 2.4. That is, the tax is increased by 140 % ! Considering that the higher bracket of the IHT is taxed at a marginal tax rate of 34 %, the effective tax rate for these heirs would be 81.6 % ! However, the coefficient for the spouse and descendants of the deceased can only be, at maximum, of 1.2.
Note that according to Spanish Law, capital gains arisen on the death of any person are tax exempt, so the only tax payable would be IHT.
You can ascertain the tax payable using our Inheritance Tax Calculator.