Understanding Inheritance Tax in Valencia, Spain, doesn’t have to be a hassle.
Our article aims to clarify common misunderstandings about Inheritance Tax in the Valencia region and provide an updated overview of what you should know and expect.
Inheritance Tax in Spain, known as Impuesto de Sucesiones y Donaciones, operates at two levels: national and local.
National rules set the foundation, while each region, including Andalucia, can apply its own specific regulations.
This tax applies to both inheritances and lifetime gifts and it is important to understand that it is charged to the recipients (the beneficiaries) which includes spouses.
Inheritance Tax in Spain is due when the beneficiary is resident in Spain or the asset that is being gifted or inherited is based in Spain.
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 |
Each autonomous region in Spain has its own reductions, deductions and allowances.
On the 22nd November 2023 the regional government of Valencia implemented a 99% reduction on the taxable base for spouses, children, and parents and
This reform aimed to alleviate the tax burden on families and prevent financial strain caused by significant inheritance tax bills.
But this was not always the case.
Over the years, inheritance tax in Valencia has undergone several reforms, reflecting shifts in economic policy and political priorities. Historically, the region offered generous deductions for immediate family members, with a 99% reduction in tax liability for spouses, children, and parents.
However, during the economic downturn, the Valencian government sought to increase public revenue by scaling back these tax benefits. In 2013, the 99% reduction was lowered to 75%, and in 2017, it was further reduced to 50%, significantly increasing the tax burden for many families. These changes sparked criticism, as they placed financial strain on inheritors, sometimes forcing them to decline inheritances due to unaffordable tax liabilities.
Recognising the concerns raised by both tax professionals and the public, the Valencian government therefore reinstated the 99% reduction in 2023, bringing it back in line with other autonomous communities that provide substantial relief for direct family members.
Given this history of fluctuating tax rates, further adjustments remain a possibility in the future.
This means that although such a favourable situation is in place, a change in the political situation might mean a change in the favourable nature of the Inheritance tax in Valencia.
The primary beneficiaries of Valencia’s inheritance tax reductions are close family members, including spouses, children, and parents. These individuals benefit from the 99% tax reduction, making inheritances within families far more tax-efficient.
This is particularly advantageous for those inheriting property, as the reductions significantly lower the financial burden that often comes with transferring real estate.
Additionally, individuals with disabilities also receive further tax benefits, ensuring additional financial support when receiving an inheritance.
However, more distant relatives or unrelated beneficiaries do not receive the same level of relief and may still face substantial inheritance tax liabilities.
Tax-Free Allowance for Close Family:
Spouses, children, and parents (Groups 1 and 2) benefit from a €100,000 tax-free allowance. Any inheritance value exceeding this threshold is subject to tax, but a 99% deduction on the taxable amount applies, making the actual tax burden negligible for most direct heirs.
Special Allowances for Disabled Beneficiaries:
Individuals with disabilities, regardless of their relation to the deceased, can receive an increased deduction of up to 75% on the total tax burden.
Recognition of Registered Partnerships:
Non-married couples who are formally registered under Valencia’s “Uniones de Hecho Formalizadas” law are granted the same inheritance rights as married couples. This ensures that long-term partners receive the same tax benefits as spouses.
Reductions for Family Homes:
Valencia provides specific reductions related to the primary residence of the deceased. These reductions help inheritors retain the property without facing a significant tax burden.
Inheritance of Businesses and Agricultural Land:
Certain business-related inheritances receive favourable tax treatment, extending beyond immediate family members:
Do you Need Expert Spanish Inhertiance Tax 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.
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 |
With the special rules in place in Valencia, as explained above, the first 100,000 euros benefit from a tax-free allowance and anything above that benefits from a 99% tax relief.
Despite Valencia’s favourable tax reductions, expats should be aware of common issues that can arise:
The general rule is the following:
It’s also important to consider the following:
Expats who are not tax residents in Spain but inherit assets within Valencia are still subject to Spanish inheritance tax.
However, following a ruling by the European Court of Justice in 2014, non-residents from the EU and EEA must be treated the same as residents, allowing them to apply Valencia’s regional reductions.
Non-EU residents, however, may face higher tax liabilities, as they are often subject to the national inheritance tax rates without access to regional deductions. Proper planning, including the use of trusts, life insurance policies, or gifting strategies, can help mitigate this.
Domicile Considerations: Spain’s inheritance tax laws may conflict with those of other countries, particularly the UK, where domicile status can still affect an estate’s tax treatment.
Double Taxation: While Spain has treaties with some countries to avoid double taxation, expats should seek professional advice to ensure compliance and avoid unexpected liabilities.
Property Valuation: Spanish tax authorities use a reference value for property rather than the market price, which can lead to higher tax assessments if not properly accounted for.
Inheritance tax must be paid within six months of the date of death, though extensions may be granted in very specific and justified circumstances.
The assets will not be released to beneficiaries until the tax has been paid.
At Private Client Consultancy Wealth, we’re experts in navigating Inheritance Tax in Valencia.
Our wealth managers and legal team can assist you in planning your financial future the way you want it to be.
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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