Which beneficiaries are hit worst by Spanish Inheritance Tax (IHT)?

Raymundo Larraín Nesbitt, June, 2. 2017

Lawyer Raymundo Larraín Nesbitt explains to us which taxpayers (inheritors) are likely the worse off on inheriting assets in Spain.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
2^nd of June 2017

Spanish Inheritance Tax is a complex tax that requires planning ahead to mitigate exposure to this tax. Our law firm has expertise mitigating the IHT burden. Ask us.

In this blog post I highlight the beneficiaries (those who stand to inherit assets in Spain) who will likely be the worse off by this tax.

Beneficiaries included in one or more of the following categories below will likely be landed with a humongous IHT tax bill unless they follow my advice and plan ahead:

• Beneficiaries classified in Groups III & IV for IHT purposes (distant relatives or else with no family ties).

Group III: Relatives in second and third degree: in-laws, brothers/sisters (siblings), nephews/nieces, aunts and uncles.
Group IV: Relatives in fourth degree, or without any kinship: a friend, common law partners, mistress.

• Large estate inherited. It is difficult to give a precise number as it is in relation with multiple factors.
• Pre-existing net wealth in Spain of the inheritor is large. The worst-case scenario is an inheritor classified in Group IV who already has a pre-existing net wealth in Spain of over €4,020,770.98 (over £3,000,000) and who inherits over €797,555. In such a case, the inheritor would be applied an extreme tax rate of 81.6% (34%*2.4). This is clearly a problem that only affects someone who was already a multimillionaire before inheriting; not exactly a problem that affects us all (unfortunately!).
• The assets or rights inherited are located in what I label as a ‘tier 2’ region for IHT purposes; meaning the regional exemptions are negligible or non-existent.
• Aged between 21 and 65 years old (because multiple lavish exemptions would not apply to that age group).
• Beneficiaries are non-resident in the EU or EEA (this is because lenient regional tax allowances do not apply to those resident outside the European Union or European Economic Area).

Conclusion

If you plan to leave an estate in Spain to your loved ones, and your appointed beneficiaries qualify for a combination of one or more of the above then you (NOT the beneficiary!) should consider speaking with our law firm to do some serious estate planning to mitigate their inheritance tax exposure – they will be forever grateful.

“If you fail to plan, you plan to fail” – Benjamin Franklin.

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Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, and litigation. We will be very pleased to discuss your matter with you. Please contact us for a free initial consultation. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

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Which beneficiaries are hit worst by Spanish Inheritance Tax (IHT)? – 2nd June 2017
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Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.