Andalusia slashes inheritance tax for relatives in third degree (Group III: brothers, nephews, uncles, etc)

Raymundo Larraín Nesbitt, October, 11. 2021

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By Raymundo Larraín Nesbitt
Lawyer - Abogado
11^th of October 2021

Following on the trend to lower taxes, Andalusia’s regional government announced last week that it would be drastically reducing IHT for relatives in third degree:

Group III: Relatives in second and third degree: in-laws, brothers/sisters (siblings), nephews/nieces, aunts, and uncles.

As we’ve reported several times, relatives in first and second degree do not pay inheritance tax for estates under 1mn euros. Over and above 1mn eruos, they have a tax allowance of 99% in Andalusia. In other words, almost no one pays inheritance tax within these two family groups:

Group I: Natural and adopted children under 21.
Group II: Natural and adopted children over 21, spouse, registered civil partnerships, parents, adoptive parents, grandparents and great-grandparents.

The new change we report on today translates into these allowances being broadened to include (for the first time) the third group of relatives. For family members in Group III, the top marginal rate in IHT is reduced from 70% down to only 45% (in the most extreme cases, when millions are inherited).

Despite drastically reducing inheritance tax in Andalusia, the regional government has earned an extra 600mn euros in taxes. This is known as the Laffer Curve which we’ve explained in detail in previous articles. Basically, it means that when you lower taxes, paradoxically, the tax revenue increases (at least until a marginal point is reached) because more taxpayers comply. As Andalusia came from a point of high taxes, the Laffer Curve effect is quite noticeable in the public coffers. This positive effect (increase of taxe revenue despite lowering tax rates) is also taking place in the autonomous region of Madrid, which also keeps lowering its taxes relentlessly.

This new change for family members in a third degree will come into effect as from January 2022.

Following this welcome tax change, Andalusia will have as from 2022 the most tax-efficient inheritance tax laws out of all the autonomous communities in Spain. This, once more, proves the unwavering commitment of our regional government to lower taxes where possible and reduce admin red tape.

These are the sort of tax measures that I keep pointing out help to attract foreign investments and foster a dynamic economy that creates jobs. Kudos to our politicians.

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Inheritance-related tax articles

New EU Regulation to be Passed on Succession and Wills –18th May 2010
EU Pulls the Stops and Vows to Put and End to Inheritance Taxation Discrimination on Non-Resident Beneficiaries Inheriting in Spain – 20th May 2010
Non-residents: Six Advantages of Making a Will in Spain – 8th August 2012
Buying and Owning Spanish Property through Companies: Pros and Cons – 7th March 2014
Spanish Wills and Probate Law in Light of European Regulation 650/2012 – 8th January 2015
Changes to Spain’s Inheritance and Gift Tax Law – 21st February 2015
Dispelling Spanish Inheritance Tax Myths – 8th August 2015
Spanish Inheritance Tax for Non-Residents (Part I) – 21st February 2016
Spanish Inheritance Tax for Non-Residents (Part II) – 8th March 2016
Inheritance Tax Novelties in Andalusia. FAQ on IHT – 8th September 2016
Which beneficiaries are hit worst by Spanish Inheritance Tax (IHT)? – 2nd June 2017
Non-Resident: Why you need to make a Spanish will – 24th June 2017
Non-resident: careful on making a will in Spain – 30th August 2017
Andalusia to slash Inheritance tax for inheritances under 1 million euros – 21st September 2017
Old Spanish wills made by (resident) British nationals are being declared void – 8^th May 2018
Seven advantages of making a Spanish will – 8th May 2018
Andalusia to abolish inheritance tax in 2019 – 29^th January 2019
Andalusia, now a tier 1 region for low taxation – 3rd July 2019
How to mitigate your inheritance tax bill in Spain – 8th July 2019
Oops! Accidentally revoking your Spanish will – 1^st August 2019
Brexit and Inheritance & Gift tax in Andalusia – 8th August 2019
Inheritance tax in Spain: regional tax reliefs to benefit ALL non-residents in the future (even outwith EU/EEA) – 26th August 2019
Andalusia slashes inheritance tax for relatives in third degree, brothers and nephews (Group III) – 11^th October 2021

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