Spanish Inheritance Tax Explained

Understanding Spanish inheritance tax — known as Impuesto sobre Sucesiones y Donaciones (ISD) — is essential if you own property in Spain or expect to inherit from someone who does. This updated guide explains how the tax works in 2025, who has to pay it, and what allowances apply, depending on your relationship to the deceased and where they lived.

Inheritance tax is something that nearly all families must face at some point. In Spain, it has a reputation for being one of the more complex and potentially costly taxes in Europe.

Whether or not you feel it’s fair, Spanish inheritance tax is legally required and can be significant depending on your residency status, the value of the assets involved, and your relationship to the deceased.

One common misconception is that if you don’t make a Spanish will, the state will seize your assets. That’s false. Spanish law ensures that your estate will pass to your rightful heirs — but without a local will, the process can be delayed, especially if you're a foreign national.

Who Pays Spanish Inheritance Tax?

Inheritance tax in Spain is paid by the beneficiary, not by the estate. If you receive money, property, or other assets, you are potentially liable — even if you live outside Spain. The key determining factors are:

• If the deceased was a resident of Spain
• If the heir is a resident of Spain
• If the inherited assets are located in Spain

Even non-residents who inherit property located in Spain may have to pay ISD.

Tax Groups and Allowances in 2025

Spanish inheritance tax law splits beneficiaries into four groups:

Group 1: Children (natural or adopted) under 21 — tax-free allowance of €47,859.

Group 2: Children over 21, spouses, grandchildren, parents — tax-free allowance of €15,956.87. Some regions extend this to unmarried partners (Parejas de Hecho).

Group 3: Siblings, in-laws, nieces, nephews, aunts/uncles, stepchildren — allowance of €7,993.46.

Group 4: Distant relatives and unrelated heirs — no allowance.

In addition to personal thresholds, some heirs may benefit from deductions related to the value of the family home or business — but these are tightly regulated.

Regional Variations

Inheritance tax in Spain is decentralised, which means each Autonomous Community can set its own additional deductions and reductions — often dramatically lowering what’s owed.

Some examples in 2025:

• Andalucía: Up to €1,000,000 per inheritor tax-free for Group 1 & 2 — for both residents and non-residents.
• Madrid: 99% tax reduction for spouses, children, and parents who are residents.
• Valencia, Murcia, Balearic Islands: Similar reductions apply, but typically only for residents.
• Cataluña: Spouses and registered partners may deduct up to €500,000; children up to €275,000 + €33,000 per year under 21 (to a €539,000 max).

Property Inheritance Rules

Spanish law provides a 95% reduction on the taxable value of a main residence inherited by close relatives (Group 1 or 2) — up to a limit of €122,606 per person. But there are conditions:

• The beneficiary must retain ownership of the home for 10 years.
• The benefit applies only to the main home, and only if the heir was living there for 2 years prior (for non-direct descendants aged 65+).

What About Non-Residents?

Since 2015, EU and EEA non-residents must be treated equally under Spanish inheritance law. That means if the deceased or heir was a resident in an Autonomous Community with favourable tax rules, those rules apply — even if the heir lives abroad.

However, British nationals post-Brexit are no longer automatically covered. While many regions voluntarily extend their rules to UK citizens, this is not guaranteed, so legal advice is crucial.

How High Can Inheritance Tax Be?

State-level ISD ranges from 7.65% to 34%, depending on the value of the inheritance. If the heir is wealthy or belongs to Group 3 or 4, additional multipliers may apply — pushing the effective rate as high as 82% in extreme cases.

How To Reduce Spanish Inheritance Tax

Here are ways you can legally mitigate the amount your heirs will pay:

• Make a Spanish will that’s compliant with EU regulations
• Gift assets during your lifetime (though gift tax may apply)
• Consider taking out life insurance with a named beneficiary
• Use residency status to your advantage if living in a generous region

Final Thoughts

Spanish inheritance tax doesn’t need to be scary — but it does need to be planned for. With expert advice and forward thinking, you can spare your loved ones legal delays and unnecessary tax burdens.

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