What is the new Spanish inheritance law...
and how does it apply to Mallorca property owners?
This is the question we get asked, just about every day. And while there are a huge number of blogs and websites out there that will explain it thoroughly, experts in law and finance and real estate agents with a sound understanding of Spanish inheritance law, we want to give you our own guide to the new inheritance law in Spain and explain how it affects property owners in Mallorca.
We look at everything to do with Spanish inheritance law; from spouse to step children, adopted children and unmarried partners, habitual residents and non-resident property owners, and claiming if you have already paid, i.e.: inheritances and donations prior to the new inheritance law.
What you need to know about Spanish inheritance law
Spanish inheritance law takes a number of factors into account; where the property is in Spain, in this case we will look at Mallorca, the relationship between deceased and inheritor, and the resident status of both, and the intentions of the new property owners. Those closest to the deceased, i.e.: spouse and children, will pay the least in Spanish inheritance tax, if any at all.
Other questions frequently arise. Especially if the inheritors are hoping to sell the property and do not habitually reside in Spain. There is the question of bank accounts, utility charges, costs...
Relatives that do not live in Spain may be happy to hear that they are not required to be present to complete Spanish inheritance law, arrangements can be made through power of attorney.
The new Spanish inheritance law, from August 2015
Traditionally Spanish inheritance law treated residents and non residents differently. A resident leaving property to resident would have to pay little, if any, Spanish inheritance tax while non-residents leaving property to non-residences would be landed with a considerable Spanish inheritance tax bill.
In 2010, the European Commission said that Spanish inheritance law discriminated against non-residents living in Spain. 5 years later, the law has now finally been amended and the new Spanish inheritance law states that residents and non-residents in Spain be treated equally in terms of Spanish inheritance law and taxes.
From the 17th of August 2015, inheritance law in most European countries has changed radically making it much easier and cheaper for non-residents in Mallorca to bequeath and inherit property on the island.
What does habitual residence mean in Spanish inheritance law?
In order to be legally considered as a habitual resident in Mallorca:
You will need to have lived in the country for 5 years.
And spend 183 days a year in the country, not necessarily consecutely.
Or you have your economic or professional base in Spain.
Or your spouse is resident in Spain (and you are not legally separated).
How much Spanish inheritance law tax will I have to pay?
Spanish Succession Tax (SST) allowances and inheritance tax rates.
Basic SST is calculated in bands, which start at 7.65 %, on amounts over EUR 7,993, increasing in stages to 34 % for amounts over EUR 797,555 per beneficiary.
All Spanish inheritance law taxes must be paid before a property can change hands so it is essential you are correctly informed about what this means. If you are hoping to sell the property in question, you will need to settle payment of all Spanish inheritance law tax beforehand.
The first thing to do is to get a cost estimate, calculating legal fees, Notary fees, Land Registry and the inheritance tax to be paid. Remember there are always different payments options available and costs can be spread out between different family members.
Spanish inheritance law for spouses and children
In the Balearics, as well as Madrid and Valencia, there is almost complete exemption from Spanish inheritance tax for spouses and children. However, if the deceased and /or beneficiaries do not reside in Spain, then National Spanish inheritance law applies.
Therefore allowances and tax rates vary according to what group the beneficiary falls into:
Spanish inheritance law - Beneficiary groups
- Natural and adopted children under 21.
- Unmarried spouses registered as common law partners ( parejas de hecho).
- Natural and adopted children over 21.
- Parents, grandparents...
- Brothers and sisters
- Uncles and aunts
- Nieces and nephews
- In-laws and their ascendants/descendants
- All others, including unmarried partners not registered as common-law partners (parejas de hecho)
In the Balearics, unmarried couples living together and registered as common-law partners ( parejas de hecho) can then be treated as a married couple for legal purposes
Spanish inheritance laws and legal advice
Recent changes in Spanish inheritance law are seen to be an important move for non residents living in Mallorca, and can save you substantial sums of money. However, no case is the same and at a time of bereavement, both resident and non residents will benefit hugely from professional legal advice.