A breath of fresh heir
Inheritance law in Andalucía is changing for the better in the form of a recently-agreed overhaul of current legislation, which will affect an estimated 10,000 future inheritors annually1 across the region.
The existing “Impuesto de Sucesiones y Donaciones”, as the tax is known in Spanish, is seen as somewhat Draconian and excessively penalises an heir or heiress of an estate. However, new policies will be introduced to combat high contributions and, in doing so, save Andalucian inheritance taxpayers around 38 million euros2.
Controversial issue in Andalucía
One of the existing issues when it comes to taxation matters such as this one is the discrepancy in fiscal policy between Spain’s Autonomous Communities.
Unlike governmental frameworks like the UK’s, for example, where central government determines tax law for the entire nation, in Spain each region defines its own taxation strategy and establishes its own budgets for healthcare, schools, infrastructure, welfare, etc.
Until now, levels of inheritance tax in Andalucía have actually been some of the highest of any of the 17 Autonomous Communities in Spain. The tax bill, which must be paid six months after death, is over 100 times higher in Andalucía than it is in Madrid and seven times higher than in Castilla-La Mancha, for example.
In terms of the difference in tax collection over the first three years of the new policies, the regional government is estimated to see an overall reduction of 18 million euros in 2019, 15.8 million euros in 2010 and 8.7 million euros in 20213.
What are the new policies?
Under the new inheritance tax guidelines, the change will be twofold. Firstly, there will be no tax payable on estates equal to or below the value of one million euros and, secondly, those estates valued at over one million euros are only subject to a one percent levy. That is to say, only the beneficiaries of high net worth individuals' estates will incur a 1% tax on any inheritance over €1,000,000 - and everyone else is exempt.
I should also point out that beneficiaries must also be European Union or European Economic Area (EU member states plus Iceland, Liechtenstein and Norway) residents and be either a “Group 1” (biological/adopted children under the age of 21) or “Group 2” (biological/adopted children over the age of 21, spouses, civil partners, biological/adoptive parents, grandchildren and great-grandchildren) category inheritor.
When will it come into force?
While there is still no fixed date for the implementation of this law, it was formally agreed between members of Andalucía’s new coalition regional government in Sevilla on 26th January4. According to news sources, Juanma Moreno, President of the Junta de Andalucía, hinted that its inception would be “a few months away”.
I know what you’re thinking, “clear as mud”. I suppose that is one thing one must expect in politics; that passing bills and ratifying laws takes time and is subject to painstaking bureaucracy.
However, this has been long overdue and the fact that these groundbreaking new changes to the Spanish inheritance tax model are being implemented is brilliant news for all of those who make the Costa del Sol and the rest of Andalucía their permanent home.
Do you have any questions about inheritance law in Spain? Are you one of the several thousand expats in Andalucía with European residency who will be affected by this law change? If you have any doubts or need a hand suggesting a professional in the field, leave me a comment below!