Inheritance taxes in Spain

If you are a UK expatriate, resident in Spain then you should be aware of these points:

Spanish Inheritance Tax
Expatriates resident in Spain for tax purposes are liable for Spanish Inheritance Tax (IHT) regardless of the country in which the inheritance is situated. Those not resident in Spain are liable to IHT in Spain on assets they inherit which are physically located in Spain.

UK Inheritance Tax
The worldwide assets of a UK expatriate are also liable to IHT in the UK. Where the deceased is not domiciled in the UK, IHT is assessed on UK sited assets.

The bottom line
Many will say that Spain is now their permanent home and that they will remain here for the rest of their lives, however most will admit that they would probably return to the UK should either partner become ill or one of them died. The fact is that most UK expatriates in Spain retain their UK domicile so are therefore liable for IHT in the UK and in Spain.

The tax - UK
The tax in the UK is assessed on the total worldwide wealth of the deceased. Currently the first £234,000 is exempt from tax - this is known as the 'nil-rate band'. A single rate of 40% applies to the excess. An important point is that no tax is payable on transfers between spouses, providing that the surviving spouse is also UK domiciled. A non-UK domiciled spouse has an allowance of £55,000.

The tax - Spain
Tax is assessed on each individual. The tax payable depends on the relationship to the deceased, pre-existing wealth and if under 21 years of age and the amount inherited. Here in Spain there is no exemption for the spouse. Tax is payable on all transfers and the allowance is just £10,000.