If you’re a resident of Madrid or own assets in the region, understanding how Inheritance Tax (Impuesto sobre Sucesiones y Donaciones, or ISD) works locally is crucial, especially if you’re a British or EU expatriate trying to plan efficiently across borders.
Spain’s inheritance system is complex, with vastly different rules depending on where you live.
Madrid stands out not only for its generous allowances but also for its unique political approach to inheritance and wealth succession.
This guide walks you through the essential rules, exemptions, rates, calculations, and how we can help you structure your estate efficiently.
Spain’s national inheritance tax framework applies a base set of rules, but the autonomous regions, like Madrid, have broad authority to apply reductions, exemptions, and rebates.
This means the same inheritance could be taxed very differently depending on where you live in Spain.
Under national Spanish law, inheritance tax is applied progressively based on:
Each heir is taxed individually, and there’s no concept of a joint estate.
The tax is paid by the beneficiary, not the estate, and applies to both inheritances and lifetime gifts.
Tax liability arises when:
Each region sets its own deductions, reductions, and allowances.
This makes location critically important in determining the final bill. Madrid, in particular, has one of the most beneficial IHT regimes in Spain, especially for close family members.
Spanish tax authorities have categorised the relationship between the taxpayer and the person making the gift/leaving the inheritance into 4 groups.
Each group is allowed specific tax-free allowance on inheritance not for lifetime gifts:
The “Raw Tax” is what the national law established at the amount of tax you should pay after the initial allowance.
| Inheritance Range | Tax Rate |
|---|---|
| Up to €7,993 | 7.65% |
| €7,993 to €31,956 | 7.65% to 10.2% |
| €31,956 to €79,881 | 10.2% to 15.3% |
| €79,881 to €239,389 | 15.3% to 21.25% |
| €239,389 to €398,778 | 25.5% |
| €398,778 to €797,555 | 29.75% |
| Above €797,555 | 34% |
The final national element to apply when considering inheritance tax in Spain is the ISD Multiplicater
| Pre-existing net wealth (Euro) | Group I and II | Group III | Group IV |
|---|---|---|---|
| 0 - 402,700 | 1.00 | 1.5882 | 2.0 |
| 402,700 - 2,007,400 | 1.05 | 1.6676 | 2.1 |
| 2,007,400 - 4,020,800 | 1.1 | 1.7471 | 2.2 |
| 4,020,800 + | 1.2 | 1.9059 | 2.4 |
Madrid is one of the most fiscally generous regions in Spain when it comes to Inheritance Tax.
In 2025, the regional government continues to apply a 99% tax rebate for close family members, meaning heirs in Group I and II typically pay just 1% of the calculated tax.
This is what the region offers:
These policies have been politically charged. The Comunidad de Madrid has long pursued a low-tax agenda to attract high-net-worth individuals, businesses, and international families.
This has created a sharp contrast with regions like Catalonia or Valencia, where effective inheritance tax bills can be substantially higher.
Madrid’s tax treatment also reflects broader ideological tensions between Spain’s central government, seeking national “harmonisation”, and regional governments defending fiscal autonomy.
To benefit from Madrid’s inheritance tax reductions, the tax residency of the deceased and the beneficiary matter.
Here’s how it works:
If the Deceased Was a Spanish Resident
The regional rules of the Comunidad Autónoma where they spent the majority of the five years prior to death will apply. If they lived in Madrid for at least 2.5 years within the last five, Madrid’s inheritance tax regime applies.
If the Deceased Was Not Resident in Spain
Then the beneficiary’s residency matters:
This rule was established after the landmark European Court of Justice ruling in 2014, which found Spain’s system discriminated against non-residents.
In addition to the 99% deduction, Madrid offers special tax treatments for:
Family-owned businesses or shares: When certain conditions are met, inheritances involving businesses may benefit from further exemptions, helping family enterprises pass from one generation to the next without liquidation.
Primary residence: If the heir is a spouse, descendant, or ascendant who lived with the deceased and commits to retaining the property for at least five years, the taxable value of the residence can be reduced by up to 95%, subject to a cap.
These rules make multi-generational estate planning a key consideration, especially when real estate or company assets are involved.
Do you Need Expert Inheritance Tax in Madrid Advice?
If you are asking yourself how much you will have to pay in Inheritance Tax, we’ve set up a fantastic 6 stage process that will assist you in getting the right information.
We however recommend you get in touch with us if you want to ensure accuracy and assistance.
First you must determine the “real value” of all the assets inherited. In practice this means that the starting point is a full, open-market valuation. This includes real estate, financial accounts, pensions, and valuables.
The taxable person in the context of inheritance in Spain is the recipient, that means during this stage the relationship between the taxpayer and the person making the gift or leaving the inheritance must be determined.
