On the 09/04/2019 the Junta de Andalucía approved the reduction of tax on inheritances of amounts over one million Euros to 1 %. The previous regulation from 1st January 2018, approved to increase the minimum exempt of inheritance tax from 250,000 € to 1,000,000 €.
The Decree-law no. 1/2019 came into force on 11/04/2019. This reduction will benefit groups I (children under 21 years old) and II (children over 21 years old, spouses, civil partnership, grandchildren, grandparents and parents. For other relatives (group III) like brothers, nephews, uncles and aunts the reductions stay the same (7,993.46 Euros per beneficiary). Group IV: Cousins), and other more distant relatives, and Non-registered civil partnerships have no rebates.
The distribution of the assets is important in Spain as it is the beneficiaries who are taxed not the estate of the deceased.
The below rebates are only applicable to beneficiaries of group I and II providing that the heirs are residents in a country of the European Economic Area and the largest number of assets of the deceased (highest combined value) are located in Andalusia.
Any Non-EEA resident heirs will be subject to the State tax regulations.
The new exemptions only apply if the death happened after March 2019.
If the asset is subject to a charge (e.g. a mortgage), the amount owed is passed on with the asset reducing its value for tax purposes.
Remember that exceptions on the payment of the inheritance taxes are not automatic and the inheritance must be settled within six months from the death, even if there are no taxes to be paid.
Article 20. Improvement of the reductions of the taxable base, multiplying coefficients and bonuses/rebates to the quota through equations.
a) De facto couples registered in the Register of Couples of the Autonomous Community of Andalusia will be equated to the spouses.
b) People who are the object of a permanent family foster care and guardianship for adoption purposes, will be equated to those adopted.
Article 33.bis. Bonus/rebate in acquisitions “mortis causa”.
Taxpayers included in Groups I and II, will apply a 99% rebate on the tax liability from “mortis causa” acquisitions, including the beneficiaries of life insurance policies. In other words, the heirs will only pay 1% over the 1 million threshold.
Pre-existing wealth per heir has raised to 1.000,000 euros.
Take into account that to calculate the estate inherited by each heir, 3% of the assets value has to be added as (household goods), the % applies even when the assets are properties.
Gift tax changes:
Taxpayers included in Groups I and II, will apply a 99% rebate in the tax quota derived from “inter vivos” acquisitions.
It will be a necessary requirement for the application of this bonus that the donation is formalized in a public document, (title of deeds signed in front of a Notary Public).
If the donated amount is dedicated to creat or to expand a company, the exempt minimum is raised to one million euro. The company must remain active for five years after the date of the public deed of the donation is signed.
The law also establishes that if the donation is in cash, the bonification will only be applicable when the origin of the funds is duly justified, provided that, in addition, it has been included in the title of deeds.
The taxes need to be paid or forms with exemptions filed within 30 calendar days.
The tax is payable by the beneficiaries, which formally accepted the gift. If the donor is resident will be liable to gift tax even if the assets are based outside Spain. Donors who are non-resident are liable if the assets are in Spain (e.g. a property).