Autonomous regional governments in Spain (like Andalucia) have the power to amend the regional part of the inheritance and donation tax.
Already in place since January 2019 is the new legislation for acquisitions “mortis causa” (inheritance tax):
- entitled to an exemption for levying inheritance tax of no less than 1 million euros per heir
- over 1,000,000 euro will benefit from a 99% exemption (per inheritor), meaning you only pay 1% over what exceeds the 1 million threshold.
That is if the the pre-existing wealth of the heir in not over a million at the time of inheritance.
With the change of government in the “Junta de Andalucía” after the last regional elections in march 2019 and the entrance of the liberal policies into the government they amended the legislation for “inter vivos” acquisitions, that is for donations (gifts).
- 99% of the quota of the tax for acquisitions “inter vivos” is bonus. Meaning you would only pay a 1% of the resulting tax bill.
Before donation tax was progressive and went from 7.65% to 36.5%. Now with the new legislation only 1% of the before calculated donation fee will actually need to be paid.
For example: the donation of € 990,000 valued property that before this reform had a tax cost of € 277,500 would now be reduced to € 2,775. An inheritance of € 990,000 for a single heir the tax would remain zero euros.
Who benefits of deductions in inheritance – and donation tax:
- Group I: natural and adopted children under 21.
- Group II: natural and adopted children over 21, grand-children, great-grand children, spouses, registered civil partnerships, parents, adoptive parents, grandparents and great-grandparents.
ONLY REQUIREMENT FOR THESE ANDALUSIAN REGIONAL REGULATIONS TO APPLY:
- Inheritor/estate beneficiary (taxpayer) needs to be EEA/EU-resident.
MEANING: after the Brexit, you will become a non-EU/EEA resident and will no longer benefit from these Andalusian/regional legislation described above. But will be subject to state legislation, which does NOT include these bonuses and deductions described here above, neither for inheritance tax as for donations.
For example donations under the state legislation have a scale from 7.65% to 34% . With additional charges based on the relationship with the recipient and their pre-existing net worth, taxation can reach 82% in very extreme cases. The full amount of these calculations would have to be due to the state, no 99% reduction.
If you want to donate your goods/property in Spain to your close relatives with no substantial tax cost, this is the moment to act. Because the limit is on the effective date of the Brexit for the change of being EEA/EU resident to being a third country resident (non-resident EEU/EEA) or the change date of the regional legislation for donations which s only into fore since mid april 2019 and is already under pressure with the national government being majority socialists.
To make this donation to family members of group I and II, the donation would have to be done through notary (title deed to donate the property). In the title deed you can decide whether to donate the entire property to your children our first line relatives or to give them only the naked property and keep the usufruct of the property yourselves.
We work in close relation to a lawyers firm Luque Martin Abogados (Lawyer Pizarro-Suarez) in Malaga specialised in this new donation regulation. We are more than happy to put you into contact with them so you can get professional expertise and guidance into this particular matter.