This stage consists of working out the personal allowance available (per recipient) depending on which category you fall under.
Once you have deducted the personal allowance available from the value arrived at in stage 1, you need to calculate the “raw tax figure” from the following table:
| Amount | To (Euro) | Rate (Percentage %) | Beginning Scale (Euros) |
|---|---|---|---|
| 0.00 | 7,993.46 | 7.65 | |
| 7,993.46 | 7,987.45 | 8.50 | 611.50 |
| 15,980.91 | 7,987.45 | 9.35 | 1,290.43 |
| 23,968.36 | 7,987.45 | 10.20 | 2,037.26 |
| 31,955.81 | 7,987.45 | 11.05 | 2,851.98 |
| 39,943.26 | 7,987.46 | 11.90 | 3,734.59 |
| 47,930.72 | 7,987.45 | 12.75 | 4,685.10 |
| 55,918.17 | 7,987.45 | 13.60 | 5,703.50 |
| 63,905.62 | 7,987.45 | 14.45 | 6,789.79 |
| 71,893.07 | 7,987.45 | 15.30 | 7,943.98 |
| 79,880.52 | 39,877.15 | 16.15 | 9,166.06 |
| 119,757.67 | 39,877.16 | 18.70 | 15,606.22 |
| 159,634.83 | 79,754.30 | 21.25 | 23,063.25 |
| 239,389.13 | 159,388.41 | 25.50 | 40,011.04 |
| 398,777.54 | 398,777.54 | 29.75 | 80,655.08 |
| 797,555.08 | and beyond | 34.00 | 199,291.40 |
Finally, multiply the tax rate determined in the table above by the coefficient that depends on the kinship category and the recipient’s pre-existing net wealth.
| Pre-existing net wealth (Euro) | Group I and II | Group III | Group IV |
|---|---|---|---|
| 0 - 402,700 | 1.00 | 1.5882 | 2.0 |
| 402,700 - 2,007,400 | 1.05 | 1.6676 | 2.1 |
| 2,007,400 - 4,020,800 | 1.1 | 1.7471 | 2.2 |
| 4,020,800 + | 1.2 | 1.9059 | 2.4 |
If the beneficiary belongs to Group I or II, apply a 99% reduction to the final tax bill.
Example:
A daughter inherits €600,000 from her father in Madrid, with no pre-existing wealth.
If this same inheritance occurred in Catalonia the final bill could exceed €100,000.
Although Madrid offers some of the lowest inheritance tax rates in Spain, you should be aware of the following:
Non-Resident Heirs: Since Law 26/2014, EU and EEA residents can benefit from Madrid’s regional tax rules, provided the deceased resided in Madrid. Post-Brexit, UK heirs must structure carefully, often through wills, residency planning, or life insurance.
Double Tax Treaties: Spain has limited inheritance tax treaties. The UK-Spain treaty only applies to certain categories of tax. Without proper planning, double taxation can occur.
Modelo 650 and Deadlines: Heirs must file Modelo 650 within 6 months of death. Extensions are possible but require formal application. Delays lead to penalties and interest.
Wills and Cross-Border Planning: To fully benefit from Madrid’s generous regime, a valid Spanish will is often advisable, especially if you have a UK or international will in place.
Foreign Assets: Spanish residents must declare overseas assets worth over €50,000 using Modelo 720. This doesn’t affect IHT in Madrid directly, but non-disclosure can result in harsh penalties.
Lifetime Gifts (donaciones) may be taxed differently than inheritances. Madrid offers similar reliefs for gifts between close relatives.
Also:
Inheritance tax is one of the most complex areas of Spanish tax law, especially for international families, blended households, and property owners.
Even in a region like Madrid, where the rules are more favourable, strategic planning can mean the difference between a small administrative fee and a major tax burden.
At Private Client Consultancy, our wealth and tax experts help both residents and non-residents structure their assets to minimise Spanish inheritance tax, ensure family members are protected, and avoid unexpected liabilities.
Whether you’re living in Madrid or hold property there, speaking to a professional now, before any assets change hands, can make all the difference.
Madrid is one of Spain’s most inheritance tax-friendly regions, with significant reliefs for spouses, children, and even registered partners.
But understanding who qualifies, when and how regional rules apply, and how to structure your estate tax-efficiently is no small task.
To explore your options and protect your legacy with peace of mind, we encourage you to get in touch with our team or use our free inheritance tax calculator to begin your planning.
Disclaimer: Tax laws, rates, and reliefs are subject to change and may vary depending on individual circumstances and residency status. Any information provided on this website is based on our understanding of current regulations (or the date of when the content was published) and should not be considered personalised financial or tax advice. As tax obligations can differ across regions, countries and evolve over time, we strongly recommend seeking professional advice tailored to your specific situation before making any financial decisions.
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