An overview of inheritance tax rates as well as legal deductions and exemptions in the Community of Madrid.

1. Inheritance Tax Deductions
In Madrid

2. This presentation has been updated and is valid for 2017.*
*Advocate Abroad does not accept responsibility for losses of any type consequent upon reliance on the
information contained in this presentation. Please consult a lawyer before acting.
Inheritance Law in Madrid
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3. In 2001 the Spanish government devolved the power to set
inheritance tax rates and deductions to the regional
parliaments.
Inheritance Law in Madrid
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4. Most regions enacted tax laws that applied generous
deductions only to those beneficiaries who were resident in
the region over the balance of the previous five years.
Inheritance Law in Madrid
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5. On September 3rd 2014, the European Court of Justice ruled
that such laws were discriminatory and contrary to European
Law.
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Inheritance Law in Madrid

6. Accordingly, the Spanish government has enacted new
legislation (Ley 26/2014) which makes any deductions that
may be applied to residents also available to non-residents
who are EU citizens.
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Inheritance Law in Madrid

7. The main impact of the new legislation is as follows:
1) If the deceased who had assets in Spain was a non-
resident, living in another European country, then the
beneficiary may apply those deductions and exemptions
provided by the regional government in which the majority
of the inherited assets are located.
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Inheritance Law in Madrid

8. 2) If none of the assets to be inherited are located in Spain,
then the resident beneficiaries should apply the legislation
enacted by the regional government where they are normally
resident.
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Inheritance Law in Madrid

9. 3) If the deceased was resident in one of the Spanish regions
and the beneficiaries were non-resident, and living in another
European Union country, then they may apply those
deductions and exemptions available to residents of the
region in which the deceased was resident.
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Inheritance Law in Madrid

10. The regional level deductions available in Madrid were
enacted by the parliament in Madrid and in their current form
are specified in Legislative Decree 1/2010.
The most important changes to State laws can be
summarised as follows:
Inheritance Tax Law in the Madrid
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11. Spanish Inheritance law first assigns beneficiaries to groups
according to the degree of kinship with the deceased:
Group I Children, including adopted children, under the age of 21
Group II All other descendants, spouses and parents
Group III Close relatives such as brothers and sisters, grandparents,
aunts and uncles
Group IV More distant relatives
Personal Exemptions
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12. These are the personal deductions as amended by regional
law in Madrid. They are in addition to state exemptions:
Personal Exemptions
Deduction
Group I
Deduction of €16,000 plus €4,000 for each year under
the age of 21 up to a max. of €48,000
Group II Deduction of €16,000
Group III Deduction of €8,000
Group IV No deductions available
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13. Equal deductions for Common Law Couples
Those deductions available to married couples are also
available to those who are unmarried and who comply with
the regulations set out in Ley 11/2001,
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14. If the beneficiary has a disability:
If the disability is classified as > 33% then a deduction of
€55,000 may be applied
If the disability is classified as > 65% then a deduction of
€153,000 may be applied
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15. Income Derived from Life Insurance Policies
A 100% deduction on amounts up to €9,200 where the
beneficiary is the:
● Spouse
● Child/Adopted Child
● Parent
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16. Deductions in transfer of Family Business
● Tax deduction of 95% of the value of the business
● Should be a sole trader or 'single director company‘
● The business must be maintained for at least 5 years
following the inheritance
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17. Inheritance of the Family Home
If the main, habitual family home is inherited there is a deduction
of 95% up to the value of €123,000 per beneficiary.
This applies to beneficiaries that are the spouse, child or parent
of the deceased.
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18. The property may not be sold for a further 5 years after the
inheritance.
Other blood relatives over the age of 65 may also benefit if living
with the deceased in the property for a period of at least two
years prior to the date of death.
Inheritance of the Family Home cntd
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19. 19
Inheritance of Special Awards
● For inheritance of special indemnities paid to victims of
toxic shock syndrome or victims of terrorism those
awards may be reduced by 99%
● The reduction applies where such indemnities are not
subject to Income Tax

20. Other Deductions:
As a general rule the following deductions may be made on
any estate:
● Funeral Expenses
● Final Medical Expenses of the Deceased
● Debts held be the deceased that are evidenced by
public documents e.g. a mortgage
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21. Tax Rates in Madrid
Taxable Sum (€)
Tax Payable On This
Sum
Any Remainder Up
To
Applicable Rate on
Remainder (%)
0,00 0,00 8,313.20 7,65
8,313.20 635,96 7.688,15 8,50
16.001,35 1.289,45 8.000,66 9,35
24.002,01 2.037,51 8.000,69 10,20
32.002,70 2.853,58 8.000,66 11,05
40.003,36 3.737,66 8.000,68 11,90
48.004,04 4.689,74 8.000,67 12,75
56.004,71 5.709,82 8.000,68 13,60
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22. Tax Rates in Madrid Cntd
Taxable Sum (€)
Tax Payable On This
Sum
Any Remainder Up
To
Applicable Rate on
Remainder (%)
64.005,39 6.797,92 8.000,66 14,45
72.006,05 7.954,01 8.000,68 15,30
80.006,73 9.178,12 39.940,85 16,15
119.947,58 15.628,56 39.940,87 18,70
159.888,45 23.097,51 79.881,71 21,25
239.770,16 40.072,37 159.638,43 25,50
399.408,59 80.780,17 399.408,61 29,75
798.817,20 199.604,23 En adelante 34,00
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23. Existing Wealth
Once the relevant tax rate has been applied the result is
multiplied by a coefficient determined by the existing wealth of
the beneficiary as well as the group to which they belong:
Group/Coefficient
Existing Wealth (€) I & II III IV
0 to 402.700 1 1.5882 2
402,700 to 2,007,400 1.05 1.6676 2.1
2,007,400 to 4,020,800 1.1 1.7471 2.2
Over 4,080,000 1.2 1.9059 2.4
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24. Existing Wealth
The Groups referred to consist of the following beneficiaries:
Group I Children, including adopted children, under the age of 21
Group II All other descendants, spouses and parents
Group III Close relatives such as brothers and sisters, grandparents,
aunts and uncles
Group IV More distant relatives
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25. Spouse, descendants and parents of the
deceased
A special discount of 99% on any tax payable on account of
any inheritance applies to those beneficiaries in Groups I or
II.
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26. Each year in Spain thousands of expats pay more
tax on inheritance than they should – simply
because they fail to follow some simple rules.
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27. To find out how to get expert advice, in English, about how to
reduce your liability for inheritance tax, go to:
Expert Probate Services in Madrid
Expert Probate Services in Madrid
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