If you have received an inheritance, a legacy, or a gift, it is important to know that you must pay Inheritance and Gift Tax. In this article, we analyze Inheritance and Gift Tax by Autonomous Community to understand what tax benefits apply depending on where the inheritance is received or the gift is made.
What does Inheritance and Gift Tax cover?
Index of contents
First of all, you should know that this is a tax regulated by national law which levies increases in wealth obtained by an individual free of charge, such as through an inheritance, a gift, or a legacy. However, the Autonomous Communities may establish their own reductions and tax benefits, which means that inheriting in Madrid is not the same as inheriting in Asturias or Catalonia.
If the recipient is a legal entity (a company), the increase in wealth will be subject to Corporate Income Tax instead.
You must file Inheritance and Gift Tax in the following cases:
- When you receive assets or rights through inheritance, legacy, or any other succession title (legally known as mortis causa acquisitions).
- When you receive a gift during the donor’s lifetime (inter vivos acquisition).
- When you are the beneficiary of a life insurance policy following the death of the insured person.
The persons required to pay this tax are heirs or legatees, donees (those receiving a gift), and beneficiaries of life insurance policies.
Filing deadlines and extensions
In the case of inheritances, the deadline to file the tax return is six months from the date of death. A single six-month extension may be requested, provided that it is applied for within the first five months of the initial filing period. The tax must be filed in the Autonomous Community where the deceased had their last habitual residence.
In the case of gifts, the filing deadline is 30 working days from the day following the date on which the gift was made. Saturdays, Sundays, and public holidays are not counted. In this case, no extension may be requested. The tax must be filed in the Autonomous Community where the recipient of the gift has their habitual residence. If the gift involves real estate, the tax must be filed in the Autonomous Community where the property is located.
Inheritance and Gift Tax: reductions and tax benefits by Autonomous Community
As mentioned above, Inheritance and Gift Tax is a national tax, but each Autonomous Community has established its own reductions and tax benefits. These depend on the relationship between the deceased and the heir, as well as on the pre-existing wealth of the beneficiary. Four groups are distinguished:
- Group I: Direct descendants or adopted children under 21 years of age.
- Group II: Direct descendants and adopted children aged 21 or over, ascendants, adoptive parents, and spouses.
- Group III: Second-degree relatives (siblings) and third-degree relatives (nieces, nephews, and uncles/aunts), as well as relatives by marriage.
- Group IV: Fourth-degree relatives (such as cousins) and other more distant relatives or unrelated individuals.
Inheritance and Gift Tax by Autonomous Community
Inheritance and Gift Tax in Andalusia
Andalusia applies a 99% tax credit on the tax liability for both inheritances and gifts for taxpayers included in Groups I and II (descendants, ascendants, and spouses).
Inheritance and Gift Tax in Aragon
Aragon regulates significant regional reductions for direct family members, which in certain cases may result in very low taxation or even the practical elimination of the tax liability, within the limits and conditions established by regional regulations.
Inheritance and Gift Tax in Asturias
Asturias provides significant reductions for Groups I and II, as well as specific tax benefits for the acquisition of the primary residence, which can substantially reduce taxation on inheritances between direct family members.
Inheritance and Gift Tax in Cantabria
Cantabria provides relevant tax benefits for Groups I and II that may result in very low taxation on acquisitions between direct relatives, depending on the taxable base and other requirements established by regional legislation.
Inheritance and Gift Tax in Castilla-La Mancha
Castilla-La Mancha regulates tax credits and reductions applicable to Groups I and II that allow for a significant reduction of the tax liability on inheritances and gifts between direct relatives.
Inheritance and Gift Tax in Castilla y León
Castilla y León applies a 99% tax credit on the tax liability for taxpayers included in Groups I and II, in addition to other specific reductions depending on age, disability, or the nature of the inherited assets.
Inheritance and Gift Tax in Catalonia
In Catalonia, tax credits are applied depending on the degree of kinship and the taxable base. In the case of spouses, the tax credit may reach 99%, while for descendants and other relatives, variable percentages apply according to the brackets established by regional regulations.
Inheritance and Gift Tax in the Valencian Community
The Valencian Community applies a 99% tax credit on the tax liability for taxpayers included in Groups I and II (descendants, adopted children, spouses, and ascendants), both for inheritances and gifts.
Inheritance and Gift Tax in Extremadura
Extremadura establishes a 99% tax credit for inheritances for taxpayers included in Groups I and II, as well as other tax benefits applicable in certain gift scenarios.
Inheritance and Gift Tax in Galicia
Galicia maintains a reduction of up to €1,000,000 for Groups I and II, which in practice means that most inheritances between direct relatives are not taxed when they do not exceed this amount.
Inheritance and Gift Tax in the Balearic Islands
The Balearic Islands apply a 100% tax credit on Inheritance Tax for taxpayers included in Groups I and II. In the case of gifts, significant tax benefits are also available for direct family members, provided that the requirements established by regional legislation are met.
Inheritance and Gift Tax in the Canary Islands
In the Canary Islands, a 99.9% tax credit applies to mortis causa acquisitions for Groups I, II, and III. In the case of inter vivos gifts, Groups I and II may also apply a 99.9% tax credit, provided that the formal requirements established by regional legislation are met.
Inheritance and Gift Tax in La Rioja
La Rioja applies relevant deductions and tax credits for Groups I and II that allow for a very significant reduction in taxation on inheritances between direct relatives, within the limits established by regional legislation.
Inheritance and Gift Tax in Madrid
Madrid applies a 99% tax credit for Groups I and II and a 50% tax credit for taxpayers included in Group III (siblings, uncles/aunts, and nephews/nieces).
Inheritance and Gift Tax in Murcia
Murcia applies a 99% tax credit for Groups I and II, along with additional tax benefits in certain cases provided for under regional legislation.
Inheritance and Gift Tax in Navarre
Navarre has its own regional (foral) regulations governing inheritance and gift taxation, so the national common regime does not apply. Tax rates and reductions depend on the degree of kinship and the applicable regional legislation.
Inheritance and Gift Tax in the Basque Country
In the Basque Country, regional (foral) regulations apply in each historical territory (Álava, Bizkaia, and Gipuzkoa). In general, acquisitions between descendants, ascendants, spouses, or registered partners are taxed at very reduced rates under their specific regulations.
In conclusion, it is essential to seek advice from a specialized consultancy firm to analyze the place where the inheritance is received in order to determine which tax benefits may apply to reduce the tax liability or whether an extension for payment can be requested.
