Assets located in Spain will be taxed upon inheritance, by the Spanish State and according to Spanish tariffs, whether one is resident in Spain or NOT, and whether the deceased leaves a will or not.
Transfers between spouses are NOT exempt from Spanish inheritance tax. This can come as a very nasty shock to individuals coming from other countries where this situation does not arise.
Where a property is held in joint names, a substantial inheritance tax liability can arise on the death of ones beloved partner. Not only will the surviving partner have to cope with the loss and the trauma that result, but will also have to find the cash resources to meet a most unwelcome and penal tax bill.
The tax assessed is payable within six month of death.
The inheritance tax payable is the liability of the inheritor and cannot be taken from the deceased estate.
Therefore, where a property is inherited, the property itself cannot be used as collateral security to provide a loan, nor can it be sold until the tax is paid.
If the tax remains unpaid after six months, additional interest and fees become payable.
The initial calculation of inheritance tax is based on the net value of the estate. The rate bands range from 7.65% through to a top rate of 34%.
For non Spanish residents it is calculated on Spanish sited assets only, but for residents, subject to the question of domicile, it could be their wealth worldwide.
The inheritance tax liability increases according to the degree of kinship between the deceased and the people who inherit.
Direct relatives become liable to inheritance taxation where their inheritance amounts to more than 7,993. Class two relatives are uncles, aunts, nephews and cousins, etc.
If a relative is further removed than is Class Two, or is unrelated to the deceased, no allowances are given. This is a Class Three beneficiary. Common law spouses, and same sex partners, fall into this category, as unfortunately do stepchildren.
After the tax has been calculated, the pre-existing wealth of the heir and their relationship to the deceased must be considered.
A Class Two inheritor will automatically have the tax assessed increased by between 59% and 90%.
A Class Three inheritor will automatically have the tax assessed increased by between 100% and 140%.
Someone already wealthy and not related to the deceased could see the amount payable increase to 240% of the amount assessed.
Unrelated wealthy beneficiaries have been known to pay a rate in excess of 80%.