Inheritance Law in Andalucía: Tax Deductions and Exemptions for Residents and Non-Residents

2. Inheritance Law in Andalucía • Last modified: 28th July 2019 This presentation has been updated and is valid for 2019.* • *Advocate Abroad does not accept responsibility for losses of any type consequent upon reliance on the information contained in this presentation. Please consult a lawyer before acting. 2

3. Inheritance Law in Andalucia In 2001 the Spanish governmentdevolved the power to set inheritance tax rates and deductions to the regional parliaments. 3

4. Inheritance Law in Andalucia Most regions enacted tax laws that applied generous deductions only to those beneficiaries who were resident in the region over the balance of the previous five years. 4

5. Inheritance Law in Andalucia On September 3rd 2014, the European Court of Justice ruled that such laws were discriminatory and contrary to European Law. 5

6. Inheritance Law in Andalucia Accordingly, the Spanish government has enacted new legislation (Ley 26/2014) which makes any deductions that may be applied to residents also available to non-residents who are EU citizens. 6

7. Inheritance Law in Andalucia The main impact of the new legislation is as follows: • If the deceased was a non-resident, living in another European country then the beneficiary may apply those deductions and exemptions provided by the regional government in which the majority of the inherited assets are located. 7

8. Inheritance Law in Andalucia 2) If none of the assets to be inherited are located in Spain, then the resident beneficiaries should apply the legislation enacted by the regional government where they are normally resident. 8

9. Inheritance Law in Andalucia 3) If the deceased was resident in one of the Spanish regions and the beneficiaries were non-resident, and living in another European Union country, then they may apply those deductions and exemptions available to residents of the region in which the deceased was resident. 9

10. Inheritance Tax Law in Andalucía • The regional level exemptions available in Andalucía were enacted by the Seville parliament and in their current form are specified in Legislative Decree1/2009 and DecretoLegislativo 1/2018. The most important changes to state succession laws may be summarised as follows:

11. Personal Deductions for Common Law Couples Those couples who are unmarried may benefit from the same deductions as spouses if they are registered in the relevant registry in Andalucía.

12. Personal Deductions Spanish Inheritance law first assigns beneficiaries to groups according to the degree of kinship with the deceased: Group I Children, including adopted children, under the age of 21 Group II All other descendants, spouses and parents Group III Close relatives such as brothers and sisters, grandparents, aunts and uncles Group IV More distant relatives

13. The following are the personal exemptions available in Andalucía:

14. Personal exemptions cntd: The tax is no longer applied cumulatively, that is to say, if the beneficiary inherits €1,000,001, they would pay tax only on €1 and not on the total (as was the case previously)

15. Inheritance of the Family Home: • Where the beneficiary is the spouse, child or parent of the deceased, and ownership of the home is maintained for 3 years, the following deductions apply:

16. Inheritance of the Family Home Cntd...

17. Inheritance of the Family Home Cntd... • Elderly relatives who were living with the deceased for a period of two years prior to the death may also benefit

18. Deductions in transfer of Family Business • Tax deduction of 99% of the value of the business • May be children, spouse or any relative 'to third degree of sanguinity' who may benefit from the deduction • Must maintain business for a period of no less than 5 years

19. Other Deductions: As a general rule the following deductions may be made on any estate: • Funeral Expenses • Final Medical Expenses of the Deceased

20. Other Deductions Cntd: • Debts held be the deceased that are evidenced by public documents e.g. a mortgage

21. Tax Rates in Andalucía Once the final amount of tax payable is determined then it is necessary to apply the relevant rate:

22. Tax Rates in Andalucía

23. Tax Rates in Andalucía

24. Existing Wealth Once the relevant tax rate has been applied the result is multiplied by a coefficient determined by the existing wealth of the beneficiary as well as the group to which they belong:

25. Existing Wealth The Groups referred to consist of the following beneficiaries: Group I Children, including adopted children, under the age of 21 Group II All other descendants, spouses and parents Group III Close relatives such as brothers and sisters, grandparents, aunts and uncles Group IV More distant relatives

26. Each year in Spain thousands of expats pay more tax on inheritance than they should – simply because they fail to follow some simple rules.

27. Expert Probate Services in Andalucia To find out how to get expert advice, in English, about how to reduce your liability for inheritance tax, go to: Expert Probate Lawyers in Andalucía