Inheritance tax in Spain

Dear Sir,

I am a British citizen who has been fully and legally resident in Spain since 2004, live permanently in Alicante province, and employed on a full contract with an S.L. company and pay income tax and social security contributions to the Spanish authorities.

My father died last year, and after settling all his affairs, the balance on his UK estate value is to be shared out between a number of family members, with the result that I will shortly receive a cash inheritance to be paid into my UK bank account of around £39,000.

This amount is well below the inheritance tax threshold here in Spain in connection with this wholly paternal inheritance that does not involve the transfer of any Spanish based assets.

Answer

You are correct in the fact you are not liable to pay tax in Spain. However, as you are a tax resident in Spain, you will have to declare your inheritance to the Spanish tax office.

This is done using official form 650, and has to be filed in Madrid.

Those individuals who are tax residents in Spain are obliged to declare, and pay inheritance tax in Spain– if appropriate - on the total inheritance wherever this is based in the world. The worldwide assets have to be declared in Spain.

For those individuals who are not resident for tax purposes in Spain, inheritance tax in Spain is payable only on assets based in Spain, i.e. real estate, bank accounts, investments etc.

The filing of your tax will probably require the assistance of a tax professional, and this person will require the death certification, the certificate of Last Wills from the Ministry of Justice in Madrid – this certification will presumably state that your father did not make a Spanish Will – so the Probate and the Last Will from the UK will be required. If the only assets belonging to your father were liquid funds a certification stating the balance of these funds on the date of death will also be required.

All the documents that are written in English will have to be translated by a sworn interpreter and those issued in the UK will have to be legalised by the Foreign Office by means of an Apostille in accordance with The Hague Convention of the 5th of October of 1961.

There are many tax residents in Spain, who don’t declare funds that have been inherited in the UK or in offshore centres, believing that the Spanish tax authorities will not find out. They will.

One of the obligations of tax residents in Spain is to declare their worldwide assets using form 720, when the value exceeds a certain amount.

When one inherits any assets outside of Spanish territory, these have to be declared in form 720. The penalties for not doing to are too painful.

In this example, you may not have to declare using form 720, but it will depend on the total value of your assets situated outside of Spain.