New regional rules that came into force on 1st January 2018 mean most families in Murcia should escape large succession and gift tax bills. This is great news for expatriates who have made their home here, as it makes Murcia one of the cheapest Spanish regions for passing on lifetime gifts and inheritances to your loved ones.
Who pays succession and gift tax?
These taxes are due whenever assets being inherited/gifted are located in Spain, or when the recipient of an inheritance/gift is resident in Spain. Allowances and tax rates vary according to who the beneficiary is, the beneficiary’s pre-existing wealth and the region.
What has changed in Murcia?
The size of the inheritance you can pass on to direct family members tax-free has increased significantly. Formerly 60%, the relief is now at 99%, which means spouses, children and parents (Group I & II beneficiaries) are only liable for 1% of the succession tax bill. So, for example, a child inheriting €350,000 from a parent in Murcia should end up paying around €641. In other Spanish regions, the same inheritance could attract succession taxes of around €31,640.
The 99% relief on inheritances is applied after all other reductions have been made, for example the relatives’ reduction (€15,956 for spouses and descendants/ascendants) and main home reduction.
Tax relief on lifetime gifts to direct family members has also lifted from 60% to 99%. As before, to qualify for this relief you would need to record the gift on a public deed (‘documento público’) and justify the origin of cash gifts.
What are the succession and gift tax rates?
The regional rates in Murcia range from 7.65% to 36.5%, with multipliers of between 1 and 2.4 potentially applied, depending on certain circumstances. Reductions for indirect relatives are very low – just €7,993 for Group III beneficiaries (which generally includes stepchildren, siblings, aunts/uncles and cousins) and nothing at all for more distant relatives.
If you or your heirs do not qualify for the regional rules, then state rules apply instead. In this case, the tax payable could be much higher, with no exemption between spouses.
Will you benefit from the new rules in Murcia?
You could qualify for the 99% reliefs if you are resident in Murcia and either receive an inheritance/gift from a parent, or wish to pass on/gift assets to spouses and children. However, it is not always so straightforward. Whether state or regional rules apply depends on various conditions, including where the beneficiary and donor are resident as well as where the assets inherited/gifted are located.
Nevertheless, the regional government estimates that around 15,000 taxpayers in the region will save approximately €75 million in taxes.
Guidance is advisable, especially if you plan to leave assets to stepchildren or heirs other than your spouse, direct descendants or ascendants, as they do not qualify for reduced relief. Also remember that the reduction only applies to those who are eligible to benefit from the regional rules; otherwise the much more expensive state rules come into play.
It is important to understand how the Spanish tax rules apply to your situation and how they affect your liability for UK inheritance tax. This is a complex, specialist area, so take professional, personalised advice to maximise your legacy and save your heirs from paying more tax than necessary.
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.